Germany Accelerates Cuts to Solar-Energy Subsidies

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http://www.bloomberg.com/apps/news?pid=20601100&sid=atc5nAYE_uNA&refer=germany

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By Jeremy van Loon

June 6 (Bloomberg) -- Germany legislators voted for steeper cuts to subsidized prices for electricity generated from solar panels and wind turbines, after almost a decade of state aid made its renewable-energy industry one of the world's strongest.

Chancellor Angela Merkel's coalition in the lower house of parliament in Berlin today approved trimming the fixed price paid to most solar generators by 10 percent and reduce aid for offshore wind power after 2015. Last year the guaranteed price paid for solar-produced electricity was reduced by 5 percent.

Europe's largest power market is altering its renewable- energy law to spur the industry to control expenses and improve efficiency. Almost nine years of subsidized prices have spawned the world's biggest market for photovoltaic panels and created the largest exporter of equipment for wind energy. Renewable- energy companies were pleased the reductions weren't worse.

``We assess the new law as positive and it will spur new investment,'' said Bjoern Klusmann, who heads the Berlin-based BEE renewable energy lobby group, in an interview. ``The cuts to solar are not as deep as we expected, but still mean that the industry will have to take considerable steps to adjust.''

Some lawmakers had demanded a cut of as much as 30 percent in the subsidized rate. The law will help support new investment in the industry, said a group that represents the sector. The so-called feed-in tariffs, a concept pioneered in Germany, oblige utilities to buy renewable energy from a range of producers, from households with solar panels to entrepreneurs who built small plants to benefit from price guarantees.

Three-Year Horizon

For solar energy, the price will decline between 8 percent and 10 percent annually over the next three years, for equipment generating less than 1 megawatt of electricity, or supplies for less than 2,000 average European homes. The law also creates a new level of prices for generating more than 1 megawatt of power that starts with a fixed tariff of 33 euro cents, or about 25 percent less than under the previous regime.

The guaranteed price ranges between 33 cents and 43 cents a kilowatt-hour, or the amount to power a vacuum cleaner for about 60 minutes, from a previous maximum of 47 cents.

``Only with massive efforts in research and development and considerable investment in new, highly modern facilities can we reach the ambitious targets politicians have set out,'' said Carsten Koernig, who heads the Berlin-based BSW German solar lobby group, in a statement on the organization's Web site. ``But the risk of the market collapsing has been exorcized.''

The fixed price utilities pay for electricity generated at offshore wind turbines will stay level until 2015 and then decline 5 percent a year, while prices for power from geothermal, water and other sources will fall between 1 and 1.5 percent a year starting next year.

Wind Farms

Owners of wind farms who replace older, smaller turbines with newer, more powerful models will also receive support, something the industry had been lobbying for, said BEE's Klusmann. The law comes into effect in January, an ``mistake'' on the part of the government that will hamper investment for the rest of the year, he added.

Shares of Q-Cells AG, the world's largest maker of photovoltaic panels, fell as much as 1.7 percent to 73.25 euros and were little down 1.1 percent to 73.70 as of 3:22 p.m. in Frankfurt. Nordex AG, a German windmill maker, fell 40 cents, or 1.3 percent, to 31.19 euros.

The measures will lead to an additional cost of 6.2 billion euros ($9.7 billion) for energy consumers in 2015, declining to 600 million euros by 2030, according to a draft of the law on the parliamentary Web site. The goal of the law is to help increase the proportion of electricity from renewable sources to as much as 30 percent by 2020, increasing ``continuously'' thereafter.

Pioneer

``This is a good day for the energy in our country and for climate protection,'' said Environment Minister Sigmar Gabriel, in a speech to lawmakers in Berlin today. ``I don't know of any other country that is such a pioneer in climate protection and renewable energy.''

Some lawmakers, including the Green Party's Hans-Josef Fell, criticized the new law for not supporting the renewable industry enough and threatening to damage it with the cuts. Some 522 parliamentarians cast votes today, with 413 members voting in favor of the new law, 52 voting against it and the remainder abstaining.

Global investment in renewable energy is expected to rise to 100 billion euros in 2010, almost doubling from 2006, according to the United Nations Environment Program. About a quarter of a million people, a figure that is expected to double by 2020, work in industries related to renewable energy in Germany.

The German government also voted to support a motion on increasing the use of cogeneration, a technique that produces both electricity and heat from power stations, to warm houses and buildings.

To contact the reporter on this story: Jeremy van Loon in Berlin at jvanloon@bloomberg.net.

Last Updated: June 6, 2008 10:00 EDT