German ministers agree to speed up solar cuts

BERLIN Wed Feb 22, 2012 12:51pm EST

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BERLIN (Reuters) - The German government has agreed to accelerate the next round of cuts in state-mandated photovoltaic incentives by three months to April 1 after a record-breaking expansion of solar power in 2011, government and industry sources told Reuters on Wednesday.

The environment and economy ministries have also agreed to deepen the next round of reductions in the feed-in tariff (FIT) to between 20 percent for smaller rooftop power plants to as much as 30 percent for larger plants.

The cuts were more extensive than previously envisioned and the speed of the agreement between the two rival ministries was also somewhat of a surprise. Chancellor Angela Merkel's conservative Christian Democrats control the Environment Ministry and the coalition partners, the Free Democrats, control the Economy Ministry.

The next scheduled cut of 15 percent was originally planned for July 1. The feed-in tariffs are the lifeblood for the industry until photovoltaic prices fall to levels similar to conventional power production.

The FIT in Germany was cut by 15 percent to 24.43 cents per kilowatt hour on January 1 after a round of steep cuts in 2010 and 2011 cut the incentive nearly 40 percent. The retail price for electricity in Germany is about 23 cents per kwh.

Germany is the world's leader in solar power with about 25,000 megawatts of installed capacity. It added 7,500 mw in 2011 and now gets about 4 percent of its electricity from solar power. The government has a target of 66,000 mw by 2030.

The FIT incentives cost consumers about 7 billion euros per year. The government has a target corridor of 2,500 mw to 3,500 mw of new installations per year.

Economy Minister Philipp Roesler had wanted steeper cuts and a limit of 1,000 mw per year, but Environment Minister Norbert Roettgen resisted such a cap. The two will formally present their joint proposal at a news conference on Thursday.

Roesler's demand to cap new installations at 1,000 mw per year -- a move that some feared could cripple the sector -- was also no longer part of the agreement between the two rival ministries.

The country's solar power industry lobby criticized the proposed cuts, warning they could endanger many of the jobs in the sector that has grown to more than 100,000 workers in the last decade.

"Thousands of solar industry jobs in Germany are now in jeopardy," said Carsten Koernig, managing director of the German BSW solar producers association. "The sector cannot handle additional cuts of between 20 to 30 percent and this move will greatly slow down the expansion of solar power in Germany."

Workers from about 50 companies in the solar sector around Germany are planning to take part in demonstrations on Thursday against the cuts.

Solar companies in Europe and the United States have been hit hard by a toxic mix of oversupply, falling prices, low-cost Asian competition and lower government incentives.

On top of the FIT cuts of up to 30 percent, the government also wants to introduce a new ceiling on how much solar power a plant can pump into the grid: a maximum of 90 percent of the electricity produced can be pumped into the grid.

Also, the FIT will be adjusted each month with an expected cut of at least 1 percent per month after April 1.

Support from the opposition parties will be needed if the measure is to clear through the upper house of parliament, the Bundesrat, quickly.

Producers of photovoltaic electricity are guaranteed fixed rates for 20 years from the point the solar power systems are installed. The FIT has fallen to 24.43 cents per kwh, down from 49 cents for systems installed in 2007.

The costs for solar power are paid for by consumers, who pay about 2 cents per kwh on top of their electricity bills for photovoltaic producers. Germany gets about 20 percent of its electricity from renewable sources such as wind, biomass and solar.

(Reporting by Markus Wacket; Writing by Erik Kirschbaum; Editing by Hans-Juergen Peters)

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