Germany poised to phase in solar subsidy cuts

Controversial cuts to the feed-in tariff incentives offered to German businesses and households that install solar panels could be introduced, after a parliamentary mediation committee recommended that the proposed cuts be watered down over the next three months.

Chancellor Angela Merkel's coalition government had proposed cuts of 16 per cent to the feed-in tariffs offered for rooftop solar panels. It also planned to reduce incentives for solar installations on open-field sites by 15 per cent, cut feed-in tariffs for so-called conversion sites by 11 per cent, and axe feed-in tariff payments for new solar sites on agricultural land altogether.

The proposals, which had been due to take effect from the start of this month, were passed by Germany's lower house, the Bundestag, in May.

However, the cuts faced fierce opposition from the left-of-centre Social Democrats, which argued that they would lead to job losses and could derail Germany's world-leading solar industry, and the proposed reforms were subsequently blocked in the Bundesrat upper house in June.

The stand-off resulted in a parliamentary mediation committee being appointed to try and break the deadlock between the two houses.

The committee ruled yesterday that each of the proposed cuts should be reduced by three percentage points from July to the end of September, with the changes being applied retroactively to all installations completed after July 1.

The Bundesrat is now set to vote on the new proposals on Friday, although reports yesterday suggested the Social Democrats believe that the scale of the new cuts could still damage the solar industry.

If the Bundesrat votes down the proposed cuts for a second time the Bundestag has the power to overrule the decision. However, if the government does resort to forcing through the changes, it will be seen as a blow to chancellor Merkel's increasingly beleaguered government.

Germany is home to Europe's largest solar industry, and although solar firms are increasingly focusing on southern Europe, any cuts to the feed-in tariff are likely to be a major problem for the sector.