German Government Warns of Deeper FIT Cuts

The German government hasn’t completely pulled the plug on its solar power subsidies yet. But it is definitely pulling hard on the cord.

Today, Federal Environment Minister Norbert Roettgen announced an agreement with the country’s solar power industry to further trim subsidies for groups feeding in electricity from privately owned photovoltaic system by as much as 15 percent. The subsidies have already been cut by a third since late 2009.

The move is intended to contain the rapidly rising costs of subsidized solar power to consumers. The German government estimates the costs to be as high 13 billion euros last year this year.

Germany has been heavily subsidizing solar power and other renewable energies since 2000. The push has prompted an industry boom.

At a press conference in Berlin, Roettgen said that while the government wants a reliable expansion of solar energy, it also sees potential to reduce the costs of this renewable energy source.

With an eye to consumers having to pay a fat electricity bill, he said solar energy “must be cost-efficient and adjusted to market-price developments.”

Under Germany’s current solar feed-in-tariff (FIT), power grid operators must buy solar power well above market prices, some as low as 29 euro cents, depending on the size and location of the system. But, for the most part, they pass on the extra costs to consumers.

Not surprisingly, the above-market prices guaranteed for a 20-year period under the Renewable Energy Source Act have attracted and continue to attract numerous property owners and other groups across the country. That could soon change.

The Environment Ministry and the German Solar Industry Association have agreed to begin reducing subsidies six months earlier than planned. Under the agreement, the ministry will implement cuts of 15 percent if capacity forecasted for the year exceeds 7.5 GW, 12 percent if it tops 6.5 GW, 9 percent if it is more than 5.5 GW, 6 percent for over 4.5 GW and 3 percent for more than 3.5 GW. The planned subsidy changes still require parliamentary approval, which is expected.

As previously planned, funding will be cut by a further 9 percent at the beginning of 2012.

Germany hopes to increase solar energy’s share in the country’s overall energy production from current 2 percent to 10 percent by 2020 with a capacity of more than 70 GW, according to Guenther Cramer, head of the German Solar Industry Association.