German Environment Minister Plans To Implement Monthly FIT Cuts

Posted by SI Staff on January 20, 2012 No Comments
Categories : Policy Watch

Following a recent jump in PV installations in Germany, representatives from the country's industry association Bundesverband Solarwirtschaft (BSW-Solar) met with Federal Environment Minister Norbert Rottgen to discuss solutions.

BSW-Solar says that approximately 3 GW of new PV capacity was installed in Germany last December, in anticipation of 2012 feed-in-tariff (FIT) reductions. These numbers prompted Rottgen to announce that FITs will now be adjusted on a monthly – or, at least, quarterly – basis in order to moderate PV development.

No plans for additional reductions beyond the 24% annual cut currently specified in Germany's renewable energy law (EEG) are scheduled, BSW-Solar notes. Rottgen and his colleagues also continue to oppose a fixed installation cap – a measure that other German policymakers have supported.

BSW describes the tone of the meeting as ‘open and constructive,’ noting that its representatives emphasized to Rottgen that promoting the continued deployment of solar power is necessary.

The change in the FIT-reduction schedule, however, is expected to have a negative effect on the market, according to analysts at Jefferies & Co.

‘This will remove the ability for the German market to materially upside estimates,’ Jefferies' Jesse Pichel, Min Xu and Elaine Kwei wrote in a recent research note. The monthly cuts may begin as soon as March 1.

The analysts explain that the monthly FIT cuts could take the form of either a formulaic decline based on annualized monthly installation numbers, or a linear decline of 2% to 3% per month.

‘We believe both scenarios will effectively cool the market, but the formulaic approach would be more draconian, removing any chance of demand pull-in and creating some [internal rate of return] uncertainty,’ they predict. ‘If installs surge, the FIT cut would be more pronounced in the following month – thus preventing meaningful pull-ins.’

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