German coalition agrees to delay solar cuts

www.reuters.com
Feb 9, 2010

BERLIN, Feb 9 (Reuters) - Germany's ruling coalition has agreed to delay cuts in solar energy incentives by two months, parliamentary officials said on Tuesday, easing pressure on solar companies so they will have more time to sell components. Support for new rooftop solar installations will be cut by 16% from June 1, said Hans-Peter Friedrich, parliamentary group leader for the Christian Social Union (CSU), the Bavarian sister party to Chancellor Angela Merkel's Christian Democrats (CDU). The original plan was to introduce the cuts on April 1.

Solar stocks around the globe gained on the news, with shares of Q-Cells, SolarWorld, FirstSolar, SunTech, SMA Solar and Yingli up 1.8 to 4.4%. "It would certainly be positive for the sector if that was the case. The sector would be able to benefit from stronger growth in April, May and June - - a strong seasonal time for installations in Germany," said Ardour Capital analyst Adam Krop. "It's positive, but still the most important thing is that it's yet another proposal," Krop added.

Critics of the cuts, including members of Germany's ruling parties, have said they could harm the expansion of photovoltaic technology in the world's largest solar market. About half of the world's solar electricity is produced in Germany. The CSU is one of three parties in Merkel's centre-right coalition with the CDU and the Free Democrats, and had called for a delay in the cut to solar incentives. It would be difficult, if not impossible, to pass a law without CSU support.

Jesse Pichel, solar analyst at PiperJaffray, said a delay to the cuts could add modestly to his forecasts for solar makers' profits, but said the reductions could still prompt Germany's manufacturers to seek to put up barriers to imports. "We think the German companies are going to be hard pressed to compete under the cost structure required," he said in an email.

Solar Fits
The so-called feed-in tariffs - - prices utilities are obliged to pay to generators of renewable energy - - are the sector's lifeline as long as grid-parity, the point at which renewables cost the same as fossil fuel-based power, has not been reached. Global solar stocks plunged in January when it emerged that the German government was planning to make additional cuts to the feed-in tariffs, arguing the industry is overly subsidised and needed to become competitive much faster.

Friedrich said the coalition still wanted to cut the feed-in tariff for open field solar systems by 15% from July 1. The coalition needs to agree final details on solar cuts, in particular on how to reduce subsidies for larger farm land installations, before sending the bill through parliament.