The center-right German government is proposing legislation to severely reduce state subsidies to solar power in an attempt to prevent market saturation and save money.

The draft law, which both the German parliament and Chancellor Angela Merkel's cabinet are to consider in the coming weeks, would cut state-guaranteed prices by 15 percent for energy produced by solar panels on open ground.

It would also cut prices by 16 percent for solar panels on roofs, where 80 percent of solar panels in Germany are, and eliminate subsidies for panels placed on arable land. A previous plan by Environment Minister Norbert Roettgen was criticized for not going far enough.

"There must be no more panels installed on arable land," said Peter Altmaier, a member of Merkel's Christian Democrat Union (CDU) who follows the solar energy sector. "The objective is to reduce excessive stimulation without hindering an expansion of green energy."

Unintended consequences

Experts have criticized solar energy subsidies in Germany for failing to spur competition in the industry, which accounts for less than one percent of all German electricity production.

The subsidies have also had several unintended consequences: Farmers have installed solar panels on their arable fields; also, the global market has greatly increased, helping manufacturers in China, where labor is cheaper.

Germany remains the world leader in solar panel production, but manufacturers have lost billions of euros in recent years and have been forced to cut and outsource jobs. German group Q-Cells grew significantly until posting a 1.36-billion euro ($1.84 billion) net loss in 2009.

Support and opposition

The reduction would save German consumers some of the one billion euros they pay per month in fees that underwrite solar energy production, according to Hans-Peter Friedrich, a leader in the CDU's Bavarian sister party, the Christian Social Union.

The law is supported by farmers resentful of investors who bought up arable land only to "harvest the sunshine."

But the solar panel manufacturing lobby staunchly opposes the cutbacks, and some companies gave employees the day off to protest the law in Berlin. Environmental groups also criticized the government, calling the law a betrayal of renewable energy.


acb/apn/dpa/AFP/Reuters
Editor: Andreas Illmer