Germany approves solar power incentive cuts

BERLIN (Reuters) - Germany’s Bundestag lower house of parliament approved on Thursday controversial cuts for solar power incentives to take effect from July.

Solar subsidies for rooftop installed solar power will see a one-off cut of 16 percent, while most open-field installations will be cut by 15 percent. Support for farmland solar systems is to be scrapped completely from July.

Cuts of one percentage point in addition to those set out in the German renewable energy act (EEG) will be made by the beginning of 2011, if newly installed capacity exceeds 3.5 gigawatts within a year.

German Environment Minister Norbert Roettgen said the cuts were appropriate given that solar modules were now cheaper and the sector had to compete with Asian producers.

“Our solution is innovation instead of subsidies,” Roettgen said. “And we also have to keep the costs with which we burden electricity clients under control.”

Germany is the world’s largest market for solar power with about half of all solar power produced there. Critics of the cuts have said they could harm development of the technology.

Oversupply of cells and modules has caused prices for solar products to fall by as much as 50 percent over the past 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.

Consumer groups and pro-business leaders in the center-right coalition had pressed for deeper cuts to the incentives. Consumers pay an extra three percent for power each month on their bills because of the support for solar power.

Cuts in public support will weigh on companies like Q-Cells, Phoenix Solar and SolarWorld, which depend on demand from Germany.

Reporting by Markus Wacket and Sarah Marsh