Germany compromises on cuts to solar PV feed-in tariff in July

The German solar industry association (BSW-Solar) has reached a new compromise on solar photovoltaic (PV) funding with the German Federal Ministry for the Environment. The step, which can be seen as an earlier than planned reduction, will see future feed-in tariffs (FiT) being adjusted in accordance with annual installed capacity.
Germany compromises on cuts to solar PV feed-in tariff in July

The expected installed capacity for the year 2011 will be based on the figures for new installations in the period from March to May. By multiplying the result by a factor of four, the Federal Net Agency should then come to a projection of the estimated installed capacity for the year 2011.

Should the calculated PV market capacity be more than 3, 500 MW, further reductions of 3% are to be introduced mid-year on 1 July. The resolution reached between legislators and BSW-Solar has determined a decline of 6% should projected capacity be over 4,500 MW, annually installed capacity of over 5,500 MW would incur cuts of a further 9%, more than 6,500 MW by 12% and an installed capacity to the same amount as last year, over 7,500 MW, will be subject to a 15% reduction. As the planning of open-space plants requires more time, their degression will not come into effect until 1 September 2011.

Funding is, as previously planned, to be cut by a further 9% at the turn of the year, 2012. Furthermore, an audit carried out by the Federal Net Agency will verify that the estimations made in spring 2011 were accurate. According to the announcement, subsequent corrections will be made should this be of necessity.

Right approach

The adjustments presented by Norbert Röttgen, Minister for the Environment and Günter Cramer, President of BSW-Solar, will be sent to parliament for deliberation. A final decision is expected later this month. As the country will soon be in the throws of state elections, experts assume that there will not be a lengthy bargaining process on percentage points, as was seen in the year before last.

“The modification of incentives in line with market conditions along with a regular review of tariffs is generally a step in the right direction and is supported by the industry,” commented Markus A.W. Hoehner, CEO of the market research and consulting house EuPD Research. Generally speaking, the fact that tariffs are to be aligned with the figures for installation should also be welcomed.

Dilemma of overheating

However, market experts see the danger of an artificial stimulation of the market and it remains unclear to what extent FiT reductions will actually pacify the markets. “The announcement, itself, of an early adjustment on 1 July equates to a simulation of the market,” says Hoehner, who warns against potential pull-forward effects.

“The German PV market is still overheated, the reoccurring discussion on amendments to incentives fuels this situation further,” adds Hoehner. Germany currently finds itself in a dilemma. Without further adjustments the market is threatened by excessive growth, a point which speaks for the measures suggested. Yet a “run” in the first half of the year is likely to overcompensate for the slowdown effects of these adjustments.

“The review of the EEG in 2012 will play a decisive role in the future of PV in Germany,” says Hoehner. “Legislators, industry representatives and stakeholders now face the challenge of developing a concept that encompasses all sources of renewable energy.”

The market observer suggests a clear message on the future of the German renewable energy industry also needs to be sent to international markets to strengthen investment security if market destabilization of the like seen recently in France, Spain or Czech Republic, is to be avoided.

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