The German government wants to reduce subsidies paid to users of solar panels, but the upper house of parliament comprising the 16 state governments has voted against the legislation, saying it goes too far.
Most solar panels in Germany are on roofs
A plan by Germany's center-right coalition government to reduce, and in some cases eliminate, state subsidies for solar panels was stalled Friday when the upper house of parliament voted to reject the legislation.
The ruling, which was to take effect on July 1, would have cut Germany's generous subsidies by 16 percent for solar panels placed on house roofs, where most panels are kept in Germany.
It would also cut subsidies for panels in open space areas by 15 percent and eliminate subsidies for panels on arable land all together. The government has also planned for further cuts in 2011 and 2012.
The upper house, or Bundesrat, is made up of Germany's 16 state governments. Members who voted against the legislation said it went too far, and called for a new bill with cuts not exceeding 10 percent.
The lower house, or Bundestag, passed the legislation at the government's request earlier this year. Members of both houses are to discuss reconciling their two proposals, but if there is no agreement the Bundestag has the ability to override the Bundesrat's vote.
The legislation would elimate all subsidies for solar panels on arable land
Incentives for innovation
Bundesrat member Ralf Christoffers, Brandenburg's economic minister and a member of the Left Party, said cutting subsidies would slow down the industry's ability to research and develop new technologies.
"Innovation needs financing, and financing needs reliable conditions," he said in parliament on Friday.
But Chancellor Angela Merkel's Christian Democrat-led government has argued that the subsidies themselves are hampering innovation, having inadvertently saturated the market with lucrative solar panels without creating incentives to improve on existing technology.
Ursula Heinen, a parliamentary official in the Environment Ministry, defended the legislation saying market saturation could "cost millions without helping the German solar industry."
German solar firms face tough competition in emerging markets
The German solar energy industry took hope from Friday's vote, with German Solar Industry Association CEO Carsten Koernig saying the government's proposed cuts would create an "existential emergency" for small and mid-size solar energy companies.
"We hope that the Bundestag will follow the request by the Bundesrat to reduce subsidies by no more than 10 percent," Koernig told news agency Reuters on Friday.
He added that he hoped for a quick decision and that "we have no interest in a delay," saying the industry needed "investment clarity."
Editor: Rob Turner