German Cuts: Short-Sighted?

The German government coalition recently made a cabinet decision to cut back support of PV solar electricity funding. Consequently, solar power plants may be promoted significantly less in the future. Despite major concessions from the industry, the reduction of the solar feed-in tariff (FiT) is considered drastic, although the actual relief for electricity customers will only be marginally affected for the time being.

At the beginning of 2010, Germany’s FiT was reduced by 9 to 11%, as regulated in the EEG (Erneuerbare Energien Gesetz, the German Renewable Energies Act). The July 2010 additional one-time cut endangers Germany’s world-leading PV market position. According to the CDU (Christlich Demokratische Union, Conservatives) and FDP (Freie Demokratische Partei, Liberals) coalition plans the support for roof top systems will be decreased by 16% and green field systems located in conversion areas by 15%, effective 1 July 2010. For green field systems located in industrial or military-related areas the cut back will be 11%.

Although the additional cut will come three months later than initially planned in the enforcement, the coalition decision doesn’t provide the support needed by the industry and potentially undermines the German PV industry in general - and could even drive the loss of thousands of jobs. Taking into consideration that as early as 1 January 2011 another significant FiT rate reduction is expected, this could jeopardize hundreds of companies.

Another signal that is disturbing to the PV industry is that Röttgen, the federal minister for environment, wants to cut PV research funds by nearly 25%. This could also undermine the competitiveness of this accelerating green industry, just when it is needed the most.

If the government wants the German solar industry to remain competitive and decrease costs rapidly, it needs a PV technology strategy that ensures a reliable German market. To that end, the PV industry leaders need to send an unambiguous message to the government: The double-digit reduction plans jeopardize one of the most important job engines and economic drivers for our country. It also jeopardizes Germany’s commitment to reducing greenhouse gases by increasing its share of renewable energies. To meet our commitment requires a thriving market and competitive solar energy companies in Germany.

We all need to ask ourselves: Should renewable incentives increase or decrease? And, what are the costs in terms of jobs, the economy and the environment if we make short-sighted decisions?