World's Biggest Solar Market Reduces Incentives

Brian Hicks

Written By Brian Hicks

Posted June 29, 2012

The German government recently passed a law that would reduce incentives for solar power (called a “feed-in tariff,” or FIT) by up to 20%.

The German Bundestag (lower house of parliament) has approved the law, a much tamer version of the previously proposed cuts, and the Bundesrat (upper house) will likely approve the decision Friday.

The new version postpones voting on plans to set in place a 90 percent limit on all incentives for solar power plants exceeding 10 kilowatts until 2014.

According to critics of Germany’s FIT policy, the tariffs worked too well—growth was too fast as a result, and the solar sector overheated in Germany. Germany currently can produce 28 gigawatts from existing solar arrays.

The FIT policy, which had utilities pay tariffs to almost 1.1 million solar power producers, propelled Germany’s solar industry to world-leading status. Indeed, the nation commands a third of the entire world’s installed solar capacity.

Under the new revision, incentives will be stopped in about five years, when total capacity hits 52 gigawatts. However, FIT by then should also drop to levels that render solar power about as expensive as ordinary fuels.

After Japan’s Fukushima fiasco, German Chancellor Angela Merkel made a strong push for abandoning nuclear energy, which was the biggest catalyst for Germany’s impressive rise up the solar energy ladder.

Today, Germany is far more reliant on alternative (read: renewable) energy sources than any other European nation.

Given that Germany has the most financial clout in the Eurozone, that is saying quite a bit.

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