German feed-in tariff cut will be 16-17% - confirmed

After a fair amount of digging and the much needed help of our German correspondent we can now confirm that the reports of a 16-17% cut in feed-in tariff rate for Germany were true, and the cuts are to go ahead from April 1, 2010.

Several German news sources have reported that this figure is in fact authentic, not least of which the German Financial Times, Sueddeutsche. The Wall Street Journal reported that the maximum 17% cut is indeed on the cards, quoting today Economics Minister Rainer Bruederle as saying, "the German government could realistically cut between 16% and 17% of the subsidies it gives to solar-power providers."

Another source, German newspaper Top Agar online made it clear that these huge cuts are in response to over-generous funding over recent years. "The current rate of support not only harms the consumer durable with extra electricity costs, it also impedes the technological breakthrough", said the vice-chairman of the CDU / CSU Parliamentary group, Dr. Michael Fox.

The publication Handelsblatt quotes the country's Federal Environment Minister Norbert Röttgen as saying, "The goal is to develop a mechanism that responds flexibly to market developments. The current system is too rigid."

Röttgen has made it clear that the government faces a fundamental correction of the EEG mechanism. At present the law encourages the production of electricity from wind, solar, hydro, biomass and geothermal energy, and guarantees the plant operators 20 years of fixed payments for their electricity. These are occasionally substantially above the market price.

For PV systems that went into operation in 2009 the cost, dependent on the type of system ranges from €0.32 to €0.43/kWh of electricity. This makes producing solar panels by far the most expensive green energy. By comparison, conventionally produced electricity was on Thursday in Germany less than €0.05 to purchase. The difference between market price and the feed-in tariff is passed on to consumers. In 2008 alone the total eco-compensation was approximately €8.95 billion.

PV systems are also very attractive as investment properties. Now that the prices of assets have fallen significantly, the allowances for the electricity generated will continue to be paid at the statutory level. The EEG provides only a slight melting that is too low, even from the perspective of the system manufacturer.

With the combination of lower asset prices and high FiT rates the demand for PV systems explodes. It is for this reason that the cut will go ahead, and will take effect in the country from April 1 this year.