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INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
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RUEHFT/AMCONSUL FRANKFURT 0013
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UNCLAS SECTION 01 OF 02 BERLIN 000206 
 
 
SIPDIS 
 
STATE FOR EUR/CE PETER SCHROEDER 
 
E.O. 12958: N/A 
TAGS: ECON ENRG PREL GM
SUBJECT: Germany's Coming Solar Eclipse? 
 
BERLIN 00000206  001.3 OF 002 
 
 
¶1.  Summary:  Environment Minister Norbert Roettgen plans to 
cut Germany's solar feed-in tariffs by 15 percent as of April 
¶2010. While the proposals are much less dramatic than the 30 
percent reduction advocated by consumer organizations, the 
solar sector has indicated that any subsidy cut above 10 
percent would be intolerable.  Roettgen's plans, which still 
need parliamentary approval, are controversial even within his 
own party, the Christian Democratic Union (CDU). 
Representatives from CDU-governed federal states with a high 
concentration of solar companies fear job and tax revenue 
loss.  Some have threatened to oppose the amendment in the 
upper house of parliament, the Bundesrat, potentially blocking 
the law.  End Summary 
 
German Solar Feed-In Tariffs - the Basics 
----------------------- 
 
¶2.  (U) On January 20, 2010, Environment Minister Norbert 
Roettgen (CDU) presented an amendment to Germany's Renewable 
Energy Law that would cut solar feed-in tariffs (FIT) for new, 
roof-mounted solar-powered devices and open field sites by 15 
percent from April 1, 2010 and July 1, 2010 respectively.  FIT 
for farmland sites would be cut 25 percent from July 1, 2010. 
The proposed amendment reflects the newly-elected government's 
October 2009 coalition agreement, which contained plans to 
reduce solar subsidies by more than 9 percent annually. 
(Comment: Since 2000, Germany's generous FIT have provided a 
20-year guarantee on above-market prices for electricity 
generated by renewable energy.  The rates are financed through 
surcharges on consumers' electricity bills and, therefore, are 
technically not a state subsidy.  Nevertheless, the tool 
effectively shifts the burden of subsidizing renewable energy 
deployment from taxpayers to electricity ratepayers.  End 
Comment) 
Supporting Legislation and Party Positions 
--------------------------- 
 
¶3.  (U) Germany's revised Renewable Energy Law, effective 
since August 2004, increased the overall solar tariff rate, 
but provided for 5 percent yearly cuts thereafter.  In 2008, 
many CDU/Christian Social Union (CSU) and Free Democratic 
Party (FDP) politicians argued that the feed-in tariff was 
generating an unaffordable proliferation of solar farms. 
Along with consumer advocates, they called for a 30 percent 
cut in the tariffs to mirror the 30 percent decrease in the 
cost of solar cells.  Despite strong opposition from federal 
states home to solar industries, the then CDU/CSU and Social 
Democratic Party (SPD) government decided to increase the rate 
of yearly tariff cuts: a 5 percent reduction in 2009, 8 
percent in 2010 and 9 percent in 2011. 
 
Germany's Solar Boom 
-------------------- 
¶4.  (U) Germany's Renewable Energy Law created a solar boom 
market, making Germany the world's largest photovoltaic 
market. Installed capacity jumped from 768 megawatts (MW) in 
2004 to 5,300 MW in 2008.  According to the German Solar 
Federation (Bundesverband Solarwirtschaft, BSW), the solar 
industry generated 10 billion euros in revenue and accounted 
for 60,000 jobs in 2009.  The generous tariff rates -- 39 euro 
cents per kilowatt hour in 2010 -- have provided enough 
incentive for 98 percent of Germany's solar producers to 
connect to the grid.  Nevertheless, photovoltaic electric 
energy generation still accounts for less than 1 percent of 
total electricity production. 
 
Consumer Protection Concerns 
---------------------------- 
¶5.  (U) Environment Minister Roettgen (CDU) plans to develop 
mechanisms to promote renewables that can better adapt to 
market developments.  As he explained, the tariffs have led to 
over-promotion: "Too many subsidies were granted, costing 
consumers billions."  Consumer advocates echo his calls for a 
drastic subsidy reduction, arguing that the renewable energy 
law should not finance extra income for producers.  Feed-in 
tariffs came under additional pressure as the price of solar 
panels dropped approximately 30 percent due to oversupply in 
¶2009.  With the high tariffs and reduced production costs, 
solar companies were among Germany's most profitable 
enterprises in 2008. 
 
Necessary Incentives? 
--------------------- 
¶6.  (U) Representatives of Germany's solar industry will 
 
BERLIN 00000206  002.2 OF 002 
 
 
accept a FIT cut, but have indicated that anything above 10 
percent would be intolerable.  They fear that customers may be 
less willing to make the initial investment in solar panels, 
if the compensation for selling power back to the grid is 
slashed too drastically.  Due to high labor costs, 
installation costs for solar systems have not decreased as 
much as the cost of the panels themselves.  German solar 
industry representatives thus argue that the 15 percent cut 
would lead to 50,000 job losses and significant investment 
cuts.  Moreover, the Federation of Renewable Energy (BEE) 
argues that the proposed cut threatens Germany's 
transformation to a low-carbon economy: "If the environment 
minister wants to implement his ambitious plans to base 
Germany's energy supply almost entirely on renewable energy by 
2050, he must provide for reliable subsidy conditions instead 
of spooking investors." 
 
The Crisis of Germany's Solar-Panel Manufacturers 
------------------------------- 
¶7.  (U) In spite of the tariffs, Germany's solar energy 
industry has lost market share to competitors.  China's solar 
industry, which has gained 30 percent of the market share 
since 2009, particularly benefits from on-going demand for 
solar panels, often from German consumers, as well as lower 
labor costs.  Global economic conditions further damaged 
Germany's solar industry.  Following the global financial 
crisis, many banks have been unwilling to finance major solar 
projects.  As a result, German companies have cut jobs and 
changed manufacturing practices.  Saxony-Anhalt-based, Q- 
cells, for example, plans to lay off 500 employees.  The 
company now ships solar cells to China for final assembly. 
Similarly, Bonn-based SolarWorld completed in 2009 
construction of a factory in South Korea. 
 
Comment 
-------- 
¶8.  (U) Some German lawmakers and companies forecast a shaky 
future for the country's solar industry if the government 
removes too much financial support.  The cuts may not leave 
breathing room for investments to compete internationally. 
However, the amendment to cut solar feed-in tariffs is not a 
done deal.  Even if the amendment obtains Cabinet and 
parliamentary approval, it is by no means certain that the 
Bundesrat will approve it.  Some states in Eastern Germany, 
including CDU-led states that are home to leading solar 
manufacturers, have threatened to block the law.  Solar 
industry employees in these states have begun to protest the 
cuts, given even more reason for opposition to the amendment. 
Given the coalition's slim majority, the law could still fall 
in the Bundesrat.  This would not be the first time that 
coalition legislation has been blocked in the Bundesrat by its 
own party members.  End Comment 
 
MURPHY