Merkel’s Solar Cuts Face Rejig as German States Object

Germany’s plan to cut solar subsidies may see last-minute changes by a parliamentary committee as 16 states represented in the upper house and Chancellor Angela Merkel’s government are deadlocked over the legislation.

Saxony-Anhalt wants the bill to be sent to an arbitration panel at the next upper house meeting on May 11, according to Reiner Haseloff, the state’s governor and a member of Merkel’s Christian Democratic Union. Baden-Wuerttemberg, Thuringia, Saxony and Brandenburg have demanded changes.

While the regional leaders and the central government are still negotiating, “it’s realistic to expect a majority for parliamentary arbitration,” Haseloff said in an interview yesterday. “The planned cuts are detrimental to the many companies producing in our region and we want a fundamental revision.”

Governors are concerned that Merkel’s plan to reduce solar incentives after an installation boom will put additional pressure on domestic manufacturers such as Solarworld AG (SWV) as Chinese rivals led by Suntech Power Holdings Co. grab market share. Four German solar companies including Q-Cells SE (QCE), once the world’s biggest cell maker, have filed for creditor protection since December.

Q-Cells employs about 1,300 people in Saxony-Anhalt and Berlin. First Solar Inc. (FSLR), the biggest U.S. solar manufacturer, said April 17 it would close its factory in Brandenburg that employs about 1,200 workers by the end of the year.

Election Result

Merkel’s position in the Bundesrat was weakened on May 7 when her party suffered its worst result in more than half a century in the state of Schleswig-Holstein after an election that put the opposition Social Democratic Party within reach of forming a coalition.

An offer by Environment Minister Norbert Roettgen, in charge of support for the renewable-energy industry, to fund more solar-energy research to soften the impact of subsidy cuts won’t change Saxony-Anhalt’s position, Haseloff said.

“It’s positive in general, but won’t help the industry in the short and medium term,” he said. Saxony-Anhalt wants more support for solar installations sized between 10 kilowatts and 100 kilowatts, he said.

Brandenburg will vote for arbitration as it seeks to reverse an elimination of support for large-scale solar plants, Steffen Streu, a spokesman for the economy ministry in Brandenburg, said by phone from Potsdam on May 4.

Jobs at Risk

Thuringia seeks less stringent cuts as they “threaten 5,000 jobs” in the eastern German state, its Economy Minister Matthias Machnig said in an online statement.

Roettgen, responding to concerns that a surge in solar installations was driving up the cost of electricity, is planning monthly cuts for subsidies to match a decline in prices for solar panels. The government argues that the industry will have to live with lower subsidies.

“If enormous overcapacity exists in the solar sector, this will lead to adjustments that we can’t and shouldn’t stop with excessive subsidies,” Roettgen said April 25 in Berlin.

Critics of the legislation, which has been in effect on a provisional basis since April 1 after lawmakers in the lower house passed it in March, need 35 of the Bundesrat’s 69 votes to send the bill to arbitration, according to Jost Huebner, a Bundesrat spokesman. The plan will be approved if there’s no majority for arbitration, Huebner said by phone yesterday.

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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