Germany: Rösler explains solar subsidy exit strategy

Minister of Economics, Phillipp Rösler FDP (Liberal Party) has come up with a law for a so-called solar subsidy exit strategy. The justification behind this is that his Ministry considers the "flexible cap" for solar subsidies to have failed. It also believes that, by 2020, a maximum of 33.3 GW of photovoltaic capacity should be installed. This can be deduced from the draft explanatory statement of January 12, obtained by sister magazine, photovoltaik.

For the moment, the Ministry of Economics is emphasizing that its aim is limiting the costs of the Renewable Energy Law (EEG) levy by having a maximum capacity of 33.3 GW of installed photovoltaics by 2020. The Federal Government also agreed to this in its Energy Concept of autumn 2010.

"This figure is appropriate to limit the costs of the EEG subsidy for photovoltaic modules and at the same time guarantee, in accordance with development worldwide, an adequate further stimulus to technological development and a contribution to the support of the solar industry," ran the statement.

However, it remained unmentioned that said target was made in context of the Federal Government’s reversal of its decision to reject nuclear energy, and also contradicts the targets given to the EU in the National Renewable Energy Action Plan, namely just under 52 GW of installed photovoltaics capacity by 2020. The Ministry did not respond to an enquiry as to which target was the more significant.

"In addition to this, a steering mechanism has to be found which is more suitable than the ‘flexible cap’ of the current §20a [of the EEG] in order to guarantee the capacity limitation desired. Under the current system, the desired scale of 2,500 to 3,500 megawatts of additional PV module construction annually was greatly exceeded in the years 2010 and 2011, standing at an estimated 7,400 megawatts and at 7,500 respectively. This was despite considerable decreases in subsidies. However, the current system’s legal prescription of set incremental degressions has shown itself to be problematic," the statement obtained goes on.

Federal Minister of the Environment, Norbert Röttgen, developed the "flexible cap" mechanism. Röttgen himself envisages cuts to feed-in tariffs (FITs) as being dependent on the installation rate. This can at the moment amount to up to 24 percent annually. From the standpoint of the Ministry of Economics, this has not, until now, resulted in photovoltaic installations being directed into the politically desirable limits of 2.5 to 3.5 GW per year. In addition, cost developments are apparently not being adequately taken into account in subsidy degression.

Does this mean the "choking cap"?

"In contrast to this, the new model for adjustment envisages a self-steering mechanism based solely on the installation rate of PV modules and which leads to automatic retroactive adjustment," argues Rösler on behalf of his proposal. It is a further development of the "flexible cap".

"For one part, the target PV-module-installation rate is decreased due to the costs it incurs. For another, a new mechanism to guide the rate of the installation is introduced. It is dependent on the amount of additional PV module installation which occurs, leading to automatic adjustment of feed-in tariffs without the setting of legislation for specific incremental degressions," the statement continues.

Green energy expert Hans-Josef Fell had already seen new legislation affecting solar promotion of this nature coming at the start of the year. With it, from his point of view, a "system of the choking cap" would be created. More specifically, the Ministry of Economics wants to affect a large one-off decrease of photovoltaic FITs, the proposed law suggests. As such, everything is being subordinated to the target of a photovoltaics installation rate of 33.3 GW by 2020. Apparently, only this target is appropriate to limit the costs of the EEG levy.

As of the end of last year, 25 GW had already been installed. As such there would be a remaining 900 megawatts to one GW of photovoltaic capacity to be installed in the coming years. However, the Ministry is basing its calculation of FIT degression on an annual minimum installation rate of a gigawatt.

"With that, the target installation rate is once again clearly within the scale originally envisaged in the EEG of 2009, that of 1,000 to 1,500 MW," the statement goes on. This represents, though, a clear step back from the scale for photovoltaics installation of between 2.5 and 3.5 GW annually, which was present in the EEG of August 2010. The Ministry of Economics considers the sinking of the target unavoidable in order to limit "further increases to EEG-conditioned costs to a level acceptable in both terms of the economy and the social contract."

Concept behind steering the rate

The deviation between the target installation rate and the actual one will be in future "the central deciding factor in adjustments to subsidy." The new mechanism for FIT adjustment follows "a new concept for steering the PV module installation rate," as the Ministry of Economics explains.

"The concept leads to, dependent on the rate of increased PV installation which occurs, an automatic adjustment of subsidy levels without legally proscribed incremental digressions. The absence of legally proscribed incremental digressions reduced the propensity to error of the rate direction, as an estimate of the cost trends for the building of PV modules is no longer necessary for tariff adjustment."

With this, the necessity of continual retroactive adjustment from the political sphere is avoided. The statement adds that this is because, in a jab at Röttgen and his "flexible cap" cuts to solar promotion have demonstrated themselves to be insufficient. As a general rule, the statement continues, two incremental cuts over the course of a year – on March 1 and September 1 – are to be adhered to.

"Behind the new adjustment mechanism is an economic control circuit. The level of subsidy for the new period is determined by the subsidy for the previous period under consideration of the deviation between the target installation capacity and the actual one. Here the deviation from the target installation rate across the previous subsidy period, as well as the accumulated deviations over the entirety of the subsidy periods to that point, are taken into account. As such, repeated exceeding of the target installation rate leads to an increased degression in subsidy. Conversely, a shortfall in the target installation rate leads to an increase of subsidy," writes the Ministry in its explanatory statement.

The mechanism would go into law from the new legislation until the expiration of the last subsidy period of 2020, on February 28, 2021. However, the paper does not make clear what happens if an installed photovoltaics capacity of 33.3 GW is already reached before 2020.

Translated by James Harris.