German government cuts FiT from March 9
Mar 1, 2012 - Mark Osborne - pv-tech.org
Due to an aggressive FiT cut of between 20% for residential and 30%, for large-scale PV installations the German government will introduce the FiT cuts from March 9, 2012
Proposed FiT Table
Due to an aggressive FiT cut of between 20% for residential and 30% for large-scale PV installations, the German government will introduce the FiT cuts from March 9, 2012 to eliminate a rush of installations to beat the tariff change.
Tariff changes include 19.5€c per kWh for small-scale to 16.5€c per kWh for larger systems and only 13.5€c per kWh for 10MW or below utility plant-scale systems.
Cuts will also be made via a new mechanism each month starting in May 2012 of 15€c per kWh, while utility-scale projects over 10MW will have all incentives withdrawn after July 1, 2012.
According to a research note issued by Deutsche Bank analyst, Vishal Shah, cuts are intended to reduce annual PV installations to within the range of 2-2.5GW per year. It has been suggested that a new law to cut subsidies by as much as 20-25% from March 9 could be introduced in the cabinet next week.
The new tariff system is also said to eliminate the self-consumption bonus and effectively puts a cap to the subsidy per unit to 85% of electricity produced for small systems and 90% for large systems.
“While we have been anticipating significant cuts, we believe the proposal introduced is a lot worse than feared and increases the risk of significantly reducing the installation run-rate in Germany (Germany could account for 60%+ of Q1 shipments),” wrote Shah to investors. “Given the strong push-back from industry associations and a few states, it is possible that the final law is not as harsh as currently proposed, but in any case, we see significant downside risk to fundamentals beyond Q1. Our checks indicate that German distributors could start cancelling orders immediately, in order to work down inventory. Solar companies have not yet seen the negative impact from ongoing subsidy discussions, but we anticipate strong supply chain reaction over the next few weeks. Poly prices have remained stable lately, but we now see increasing risks of additional poly price declines with spot poly reaching low $20/kg in the next few months.”
According to the German PV trade organization BSW-Solar, thousands of employees from more than 50 solar companies protested today in Berlin and in many other cities against government plans to radically change the FiT.
“It is completely incomprehensible to us how the Federal government can argue these drastic reductions,” stated Dr. Karl Kuhlmann, CEO of S.A.G. Solarstrom AG in a statement denouncing the FiT changes. “The share of costs of photovoltaics in the Renewable Energy Act (EEG) levy of consumers continues to decline, but is used again and again by the energy corporations as a welcome justification for some quite significant increases in electricity prices. This is complete nonsense. The Renewable Energy Act levy has increased from 3.53 Eurocents in 2011 to 3.59 Eurocents in 2012, yet the suppliers in Germany increased the electricity prices by 3.4% on average at the start of 2012, many even higher. The high portion of renewable energy even had a considerable cost-cutting impact on the electricity exchanges. Photovoltaics is being made a scapegoat by the energy corporations in order to expand their own profit margin without any risks,” added Dr. Kuhlmann.
S.A.G. Solarstrom said that it expects a significant decline in the German PV market as a result of the planned cutbacks.
“The German market will lose its global significance with this decision,” noted Kuhlmann. “It is a sad state of affairs for Germany as a business location that the Federal government wants to turn the statutory framework conditions for our industry completely upside down within one year. In this area too, we are experiencing that politics does not set any reliable framework conditions."
EuPD summary of key changes:
• Systems up to 10kW: 20.2% reduction to 19.5c per kWh.
• Systems from 10 to 1,000kW: between 25 and 29% reduction to 16.5c per kWh.
• Systems larger than 1,000kW: circa 26% reduction to 13.5c per kWh.
• Systems over 10,000kW: Future subsidies will be dropped entirely.
• New small systems will only be remunerated for 85% of the electricity produced; middle-sized and large systems will receive remuneration for 90%.
• The bonus for own consumption will be dropped.
• From May onwards, there will be a monthly cut (degression) of 0.15c per kWh for all new systems.
• From 2014 a continual decrease of the yearly installation corridor by 400 MW, and from 2017 the installation corridor will lie between 900 and 1,900MW.
“We generally regard the intervention critically. The breathing cap worked, and would have further slowed down the market after the lack of growth between 2010 and 2011. Market instruments require time in order to come into effect, there was no real need to intervene in the market again,” commented chief analyst of EuPD Research, Markus Lohr. “Currently, there is no definite commitment to an installation goal of 52 GWp. The question is – how can this goal be achieved cost effectively? If the reductions sink too low and the market is stalled, cost efficiency cannot be guaranteed. The subsidies agreed on today will not mean the end of the German market, but they will leave manufacturers and installers with very little breathing space.”
Opposition to changes in the past have led to policy amendments that were less radical than originally planned.