Solar industry prepares for German tariff blow

The German government is expected to announce cuts to its renewable energy feed-in tariff incentive scheme later this week, with reports claiming the scale of the cuts could be greater than expected.

Shares in several of the world's leading solar energy firms fell by between one and five per cent on Friday after Reuters reported that the German government plans to cut solar subsidies by 16 to 17 per cent, as opposed to the 10 per cent cut already set out in its Renewable Energy Act.

Government and industrial sources told the news agency that the cuts would apply to new roof and open-field solar panel installations and would come into effect from April. They added that bigger cuts were planned for solar installations on agricultural land, while further cuts would be introduced in 2011 if German solar projects deliver more than 3,000MW of capacity over the next year

A spokeswoman for the environment ministry told Reuters that the government had yet to finalise its decision, adding that an announcement was planned for this week.

The German government has made it clear that having built the world's largest solar energy market on the back of its generous feed-in tariffs, it now feels the sector is over-supported and can continue to grow with a lower level of subsidy. However, while cuts had been expected, the scale of the mooted reductions will still have shocked many within the industry.

Shares of leading Chinese solar panel manufacturers, Trina Solar and Yingli Green Energy Holdings, fell three and four per cent respectively on the New York Stock Exchange following the news.

Similarly, the Nasdaq-listed First Solar saw its share price slip one per cent, while SunPower Corp was also hit by a one per cent fall.

Germany is a major market for all of the world's largest solar panel firms, with some generating as much as 70 per cent of their revenue in Germany. Analysts said that any cut in German tariffs would force them to accelerate plans to diversify into new markets and could kick-start the industry consolidation that experts have been predicting for some time.

However, it was not all bad news for solar firms last week, after the French government announced revisions to its feed-in tariff scheme that will result in some of the most generous levels of subsidy in the world.

According to reports, solar panels that are integrated in a "visually appealing manner" will earn their owners €0.58/kWh (£0.50/kWh) through the new feed-in tariff - the highest feed-in tariff rate in the world currently.

Standard installations for commercial, industrial and agricultural sites will also receive €0.50/kWh, putting France well ahead of the €0.39 rate expected in Germany.