BERLIN - German Environment Minister Norbert Roettgen proposed a 15 percent cut in support for new roof-mounted solar power, a bid to ease the industry toward free competition but a slightly smaller reduction than expected.
The cut confirmed figures earlier published by Reuters and will take effect from April. It amounts to slightly less than the 16 to 17 percent reduction to the so-called feed-in tariffs that sources said last week was being eyed. Roettgen added that the tariffs for solar energy generated from open field and farmland sites should also be cut from July, by 15 percent and 25 percent respectively.
Cuts in public support will weigh on companies like Q-Cells, Phoenix Solar and SolarWord, which depend on demand from Germany, the world's biggest market for solar energy as measured by installed capacity.
Proponents of cuts say the industry is overly subsidised. Prices for solar products have fallen by as much as 50 percent over the last year, which has increased pressure on industry players to have more efficient production and become more competitive.
Such a step would lead to more consolidation, but this is what the sector needs, said Olaf Koester, manager of the New Energy Fund at VCH.
Additional cuts of 2.5 percent will be made from 2011 if installations exceed 3,500 megawatts (MW) in the previous 12 months. A further cut of 2.5 percent is possible once the volume surpasses the 4,500 MW mark, Roettgen said.
Feed-in tariffs will be raised from 2011 by 2.5 percent should installations fall below 2,500 megawatts.
Since Germany's new center-right coalition government was elected in September, the solar power industry has expected cuts to the country's solar aid, prompting installers to rush to build projects before they are announced.
The minister said the target for new installations was some 3,000 MW per year and just over half this had previously been achieved. However, lately the total was considerably higher than 3,000 MW, he added.
The global solar power industry has struggled over the past 15 months to secure funds for new projects as the financial crisis hit investment. Still, Germany's lucrative incentives have kept the country at the forefront of the industry.
(Writing by Christoph Steitz and Dave Graham; editing by Karen Foster and Andrew Callus)