Germany takes knife to solar subsidies

A German Solar Installation – Are the Solar Glory Days over in Deutschland?

From manufacturing quality cars to leading the continent in economic policy, Germany is often considered Europe’s “go to” country. The “engine room” of European manufacturing also is well out in front of its neighbours in renewable energy policy, with its clear and consistent support for solar installation legendary.

No pocket was too deep apparently as successive German federal governments saw fit to scrape out generous and consistent subsidies for its solar energy sector. This much admired method of solar support, which many solar commentators have tried to point to as a way forward for an Australian model (Ha! Likely story), has made the country Europe’s largest solar market.

But in a surprise move, German feed-in tariffs will be cut by as much as 30 percent, beginning in early March. Environment Minister Norbert Roettgen told a news conference last week that the move had been made to slow installation and cut costs.

“We’ve had an enormous reduction in the incentives in the past few years but the incentives were still too high,” Mr. Roettgen told reporters. “Solar is a success story made in Germany. We want it to be an acceptable technology not only in the future but right now. The cost factor has to be at acceptable levels.”

However the move is not entirely unexpected. As Matthew Wright of renewable energy action group Beyond Emissions pointed out in a recent Radio National discussion, the aim of the government’s support was to give encouragement for these emerging technologies, while weaning them off support as they became more efficient.

“If that technology shows that it can actually run down the cost curve [the German government] say…incentivise it, at day one, at a certain price,” said Wright. Then over a ten year period, or a five year period, it has to get itself weaned off those incentives…So they have only chosen technologies that can prove, to a technical panel, that they can go down the cost curve,”

he added.

Which all sounds like good sense doesn’t it readers? But how much of this latest reduction of feed-in tariffs is from this long anticipated weaning off of government support and how much related to the current economic crisis lapping at Europe’s shores?

The cuts are more savage than expected according to Morning Star analyst Steven Simko who predicts that demand for solar in the world’s number 2 market will nosedive, which will have global ramifications for demand.

Will this set a trend that will be felt here in Australia?

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