UPDATE 3-German solar cuts less than feared, stocks rally

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By Markus Wacket and Peter Dinkloh

BERLIN/FRANKFURT, May 30 (Reuters) - Germany's ruling parties have reached a deal to reduce support for the solar energy sector in coming years by far less than the booming industry had feared.

Shares in German solar power companies rallied, topping the leader board of Frankfurt's technology index .TECDAX after the deal came in lower than the 30 percent decrease in 2009 some German conservatives had pushed for.

German law requires utilities to pay solar energy producers higher prices for solar power they put into the grid than power from traditional sources. The government says the industry can live with less support and wants to redirect help to other types of renewable energy.

Under the agreement, which coalition partners reached after eight hours of talks late on Thursday, support would decline by 8 percent in each of the next two years and by 9 percent in 2011, Social Democrat Hermann Scheer told Reuters.

The cuts affect support for rooftop solar panels, which supply the lion's share of Germany's solar-produced energy.

The decline in support for bigger installations on open fields was slightly bigger, coalition sources said, bringing the overall cut for all installations to an average 10 percent next year and 7 and 8 percent in the following years.

The chief executive of solar cell maker SolarWorld (SWVG.DE) told Reuters the cuts were bearable.