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German govt approves solar R&D subsidy

* Cabinet approves 100 million euros new subsidies

* New R&D support aimed at breaking resistance to cuts

BERLIN, April 21 (Reuters) - Chancellor Angela Merkel’s cabinet approved plans on Wednesday to grant 100 million euros in support for the solar power industry to overcome resistance in parliament to its plans to cut state-mandated incentives.

Government sources said the 100 million euros ($134.4 million) in subsidies will be earmarked primarily for research and development.

The sources told Reuters the funding is designed to break the resistance in eastern German states to the government’s plans to cut the so-called feed-in tariffs that utilities are obligated to pay for solar power.

Education Minister Annette Schavan, whose portfolio also includes science and research, told journalists after the subsidy was announced the 100 million euros should go primarily to research into solar power over the next three to four years.

She said the money was earmarked to expand R&D institutes in eastern states Thuringia, Saxony and Saxony-Anhalt as well as for research into laser production technology.

“A more reserved approach with the feed-in tariff and yet a more offensive approach with research,” Schavan said. “It’s important to support R&D so that we can retain our market leadership.”

Germany is the world’s largest market for solar power with about half of all solar power produced there.

The measure to cut the feed-in tariff was approved by cabinet in March but still lacks approval of the Bundestag, or lower house of parliament. The measure does not need approval from the upper house, the Bundesrat, or states’ chamber.

But some key states have nevertheless raised objections to the one-off cuts of some 16 percent in July and MPs from those states -- especially in eastern Germany and southern Germany with large solar power industries -- want it watered down.

Merkel’s centre-right coalition has a comfortable majority in the lower house but the resistance has held up the measure. The government wants to cut the incentives for rooftop solar power by 16 percent from July 1 and eliminate support for converted farmland.

The cuts in the feed-in tariff will also include a 15 percent cut for non-agricultural fields.

Feed-in tariffs -- prices utilities are obligated 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.

There has also been criticism of the proposed cuts from some conservative leaders in several eastern German states, where many solar companies have substantial production sites.

But consumer groups and pro-business leaders in the centre-right coalition want the incentives cut even further. Consumers pay an extra three percent for power each month on their bills because of the incentives for solar power.

Cuts in public support will weigh on companies like Q-Cells QCEG.DE, Phoenix Solar PS4G.DE and SolarWorld SWVG.DE, which depend on demand from Germany, the world's biggest market for solar energy as measured by installed capacity. ($1=.7439 Euro) (Writing by Erik Kirschbaum; Editing by Christoph Steitz and Hans Peters)