German energy minister rejects cap but agrees to monthly FiT cuts

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Following meetings between the German government and solar industry representatives yesterday, Germany's Federal Minister of Energy and Environment, Norbert Röttgen, has announced his intention to accelerate the degression of feed-in tariffs. The Renewable Energy Act will need to be rewritten in order to incorporate the changes. Both the government and the solar industry were said to have agreed that FiTs should be cut every month, rather than the current six months, to avoid the last minute rush that, in 2011, created a record level of 7.5GW capacity.

The Federal Solar Industry Association (BSW-Solar) has asserted that Röttgen is committed to a step-by-step reduction in solar subsidies and rejects a PV cap. The cost of the subsidies has sparked a heated political debate within Chancellor Angela Merkel's coalition government. Röttgen, a staunch supporter of solar energy and renewables despite being a member of Chancellor Angela Merkel’s centre-right Christian Democratic Union, was under heavy pressure within his party to reduce the subsidy asked for by the solar sector. Economy Minister Philipp Röesler feels the subsidy system needs to be overhauled to prevent costs from spiralling. The junior coalition partners, the Liberals (FDP) and members of the economic wing of Merkel's conservative CDU party have called for a change in the way the subsidies in the industry have operated to date, accusing Röttgen of failing in his brief.

FiT reductions will not exceed 24% per year, the German solar lobby group BSW said in a statement following the talks. Last summer Germany cut tariffs by 15% and again on January 1 this year. Through this new system Röttgen believes solar subsidies could be phased out by 2017, saying, “The increase in installations in the past few years has gone far beyond what we had targeted in our legislation.”

“It was clear that Röttgen would accelerate feed-in tariff digressions which would remove the bloom from the rose,” Jesse Pichel, analyst for Jefferies Group, said today. “This will remove the ability for the German market to materially upside estimates.”

Meanwhile – the share prices of solar companies have been plummeting amid fears that competition from cheaper Chinese imports will add fuel to the fire. However, industry specialists have reported that many German firms will initially profit from the subventions. These fears are perhaps being propagated by two major German companies – Solon and Solar Millennium – recently filing for bankruptcy.

However, Chinese manufacturers listed in New York led the declines after the announcement last night, with Trina Solar falling 16% and JA Solar Holdings dropping 15 %. GCL- Poly Energy Holdings slid the most since November in Hong Kong. In Europe, Meyer Burger, Solarworld and SMA Solar Technology also fell today.

In the US, Suntech Power Holdings dropped 14% to US$3.20 at the close in New York and First Solar slipped 10% to US$38.70. Trina Solar declined 16% and the 37-member Bloomberg Global Leaders Solar Index slipped 3.4%.

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