The German Government has agreed an amendment of the German Renewables Act 2009 in order to revise the feed-in tariff for electricity generated from solar radiation.

Shortly after the German federal election in September 2009, the parties of the new governing coalition announced plans to reduce subsidies for solar electricity. In its session on 3 March 2010, the German Federal Cabinet agreed an amendment of the German Renewables Act 2009 (GRA) in order to revise the feed-in tariff for electricity generated from solar radiation. The proposed reductions are less drastic than the expected 25 per cent cut. Effective as of 1 July 2010, the feed-in tariff for roof installations would be reduced by 16 per cent and for field installations generally by 15 per cent (in addition to the reduction on 1 January 2011 already set forth in the GRA). At the same time the Government intends to stabilise the amount of newly-installed capacity of solar electricity in Germany at 3,000 megawatts (MW) per year. The Bill is due to be introduced to the Federal Parliament shortly and is expected to become effective on time without any major changes.

Promotion of Solar Electricity Pursuant to Current German Renewables Act 2009

The promotion of solar energy under the GRA comprises a differentiated feed-in tariff system and annual degression.

Tariff System

The GRA provides for a fixed feed-in tariff for a period of 20 years plus the year in which the installation was commissioned. The tariff differentiates between solar electricity generated by installations attached to or on top of buildings (“roof installations”) and field installations. Intending to give preference to roof installations, the GRA initially promoted these with an increased feed-in tariff ranging from 43.01 to 33 (euro) cents/kwh depending on the size of the respective installation, whereas field installations were entitled to a feed-in tariff of 31.94 (euro) cents/kwh. As a consequence, 80 per cent of the capacity of solar electricity installations in Germany is through roof installations.

Existing Annual Degression of Feed-In Tariff

Pursuant to the GRA, the fixed feed-in tariffs are being reduced by an annual degression to factor in technological development and lower production costs. For field installations, the degression percentage generally amounts to 10 per cent in 2010 and 9 per cent from 2011 onwards. This general degression will be increased by 1.0 percentage point as soon as the capacity of the installations exceeds certain amounts - 1,500 MW in the year 2009, 1,700 MW in 2010, and 1,900 MW in 2011. On the other hand, in the event of the capacity falling below a certain amount - 1,000 MW in the year 2009, 1,100 MW in 2010 or 1,200 MW in 2011 - the general degression percentage will be decreased by 1.0 percentage point. In 2009, the capacity of newly registered solar electricity installations exceeded the limit of 1,500 MW. Accordingly, for field installations starting their operation in 2010, the Federal Network Agency announced a decreased feed-in tariff of 28.43 (euro) cents/kwh independent of the amendment to the GRA.

Federal Cabinet Resolution: Additional One-Time Reduction on 1 July 2010

Reduction of Feed-In Tariff

The Federal Cabinet has agreed a Bill reducing the feed-in tariff paid to solar electricity installations in addition to the annual degression already effective since 1 January 2010. This additional reduction would occur once on 1 July 2010 and affect all solar electricity installations except for field installations already approved before 1 January 2010 and connected to the grid before 2011. While the feed-in tariff for roof installations of any size would be reduced by 16 per cent, the exact amount of the applicable reduction for field installations would depend on the characteristics of each plot of land. Specifically, the Government intends to increase the use of land converted from military or economic use (e.g., landfill, former industrial or commercial use areas) for renewable energy purposes. Field installations on this land would therefore benefit from a reduction of only 11 per cent, whereas all other field installations including those on plots of sealed land (e.g., land next to motorways or railway tracks, both of which are newly introduced to the GRA) would be reduced by 15 per cent. A significant change for investors is the complete abolition of the feed-in tariff for field installations on farmland, also effective as of 1 July 2010.

Future Degression

The annual degression relating to solar electricity installations provided for in the GRA remains in force. Therefore, further annual reductions will occur from 1 January 2011 onwards. However, to encourage an annual increase in the capacity of solar electricity installations from 2,500 to 3,500 MW, the limits for a revised degression percentage would be amended. The annual degression of 9 per cent from the year 2011 onwards (see above) would be reduced by 2.5 per cent as soon as the capacity of the installations registered within the previous year falls below 2,500 MW and by 5 per cent as soon as the capacity falls short of the further limit of 2,000 MW. In the event of the newly registered capacity of solar electricity exceeding the limit of 3,500 MW, the degression would be increased by 2 percentage points in 2011 and by 3 percentage points in 2012. For every 1,000 MW over the limit, an additional 2 percentage points would apply.

Summary

According to the Federal Government, the reductions agreed by the Federal Cabinet and yet to be passed by the Federal Parliament would help reduce costs for electricity customers by EUR 2 billion. The Federal Government claims, however, that the future feed-in tariff still allows for profitable investments in solar energy in Germany given technological developments and lower production costs.  

Overview: New Feed-In Tariff for Solar Electricity