Germany to Axe Solar Panel Installations by More than Half in 2012

Germany has always faced many twists and tales with regards to its solar subsidies in the last 2-3 years. The reason is that the targeted solar panel installations are always more than what the government is trying for . While the German government is reaching for around 50 GW by 2020 , more than 20 GW of solar panels have been installed in by 2011 itself with a monstrous 3 GW surge of solar modules in December of 2011 itself. This means that Germany needs only about 3 GW of solar panel installs per year while it did around 7.5 GW in 2010 and 2011.

There is urgent need to reduce the solar capacity addition in Germany because

a) It is requiring almost half of the $21 billion renewable energy subsidies in 2011 while generating 3% of the total power

b) Too much solar power while put pressure on the power grid as at the peak afternoon hours solar can generate almost 10% of Germany’s power requirement which means shutting down other sources

c)   German Solar Panel producers have stopped benefiting from German domestic growth. Most solar companies in Germany have been decimated by Chinese competition and around 20000 solar jobs and 5000 companies have shut down.

The German economy and environment minister are on the same page saying that the German Feed in Tariffs will have to be reduced as the returns on putting solar panels is still very high.There are a number of proposals that are being considered on top of the 15% expected cut in FIT in July of 2012.One is a 30% cut instead of 15%.Others are a 2% cut each month in 2012 to let the solar developers adjust for the change. Expect solar demand  in Germany to be very high as installers get aggressive to keep ahead of the subsidy cut.

German Solar December Surge

The German Solar Energy Market is biggest in the world and has installed the largest number of solar panels for the last few years. 2012 promises to be no different with Germany again set to the biggest solar market for solar panel manufacturers though Italy would give good competition. The German Solar Subsidy program has been the best in the world unlike the start and stop feed in tariff programs of Spain,Czech,UK,Australia and other places. A stable step in cut of feed in tariffs has helped solar energy prices coming down by more than 50% in the last few years though demand has only increased.

The influx of cheap solar panels from China has let the December 2012 explode to almost 2-3 GW according to the German solar association BSW. The high rates of return of over 10% due to super cheap Chinese solar panels at 80-90c/watt has been the major reason for the explosion in demand which could be the biggest month in Germany ever. While German Solar Market has remained robust as ever,the German solar panel producers like Solon, Sunways have been vanquished with a number of major solar companies failing and getting acquired. The Asian solar companies have been the major beneficiaries of this demand growth in Germany and Europe.

Reuters

Germany’s large number of solar installations is still expanding too rapidly and must be restricted if the market is to be kept sustainable, German Environment Minister Norbert Roettgen said on Wednesday.Roettgen said while the government had aimed for new installations of about 3 GW last year, the figure had reached 7.5 GW, despite cuts to subsidies over the last two years in what is the world’s largest solar market.”We need to reduce new installations,” he said at an annual energy conference organised by German newspaper Handelsblatt. “Seven gigawatts (GW) a year is a no-go.”

The returns are still high in 2012 with existing FIT , so the German government may have to plan additional cuts with plans of

b) a cap on feed in tariffs to solar systems of  3 kilowatts only .This will prevent larger solar installations and building of large solar farms

Note Germany Feed in Tariffs have always followed many twists and turns each time as installations have always exceeded expectations.

The German Solar Feed in Tariff cut scheduled for July 2010 has got another twist with the Upper House of German Parliament Bundesrat not passing the Law in its current form.The one-off German Feed in Tariff cut has seen enough twists and turns to make a person go giddy . It all started with the new German government deciding to cut the highSolar FIT which was leading to outsized returns for investors installing solar panels in Germany leading to a situation similar to Spain’s  2008 solar frenzy .The reason was that the solar module prices had gone down by almost 50% in 2009  with the FIT rate ( higher subsidized electricity rates given to generators of renewable energy) going down by the only scheduled 10% .So in addition to the annual 10%  2010 cut , the German government decided to add another 16% Feed in Tariff cut byMay 2010 which led to a huge uproar from the industry.This led to a lot of bargaining between the industry,the coalition partners of the German government and the various industry lobbies.Ultimately the law went in with almost the same percentage of cuts but the cut was delayed from May to July . With the German Lower House Bundestag passing the government proposal , the Bundesrat’s approval was only supposed to be formality.However it seems that the Eastern German states which have the most to lose in terms of jobs and taxes from these cuts want to reduce the quantum of the cuts which in their original form would lead to a ~35% cut in one year.The law which is supposed to go into effect by July 1 might see more delays as it leads to more negotiations.