January 14, 2010 / 9:25 PM / 8 years ago

UPDATE 2-Germany plans solar subsidy cuts from April-sources

* Tariffs on new roof sites to be cut 16-17 pct-sources

* Additional one-off cuts in 2011 possible-sources

* No decision has been made yet-environment ministry

* Shares of SolarWorld, Phoenix Solar end down (Adds analyst comment, details, background)

By Markus Wacket

BERLIN, Jan 14 (Reuters) - The German government plans to slash solar power incentives much more deeply and sooner than expected, government and industry sources told Reuters on Thursday, raising fears that growth would slow in world’s largest consumer of the renewable power source.

The sources said the government envisaged a one-off cut in feed-in tariffs for new roof and open-field sites from April by between 16 percent and 17 percent in addition to the annual decline that it has previously set out in the country’s Renewable Energy Act (EEG).

The news sent U.S.-listed shares in solar companies down between 3 percent and 10 percent because market analysts have anticipated a lower cut of 5 percent to 10 percent, and not until July 1, at the earliest.

“The cut, if it happens, would be much tougher and faster than expected. For the industry as a whole, this would be bearable. But some companies, most likely SolarWorld SWVG.DE, Solon SOOG.DE and Phoenix Solar (PS4G.DE), would be hit quite significantly,” said Robert Schramm, analyst at Commerzbank.

Shares of Solon ended up 0.8 percent, while SolarWorld and Phoenix Solar were down 0.6 and 1 percent, respectively. The FTSE clean tech index .FTET50 was 0.5 percent higher.

The global solar power industry has struggled over the past 15 months to secure funds for new projects as the financial crisis choked off investment in many regions. Still, Germany’s lucrative incentives had kept the country at the forefront of the industry.

FINAL DECISION DUE

A spokeswoman for the environment ministry said no decisions had been made yet. “That is planned for next week,” she said.

On Wednesday, solar companies, consumer lobby groups and the government met in Berlin and moved closer to an agreement on trimming state-mandated incentives for solar power to reflect a steeper overall slide in costs that has thrown the industry into crisis. [ID:nLDE60C14F]

Under the feed-in tariff, utilities are obliged to pay 39 euro cents per kilowatt hour of electricity produced for 20 years for systems installed in 2010, which is down from 43 cents for systems installed in 2009.

The feed-in tariff had been falling by about 8 percent per year before dropping 10 percent in 2010, as set out in the EEG.

The sources told Reuters that the plans also envisage an additional one-off cut of 2.5 percent in 2011, should the installation volume in 2010 exceed 3 gigawatts, and even more if it totals more than 3.5 gigawatts. Bigger subsidy cuts are planned for solar equipment on farm land.

The European Solar Industry Association EPIA estimates that 2010 installation could rise to 2.8 GW.

Since Germany’s new coalition government was elected in September, the solar power industry has widely expected cuts in the country’s solar aid, prompting installers to rush to build projects before the cuts are made.

Estimates of how and when those cuts to the feed-in tariff will take place have varied widely, from as low as 5 percent to as high as 25 percent, or even the creation of a variable tariff that would give companies a stable rate of return on their projects.

Companies across the sector will be affected by cuts in solar aid, whether they are heavily exposed to Germany or not, analysts say.

“If a good pool of demand dries up because a change of subsidy, that is going to affect everyone,” Wedbush Morgan analyst Christine Hersey said. “It’s just going to add to the oversupply conditions and put further downward pressure on pricing.”

In 2008, a cut in supports by the Spanish government erased about two-thirds of the demand for solar power systems there, creating a glut of supplies that eroded global prices for solar modules.

That, combined with the global credit crisis and fast-rising solar module manufacturing capacity, have contributed to a decline in the cost of the panels that some analysts have estimated at about 50 percent over the past year.

In New York, shares of First Solar (FSLR.O) and SunPower Corp SPWRA.O both fell 4.4 percent, to $126.27 and $23.92, respectively, while China’s Trina Solar fell 11.1 percent to $42.61 and Canadian Solar (CSIQ.O), Solarfun Power Holdings SOLF.O, Suntech Power Holdings STP.N and JA Solar were down between 6 percent and 8 percent. (Additional reporting by Christoph Steitz in Frankfurt, Laura Isensee in Los Angeles and Matt Daily in New York; writing by Christoph Steitz and Madeline Chambers in Berlin; Editing by Steve Orlofsky)

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