(BN) Germany to Speed Solar-Subsidy Cuts to Undercut Boom (Update2)


Germany to Speed Solar-Subsidy Cuts to Undercut Boom (Update2)
2011-01-20 16:24:32.581 GMT

(Updates with CDU Bundestag member comment from 10th

By Marc Roca and Brian Parkin
Jan. 20 (Bloomberg) -- Germany's Environment Ministry and
the solar industry agreed to cut subsidies six months earlier
than planned to slow growth in the world's largest market for
photovoltaic panels that turn sunlight into power.
The above-market rates paid for solar power will be lowered
in July by 3 percent to 15 percent for new installations if more
than 3.5 gigawatts are forecast for this year, the ministry said
today in Berlin. The estimate will be based on data for projects
connected to the distribution grid in March through May.
Chancellor Angela Merkel's government is paring aid to curb
the cost to consumers who pay for subsidies in their power bills
after solar-panel prices fell about 50 percent in the last two
years. That spurred a boom in new installations on rooftops and
fields and led to a glut on the German market.
"In the interests of power users in Germany, solar energy
must be cost-efficient and adjusted to market-price
developments," Environment Minister Norbert Roettgen said in a
briefing today in Berlin with Guenther Cramer, head of Germany's
BSW solar industry group. "A solar market that grows too
quickly and overheats would push up power costs."
If the forecast for Germany is more than 3.5 gigawatts, as
analysts expect, a portion of the cuts that originally were
planned for January 2012 will be moved to become effective in
July. Early reductions then will be deducted from the percentage
cuts planned for next year, which were set in law at as much as
24 percent, a ministry statement released today shows.

'Urgent' Response

Germany might install 6 to 8 gigawatts in new solar
photovoltaic capacity in 2011 out of about 20 gigawatts
worldwide, Bloomberg New Energy Finance forecast Jan. 12.
"The fact that industry and government and opposition
parties agreed on these cuts so rapidly illustrates the urgent
need to slow German PV market growth from an estimated 8-9
gigawatts in 2010 to a more sustainable level in 2011,"
Francesco D'Avack, a solar analyst at Bloomberg New Energy
Finance, said by e-mail today.
The Environment Ministry said it will implement cuts of 15
percent if capacity forecast for this year is more than 7.5
gigawatts. The reduction will be of 12 percent if new projects
exceed 6.5 gigawatts, 9 percent if they top 5.5 gigawatts, 6
percent for more than 4.5 gigawatts and 3 percent if over 3.5
gigawatts, according to the agreement. The scaled plan needs
approval from Parliament to become effective.

Fixed Cap

This agreement on flexible adjustment to financial support
makes it possible to avoid introducing a fixed cap to the
market, Gunther said in a BSW statement today. "A fixed cap
would not only cancel out competitive market forces, but would
also prove counterproductive to the objective of further
reducing the price of photovoltaic systems," he said.
A limit on solar installations and further tariff cuts are
still on the table, according to Joachim Pfeiffer, Bundestag
member and economics spokesman in the chamber for the ruling CDU
"We need to look at subsidy cuts again, as well as the
possibility of reducing the 20-year payment for solar
generators," he said by telephone today. "We must also examine
whether we need to set a cap from next year. I don't rule out
the implementation of a cap."
Today's compromise wrought by the government and industry
over solar subsidies is a "stop-gap," a temporary move that
will stem surging subsidies that increase power prices, he said.

Building Boom

Germany pegged subsidies last year on an assumption new
solar capacity would grow by 5,000 megawatts. It actually grew
by some 7,000 megawatts, equal to about 6 new medium-sized
conventional electricity plants, according to the environment
minister. That's why the country had to speed up reducing
subsidies, he said at the briefing.
Cutting tariffs is one way to limit the cost of further
solar capacity build-up, according to D'Avack. "But in the past
such cuts have lead to even faster market growth as installers
and developers rushed to connect systems before the decline in
tariffs, making the problem only worse," he said.

For Related News and Information:
Top environment stories: GREEN <GO>
News on power markets: NI PWRMARKET <GO>
German top stories: TOPG <GO>
Top energy page: ETOP <GO>

--With assistance from Rainer Buergin in Berlin. Editors: Todd
White, Jonas Bergman

To contact the reporters on this story:
Brian Parkin in Berlin at +49-30-70010-6229 or
Marc Roca in London at +44-20-3216-4638
or mroca6@bloomberg.net

To contact the editors responsible for this story:
James Hertling at +33-1-5365-5075 or jhertling@bloomberg.net;
Reed Landberg at +44-20-7330-7862 or landberg@bloomberg.net