Germany’s Upper House Delays Solar Subsidy Cuts

on May 14, 2012
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Germany’s Upper House, the Bundesrat, delayed the government’s proposed cuts in subsidies for the solar power industry on Friday and referred them to a parliamentary mediation committeethat will renegotiate the bill. The decision was made after theEnvironmental Committee of the Bundesrat, passed a majority recommendation to enter into negotiations with the Federal Government in order to bring about corrections to the Renewable Energy Sources Amendment Act and reconsider the scheduledsolar subsidy cuts.

The German government has been pushing for months to adopt cuts to feed-in tariffs of between 20 and 40 per cent, which according to ministers are necessary in order to reduce the cost of the incentive scheme to the taxpayer. The majority of states, however, voted to send the bill to an arbitration conference with Germany’s Lower House, the Bundestag, arguing that such drastic subsidy cuts threaten thousands of the sector’s estimated 130,000 employees and may cause a rise in the price of electricity. The opposition to the scheduled feed-in tariff cuts did not get a big enough majority to reject the law, but had enough support to delay it, potentially for several months.Among the states that opposed the subsidy cuts were some eastern Germany and Bavarian conservatives in areas reliant on solar power firms or which get good revenue from panels used in the conversion process.States run by the Green partyand the Social Democrats, as well as some other areas of Germany where solar power provides economic growth and employment, also defended the subsidies that have helped Germany become the world’s largest market for photovoltaic energy.

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!m[](/uploads/story/84/thumbs/pic1_inline.png)Since the 1990s Germany has significantly increased its production of solar energy, mostly because of its feed-in tariff policy whichsubsidises clean energy projects by spreading the cost difference among the country’s utilities’ customers. Thanks to thisincentive scheme,Germany became the world’s top installer of photovoltaic power, with a solar capacity of around 25 GW, or half of the current global capacity.But as the countryhas met its renewable energy targets, theGerman Bundestag has approved plans to cut solar subsidies as of 29 March 2012. The subsidised support for solar was expected to be reduced by between 20 and 40 per cent this year, depending on the size of the solar plants. According to the industryand its proponents,such incentive cuts will depress installation levels and threaten German manufacturers, which are already struggling with the rising competition from China.

“The legislation in its current form would threaten Germany’s solar industry,” said Winfried Kretschmann, the Green Party environment minister in the south-western state of Baden-Wuerttemberg, in the Bundesrat. “This law would put our success story at great risk,” he addedahead of the vote on Friday.
In response to the opposition, government officials said they would continue to push for the cuts to be adopted as soon as possible.The chancellor’s spokesman on Friday stressed that Ms Angela Merkel continued to believe that the subsidy cuts were the only way to reform the system. Notwithstanding the strong position of the government,the mediation committee will probably notmake a final decision for several weeks.Analysts claim it is unlikely the proposed subsidy cuts to be fully rejected, but the delay would give solar firms more time to complete projects while alsoincreasing the possibilityfor more modest reductions tothe solar incentives.

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