Vote boost for German solar power

Germany's beleaguered solar energy sector saw a ray of hope on Friday that it might avoid the full blow of steep subsidy cuts when the country's regional governments blocked the plans tabled by Berlin in the upper house of parliament.

A majority of states - including some governed by chancellor Angela Merkel's Christian Democratic Union - voted to send the bill to an arbitration conference with the lower house, the Bundestag, arguing that big cuts to electricity price guarantees threatened thousands of the sector's estimated 130,000 employees in Germany.

"We simply can't accept that Berlin says, 'the Chinese are cheaper now, so goodbye,'" said Reiner Haseloff, the Christian Democrat state premier of Saxony-Anhalt, adding there would be "a national outcry" if the car sector were so treated.

Ms Merkel's government wants to cut subsidies for solar-power installations by up to 30% - backdated to April - to reform a support system that has run haywire and left consumers footing a rising bill for evermore sun-powered generation.

That has only added to the woes of a sector, which was the only recent industrial success story of eastern Germany until Chinese solar equipment makers started offering cheaper products. A slew of German companies - including one-time poster-child Q-Cells - have since been forced to seek protection from creditors.

Initial cuts last year did little to discourage investors from taking advantage of price guarantees extending up to 20 years, leading to the installation of 7.5 gigawatts of solar panels, twice the capacity the government had forecast. This pushed up the renewable energy surcharge on consumers, who fund the price guarantees.

Unchecked, Ms Merkel's government argues, that regime would drive electricity prices higher and higher, besmirching the reputation of renewable energy just as Berlin tries to switch the country from nuclear to other energy forms by 2022.

Critics of the current scheme also point out that it saps subsidies from other, more promising renewable-energy sources such as wind power, which Berlin is banking on in its "energy transformation".

Solar energy last year received 60% of price supports, leaving €6bn to be divided among the five other renewable forms.

The chancellor's spokesman on Friday stressed that Ms Merkel continued to believe that price guarantee cuts - of between 20 and 40% depending on the size of the solar plant - were the only way to reform the system.

But her government might have to give ground or promise the sector other types of help.

Source:http://www.moneycontrol.com/news/world-news/vote-boost-for-german-solar-power_703680.html