New German government won't slash solar power rates: source

BERLIN (Reuters) - Germany’s conservatives and their Free Democrat allies will reform the Renewable Energy Act (EEG) but cuts for solar power rates will be modest to prevent harming the fast-growing industry, a coalition source said on Sunday.

“We’re not going to take an axe to the EEG and we obviously won’t agree to any changes that would damage such an important sector,” a source told Reuters. “Any cut in feed-in tariffs will be modest -- not anywhere near as high (as) some are suggesting.”

The FDP and the CDU business wing want reforms to the Renewable Energy Act (EEG). They have talked of cutting state-mandated feed-in tariffs, which utilities pay for CO2-free energy, by some 30 percent.

That has hit share prices of German companies such as Q-Cells, Solarworld, and Conergy.

The coalition source said any cut agreed would be far less than that -- most likely in a range somewhere around 15 percent.

The FDP and their allies have demanded steeper cuts to the scheme that requires power consumers to subsidize green energy through higher electricity bills. The EEG adds about 3 percent to monthly power bills, or 9 billion euros per year.

But CDU leaders in states with photovoltaic industries -- Saxony, Thuringia, Saxony-Anhalt, Bavaria and Baden-Wuerttemberg -- have blocked steeper cuts in past reforms. The source said those states were again aligned against any radical cuts.

“Germany is a world leader in photovoltaic and you can’t go out and destroy that industry,” the coalition source said. “We’re not going to allow anyone to run roughshod. There’s scope for a correction and we’ll agree to explore a modest reduction.”

The photovoltaic industry in Germany has continued growing strongly despite the economic crisis of the last year, he added.

“It’s not only big companies but many smaller installation and electric companies that depend on the solar industry,” he said. “It’s essential that lawmakers remain a reliable partner.”

He said he was sure key CDU leaders “could not agree” to any demand for a 30-percent cut as some have called for. He declined to specify what would be acceptable but hinted a reduction in the feed-in tariff of about 15 percent could win broader backing.

Utilities are now obligated to pay 43 cents per kilowatt for 20 years for photovoltaic for systems installed in 2009. That rate has been falling by roughly 8 percent per year and is scheduled to drop by 9 percent in 2010 to 39 cents per kilowatt.

Returns on investment have nevertheless soared in recent years as costs for photovoltaic systems declined at a much steeper rate. There are 280,000 jobs in Germany’s renewable energy sector, including 80,000 in photovoltaic.

The photovoltaic industry has boomed since the EEG was created in 2000. More than half the world’s photovoltaic energy is produced in Germany.

Reporting by Erik Kirschbaum; editing by Simon Jessop