Environment Ministry and Solar Industry Jointly Propose 2011 Mid-Year Solar Feed-in Tariff Reduction

The Federal Ministry for the Environment (BMU) and the solar industry association BSW Solar jointly presented a proposal to bring forward parts of the regular 2012 solar feed-in tariff cuts to 1 July and 1 September 2011. The July/September reductions up to 15% shall depend on PV capacity installed in March, April and May 2011.  The move is due to the continued massive solar expansion and the increasing costs for consumers in the recent past, which triggered criticism from various parties, including consumer protection agencies.

The proposal contains the following main elements:

  • The proposed 1 July/1 September 2011 reduction shall bring forward parts of the 2012 degression currently contained in the Renewable Energy Sources Act (EEG);
  • For freestanding PV systems, the degression shall be effective 1 September, for other systems it shall be 1 July 2011;
  • The July/September reduction will cover the quantity dependent part of the 2012 degression, i.e. the part of the 2012 reduction that depends on the additionally installed capacity in 2011 ( additional 3% above 3,500/4,500/5,500/6,500 MWp);
  • For capacity growth exceeding 7,500 MWp, an additional 3% degression shall be introduced. This brings the maximum mid-year reduction to 15% (i.e. 5 times 3%);
  • The 9% reduction for 2012 that applies regardless of additionally installed capacity remains unchanged and shall remain to become effective 1 January 2012;
  • The 2011 mid-year degression rates will be based on a forecast for which the new capacities of March to May 2011 will be extrapolated for the whole year by the Federal Network Agency;
  • For installations starting operation after 1 January 2012, the degression rate shall depend on the actual market growth in 2011 (and not the extrapolated figures used for the July/September 2011 reduction).

Based on this proposal, a hard cap on solar expansion, which had been strictly opposed by the industry association BSW Solar, is off the table for the time being. “We welcome the decision, which expresses the political commitment with respect to the expansion of photovoltaics, the German production facilities, and the 130,000 jobs created by the industry”, Günther Cramer, President of BSW Solar said.

After having heavily opposed last year’s feed-in tariff cuts, the solar sector itself is in favour of the cuts now proposed, as Björn Klusmann, managing director of the German Renewable Energy Federation (BEE) told the newspaper Frankfurter Allgemeine. Without a further reduction of solar feed-in tariffs, the whole renewables sector might have come under pressure because of the rising electricity prices.

According to BSW Solar, more than 230,000 solar power plants with a total capacity of 7 to 8 GW have been connected to the grid in Germany in 2010. Solar energy meanwhile accounts for about 2% of total final energy consumption. However, almost half of the estimated EUR 13 billion in reallocation charges paid pursuant to the EEG are attributable to solar energy, the newspaper Frankfurter Allgemeine Zeitung writes. With the so-called EEG reallocation charge, consumers have to pay the difference between market prices for renewable energy and the feed-in tariffs pursuant to the EEG.

BMU also proposes to contain the costs of the “Green Power Privilege” (Grünstromprivileg). This relates to an exemption for utilities that supply electricity deriving at least for 50% from renewable energy sources. We will cover this proposal in a separate blog post.

The proposal for the new 2011 feed-in tariff reduction will be presented to the Bundestag for decision, and may be amended during the parliamentary process. Technically, the proposal is likely to be added to an existing proposal to amend the EEG in the context of the European renewable energies directive (Directive 2009/28/EC). This would allow an expedited parliamentary procedure to introduce the 2011 reductions.

Source: BMU, BSW Solar, Frankfurter Allgemeine Zeitung

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