UPDATE 2-German solar boom strengthens critics of subsidies

Mon Jan 9, 2012 11:58am GMT

Quotes

   

* 7.5 GW added in 2011 - preliminary data

* Slightly exceeds 7.4 GW in 2010

* Pace suggests further subsidy cuts in July (Recasts, adds background, analyst quotes)

By Vera Eckert and Christoph Steitz

FRANKFURT, Jan 9 (Reuters) - New solar installations reached a fresh record of 7.5 gigawatts (GW) in Germany in 2011, playing into the hands of advocates for steeper cuts in tariff subsidies to reduce growth of solar power and the resulting higher costs for consumers.

The figure slightly exceeds the 7.4 GW recorded in 2010, German network regulatory agency Bundesnetzagentur (BnetzA) said in a statement on Monday.

Boosted by lavish tariff incentives, Germany became the world's largest solar market by installations and a major sales market of sector bellwethers such as U.S.-based First Solar , China's Suntech, Norway's Renewable Energy Corp and Germany's SMA Solar.

But the country has been cutting those favourable tariffs in an effort to force the industry to lower its costs faster and head off steep rises in energy bills for companies and households, which are required by law to pay the feed-in tariffs.

Additions in December alone amounted to 3 GW, the agency said, citing preliminary figures and adding that the pace of installations could trigger a 15 percent cut in tariffs under the feed-in law for renewable energy from July 2012, if unabated.

Under previous regulation, it would take the installion of only 225 megawatts (MW) between January and April of this year to reach a level that would trigger a 15 percent cut in subsidies from mid-year, BnetzA President Matthias Kurth said.

"We see proponents of an annual installation cap gaining influence in the discussion, especially in the context of an overall weakening economy, making politicians more sensitive to cost burdens in the manufacturing industry sector," Equinet analyst Stefan Freudenreich said.

The contribution of solar to Germany's overall power output so far is modest at just over 3 percent, or 18 billion kilowatt hours (kWh).

DZ Bank analyst Sven Kuerten also said the risk of a hard subsidy cap on new installations was increasing.

In November, Germany's Economy Ministry released a paper proposing to reduce the annual growth of new photovoltaic installations to 1,000 megawatts, or 1 GW, a move that would dethrone the country as the world's largest market for solar panels.

A similar move caused Spain to fall from a rank as the world's biggest market in 2008 to an expected No.8 position in 2011. (editing by Jane Baird)

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