Germany Close to Slashing Solar Subsidies

The German government is close to slashing subsidies for solar energy by 20 to 40 percent. The current discussion in Germany’s Budestag (parliament) could threaten Germany’s global leadership in the development of solar power, which currently stands at approximately 25 gigawatts, or half the world’s current solar capacity.

Since the 1990s, Germany has ramped up its production of photovoltaic energy, mostly because of an aggressive feed-in tariff policy which subsidizes clean energy projects by spreading the cost difference among the country’s utilities’ customers. But the combination of austerity measures and cheap imports from Asia have pushed Chancellor Angela Merkel and her center-right ruling coalition to roll back some of Germany’s solar programs.

Opponents of the solar power subsidy cuts point to a market running amok because of rate guarantees that can last up to 20 years. The German government had cut some subsidies out of the last fiscal year’s budget, but solar projects still accelerated and spiked to the installation of an additional 7.5 gigawatts of power. The result was an increase in electricity rates because of rising surcharges on utility bills nationwide. Supporters of such other renewable energy as wind power also complain that the rush to solar leaves little on the table for companies seeking opportunities to scale their technologies.

But proponents of the solar subsidies argue that Germany has no choice but to pursue alternative energy options, especially since the Merkel government last year pledged to shutter its nuclear power industry. Even conservative political leaders in the country’s eastern states and Bavaria, which are home to a thriving solar industry that provides many jobs for their constituents, are lining up to oppose the cuts.

To that end, the Budestag’s upper house, or Bundesrat, on Friday declined to vote on the proposed cuts and referred them to a parliamentary mediation committee that will renegotiate the bill. The political climate in Germany, underscored by the country’s center-left victory yesterday in the country’s most populous state, is also a signal that any threat to the solar industry despite its recent struggles will not be taken lightly by the electorate. While some of Germany’s largest solar companies have filed for creditor protection in recent months, the industry still is set for growth and employs at least 130,000 Germans.

Leon Kaye, based in California, is a sustainability consultant and the editor of GreenGoPost.com. He also contributes to Guardian Sustainable Business and Inhabitat. You can follow him on Twitter.