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Solar panels
Panels are cheaper, but customers still need enough compensation to invest in solar energy

Solar incentives

October 15, 2009

Germany has been a leader in subsidizing renewable energy industries, but Chancellor Angela Merkel's new government has said hefty cuts may be coming. The solar industry, however, is warning against taking drastic steps.


In coalition talks, Chancellor Angela Merkel's Christian Democratic Union (CDU) and the pro-business Free Democratic Party (FDP) have discussed drastically slashing renewable energy subsidies as the industry becomes more efficient.

"Where it makes sense, we may have to make cuts," energy expert Michael Fuchs told reporters earlier this week, "For example where technology has led to a reduction in price, as with solar energy,"

CDU energy expert Joachim Pfeiffer said the subsidies for solar power will be reassessed in 2010. This is a schedule both the economic and the environmental committees of the upcoming coalition could agree on.

Costs for solar plants have dropped

According to Holger Krawinkel, an energy expert at the Federation of German Consumer Organizations, cuts are necessary for compensation for selling solar power back to the public grid.

"If costs for solar plants drop by 30 percent, then it's not quite logical why the compensation shouldn't be proportionately reduced," he said. "Our demands have been met: the plants have gotten cheaper; the Renewable Energy Sources Act (EEG) planned a reduction anyway."

Carsten Koernig, executive director of the German Solar Industry Association, said subsidies to the industry are cut by 10 percent each year as it is. This was appropriate, considering that the industry had been able to cut its costs by 50 percent since 2000, he added.

"Now the question is: Are there even bigger margins? We warn against large-scale changes," said Koernig, who conceded that the new government may want to assess the need for change, considering the recent cost cuts.

Large-scale reductions, however, could have a negative impact on customers' willingness to make the initial investment in solar panels, should the compensation for selling back to the grid be slashed too drastrically.

However, Koernig said he suspects another motive: "We all know that [the German government] mainly want to implement longer runs for nuclear power facilities."

Solar panels
The solar industry has drastically reduced the cost of panels in recent yearsImage: AP

Selling energy to the public grid

Solar energy customers who have installed solar cells at home and feed energy into the public grid are now getting paid a hefty 43 cents ($0.64) per kilowatt hour as an incentive to purchase the initial solar set-up.

The costs of subsidies is passed on to all electricity consumers, said Koernig.

"This leads to an increase of the electricity tariff by 0.5 percent," he added. In comparison, the energy wasted by leaving electronic devices in stand-by mode adds up to 10 percent of an average customer's bill.

Some are claiming this amount is too high. According to Krawinkel, the subsidy should drop proportionally. "Do I need a return of 15 or 20 percent [for solar energy sold back to the grid], or shouldn't three, four, five percent do the job of an incentive for this innovation?

"The purpose of the EEG is not to finance extra incomes," he said.

Author: Sarah Steffen

Editor: Kate Bowen

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