Germany Faces State Calls to Adjust Solar Subsidy Reduction Plan

German Chancellor Angela Merkel’s government is facing calls from the opposition and a state premier from her own party to amend plans to reduce solar energy subsidies amid mounting concern that the cuts may drive domestic companies out of business.

Reiner Haseloff, the state premier of Saxony-Anhalt and a member of Merkel’s Christian Democrats, said the government’s proposal to lower subsidies by a record as early as March 9 threatens domestic solar companies. His call was backed by the opposition Green Party, which said in a statement today that it asked the Bundestag, the lower house of Parliament, to schedule a debate over the cuts that “threaten entire regions.”

“We need to urgently intervene politically so that what is planned won’t happen,” Haseloff said in a video message. He urged state leaders from Brandenburg, Saxony, Thuringia and Bavaria who have backed solar energy in the past to join Saxony- Anhalt in seeking to change “deadlines and feed-in tariffs, and protect ongoing projects.”

Merkel wants to reduce by half annual solar installations after incentives for the industry pushed capacity past government targets even as she proceeds with plans to encourage renewable energy to replace nuclear power stations that close by 2022.

Companies including Solarworld AG (SWV), the country’s largest solar panel maker, have protested a plan to lower subsidies by as much as 29 percent from March 9 and to subsequently scale these back each month, starting in May.

Solar ‘Compromise’

“I think the government will have to weaken some of the cuts on the massive protests from the industry and opposition politicians,” Sebastian Zank, an analyst at Silvia Quandt Research in London, said today by phone. “There will have to be a compromise.”

The cuts are deeper than the 15 percent reduction ordered on Jan. 1 and may also hurt manufactures such as Conergy AG and Q-Cells SE (QCE), whose shares have fallen 67 percent and 41 percent this year, respectively. Merkel’s Cabinet of ministers is expected to vote on the proposals in its next meeting on Feb. 29.

European countries including the U.K., Italy and France have accelerated cuts for solar subsidies in the past year to adapt to falling product prices and limit runaway growth. Solar panel prices fell 46 percent last year after Asian manufacturers led by Suntech Power Holdings Co. boosted production.

Environment Minister Norbert Roettgen said the proposals are meant to rein in costs linked to new installations. “We want photovoltaic energy, but it has to grow at a reasonable level,” he said on Feb. 23.

To contact the reporter on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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