Feb. 29 (Bloomberg) -- Chancellor Angela Merkel’s Cabinet backed measures giving ministers authority to adjust subsidies for renewable energy in Germany, a move the industry says will destabilize its ability to finance plants.
A draft from the environment and economy ministries endorsed by the Cabinet today includes a clause that enables officials to change rates paid for solar power without fresh backing from parliament. It would come into force should installations exceed a government target of 2.5 gigawatts to 3.5 gigawatts a year.
“The provision is dangerous as it would destroy investment security and may be expanded to subsidies for wind and biomass,” Carsten Koernig, the head of the BSW Solar industry group, said yesterday in Berlin. “We fear a rollback in clean-energy and climate policy at a time when Germany wants to lead.”
Germany, the world’s largest solar market, wants to cut in half the annual pace of installations after incentives for the industry pushed capacity past government targets. Merkel is encouraging renewables as a replacement for nuclear power stations that close by 2022.
The proposals, to be debated by lawmakers next month, would make the biggest ever reductions in solar subsidies starting next month and eliminate them for the largest photovoltaic plants.
The provision enabling the government to quickly change subsidies “effectively serves as a hard cap,” Aaron Chew, an analyst at Maxim Group LLC in New York, said in an e-mailed note. “This yields a lack of visibility and uncertainty that complicates project finance.”
Lawmakers from the government and the opposition parties spoke out against giving ministers power to cut subsidies in a meeting of the parliamentary environment committee today, according to the Bundestag’s HiB newsletter.
Katherina Reiche, deputy environment minister, told the meeting that current regulation was not sufficient to reduce installations. “We need new rules that enable us to react quicker,” she was cited as saying by HiB.
Ann-Christin Wiegemann, a spokeswoman for the economy ministry, said she couldn’t comment on the details of the draft as the environment ministry is mainly responsible. The environment ministry didn’t return a call seeking comment.
The opposition Green Party, the state premier of Saxony-Anhalt and companies including Solarworld AG, the country’s largest solar panel maker, have protested the plan that would cut premium rates for solar power by as much as 29 percent from March 9 and decrease them further each month beginning in May. Plants larger than 10 megawatts won’t get support after July 1.
The cuts would put further pressure on solar companies such as Q-Cells SE and Conergy AG, the German manufacturers that are already struggling with rising competition from China, where the world’s three biggest panel makers are based.
Environment Minister Norbert Roettgen said the proposals are meant to rein in costs linked to new installations and protect the stability of the power grid. Germany added 7.5 gigawatts of panels last year, more than double the government’s target. “We want photovoltaic energy but it has to grow at a reasonable level,” Roettgen said Feb. 23.
The opposition has attacked the subsidy cut plans and especially the clause that would enable ministers to change tariffs without asking lawmakers.
“This disempowerment of parliament only serves the interests of the big utilities,” Hans-Josef Fell, a Green party lawmaker and one of the inventors of Germany’s renewable energy law, said by e-mail. “Lawmakers across party factions will now have to show that they’re representing the interests of the people.”
Koernig said the draft could be debated by lawmakers in the Bundestag, the lower house of parliament, as early as March 8. If government lawmakers, who have a majority in the Bundestag, back it, then it will be sent on to the Bundesrat, the upper house. While state leaders could ask for parliamentary arbitration to adjust the bill, they can’t stop it.
“This draft, if unchanged, would be a solar-exit law,” Koernig said. “It threatens an industry with 130,000 jobs linked to it.”
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