UPDATE 4-Germany to slash solar panel subsidies

Wed Jan 20, 2010 11:46am EST

Related Topics

* Aid for roof sites to fall 15 pct from April

* Cuts for open field, farmland sites in July

* Announcement sparks criticism from industry execs

* Volumes could fall 25 pct, revs 40 pct lower-analyst

* Shares in German, U.S. solar stocks fall

(Adds REC comment, more details on solar market)

By Markus Wacket

BERLIN, Jan 20 (Reuters) - Germany on Wednesday slashed subsidies for solar power in a move to ease the world's largest solar market towards free competition, drawing howls of protest from panel manufacturers.

Environment Minister Norbert Roettgen set out a 15 percent cut in so-called feed-in tariffs for new roof-mounted solar power from April, confirming figures reported earlier by Reuters.

Frank Asbeck, head of Germany's biggest solar company by revenue, SolarWorld SWVG.DE, said the cuts were unacceptable. [ID:nWEB5912] [ID:nWEB5921]

"The drastic short-term reduction of the tariffs in the German renewable Act will have significantly negative consequences on the German solar industry," said Marko Schulz, board member at Q-Cells QCEG.DE, one of the world's largest makers of solar cells, told Reuters.

The move was also criticised by Bjoern Brenna, chief financial officer at Norway's Renewable Energy Corp (REC) (REC.OL), Europe's largest solar company by market capitalisation. Roettgen said that the tariffs for solar energy generated from open field and farmland sites would also be cut from July, by 15 percent and 25 percent respectively.

Cuts in public support will weigh on companies like Q-Cells, Phoenix Solar (PS4G.DE) and SolarWorld, which depend on demand from Germany, the world's biggest market for solar energy as measured by installed capacity.

"This is a double whammy for the industry. Roof installations will be hit from April as many projects have already been started," said Goetz Fischbeck, analyst at BHF-Bank in Frankfurt.

OVERLY SUBSIDISED

Sven Kuerten, analyst at DZ Bank, said in a note he expected the German solar market to shrink by at least 25 percent in volumes and 40 percent in revenue in 2010. Analysts estimate the country accounts for at least 50 percent of the worldwide photovoltaic market, whose size was estimated by GTM Research at $12 billion for 2009, down 15 percent year-on-year.

Proponents of cuts say the industry is overly subsidised and the recent price slump which has gripped the industry needs to be reflected in the subsidies.

"Such a step would lead to more consolidation, but this is what the sector needs," said Olaf Koester, manager of the New Energy Fund at VCH.

Oversupply of cells and modules has caused prices for solar products to fall by as much as 50 percent over the last year, which has increased pressure on industry players to have more efficient production and become more competitive.

Feed-in tariffs -- prices utilities are obliged to pay to generators of renewable energy -- are the sector's lifeline as long as grid-parity, the point at which renewables cost the same as fossil fuel-based power, has not been reached.

Utilities currently pay about 39 euro cents in feed-in tariffs per kilowatt for solar power, about eight times as much they pay for conventional power, and industry experts expect the planned cut to speed up the shakeup in the industry.

Additional cuts of 2.5 percent will be made from 2011 if installations exceed 3,500 megawatts (MW) in the previous 12 months, according to the plans.

"There will be changes. We want to introduce the free market and not provide existence guarantees for participants. It'll be a boost for technology," Roettgen said in Berlin.

Since Germany's new centre-right coalition government was elected in September, the solar power industry has expected cuts to the country's solar aid, prompting installers to rush to build projects before they are announced.

For an INSTANT VIEW on the announcement double click on [ID:nLDE60J125]

For a FACTBOX on solar companies' sales exposure to Germany double click on [ID:nLDE60I1XI]

For a related Q+A double click on [ID:nLDE60E0YO]

For a related ANALYSIS double click on [ID:nLDE60E0E4]

For Reuters latest environment blogs, click on: blogs.reuters.com/environment/

(Additional reporting by Christoph Steitz in Frankfurt, Erik Kirschbaum in Berlin, Anneli Palmen in Duesseldorf and Richard Solem in Oslo; writing by Christoph Steitz and Dave Graham; editing by David Cowell)

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