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Germany’s Solar Installs Break Record Amid Race for Subsidy

Published at: Jan 9, 2012
source: Businessweek

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Record solar installations in Germany will trigger automatic reductions in subsidies, which are designed to decrease as installed capacity increases.

Germany added a record amount of solar panels last year as developers raced to beat a subsidy cut in the world’s biggest photovoltaic market.

December installations reached 3 gigawatts, the most that Germany ever added in a single month, the Bundesnetzagentur grid regulator said today. Volume for 2011 may be the country’s most ever, 7.5 gigawatts, according to preliminary estimates, a level that the BSW-Solar lobby group said will probably trigger an additional 15 percent subsidy cut starting in July.

The figures add to pressure on Chancellor Angela Merkel’s government to curtail subsidies that have supported a three-year boom, making Germany the top market for solar power. They also indicate strengthening demand may help offset the plunging price of panels that’s depressed the shares of such manufacturers as Q-Cells SE and LDK Solar Co.

“Prices for solar systems are falling quicker than subsidies,” the grid regulator’s head, Matthias Kurth, said in an e-mailed statement.

German Environment Minister Norbert Roettgen will invite the energy industry for talks about the installations, market developments and possible adjustments to solar subsidies next week, he said today in an e-mail.

The year-end rush was sparked in part by “massive” panel inventory from Chinese manufacturers for large-scale solar plants, said Frank Asbeck, chief executive officer of Solarworld AG, Germany’s largest panel maker.

‘Dumping’ Panels?

Solarworld is seeking to join forces with European peers to start proceedings against Chinese competitors for allegedly “dumping” panels on German markets at below-market costs in recent months, he said.

Renewable energy subsidies in Germany need to decline to be more in line with the realities of the current economic climate, Economy Minister Philipp Roesler has said.

A planned subsidy cut that took effect on Jan. 1 and Roesler’s proposal to cap yearly installations at 1,000 megawatts also helped cause the installation rush, Asbeck said. He suggested further cuts to subsidies for large solar plants.

“It’s right that we now adjust” above-market rates paid to operators of photovoltaic power plants, Roesler told his pro- business Free Democratic Party colleagues in Stuttgart last week. “Survivability means commercial viability.”

Cap Discussions

Roettgen criticized the discussion about a cap, saying it prompted the year-end rush as investors feared the support would eventually disappear. The so-called breathing cap currently in place, which reduces subsidies depending on new installation levels, is “adequate” to further drive down costs for solar power, he said.

Germany, which seeks to exit nuclear energy by 2022, added about 4,150 megawatts of panels in the fourth quarter of last year compared with about 3,400 megawatts in the first nine months. Installations of about 225 megawatts through April would trigger an automatic 15 percent cut in subsidies beginning in July, the regulator said. Germany installed about 7.4 gigawatts of panels in 2010 before Merkel’s government trimmed subsidies.

Industry Struggles

The country’s solar industry struggled with slowing demand in the first nine months of last year amid rising competition from manufacturers in China. Solon SE, based in Berlin, and Solar Millennium AG of Erlangen, Germany, filed for insolvency last month. Q-Cells, once the largest maker of solar cells, is looking for a buyer.

The figures leave Germany on course to surpass the 52 gigawatts that it’s targeting to install by 2020, based on its National Renewable Energy Action Plan, London-based researcher Bloomberg New Energy Finance said.

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