Germany May Cut Rates 18% for Solar-Power Producers

Germany’s government aims to reduce rates earned by solar-power producers by 17 percent to 18 percent to lower consumer prices and spur solar-panel makers to compete more, two people familiar with the plans said.

In talks this week with the solar industry in Berlin, the Environment Ministry led by Minister Norbert Roettgen proposed cutting prices that utilities must pay to panel-owners starting July 1, said the people, who declined to be identified because the discussions are not public. Shares in manufacturers such as SolarWorld AG and Solon SE fell as much as 8 percent in Germany.

Chancellor Angela Merkel’s government is trying to lower consumer prices and speed up solar-rate cuts already scheduled annually, all without undermining the outlook for photovoltaic- panel makers such as SolarWorld and Q-Cells SE, the people said.

“Cuts of such magnitude could lead to a booming demand in the first quarter and afterwards to a market shakeout because small and financially weak companies with a narrow product focus might not be able to cope,” said Merck Fink analyst Theo Kitz. SolarWorld will likely be the “main survivor,” he said in a note to investors.

For a decade Germany has guaranteed businesses, homes and solar farms above-market rates for homemade power from the sun, turning the nation into the biggest market for photovoltaic panels with almost 20 publicly traded solar companies and about 50,000 employees, 15 times the number in 2000.

The above-market rates, which are passed on to electricity consumers in the form of higher bills, were scheduled to drop around 10 percent this year.

Follows France, Spain

Germany’s move would follow France, which on Jan. 13 cut tariffs for power from rooftop solar panels by 24 percent. The French government said it wanted to avoid overheating an industry that was expanding faster than other renewable energies. Spain made similar cuts in 2008 for similar reasons.

Solarworld and Q-Cells led declines among Germany’s solar power companies today after Reuters reported that the government will reduce aid to the industry by as much as 17 percent in April, more than some analysts estimated.

Solarworld slumped as much as 6.5 percent in Frankfurt trading, the biggest intraday drop since Sept. 1. Q-Cells fell as much as 7.5 percent while Solon SElost as much as 8 percent.

Tied to Roettgen’s proposal is a plan to subsidize rooftop solar systems that generate power for private consumption.

Guaranteed Prices

The government guarantees a price of as much as 39 euro cents (56 U.S. cents) a kilowatt-hour to small residential owners of solar-powered systems, about double what consumers pay for a kilowatt-hour of electricity. Germany has trimmed subsidies 5 percent a year from about 1 euro 10 years ago to spur the industry to control expenses and raise efficiency.

The government will put thousands jobs at risk in the industry if the Environment Ministry decides to cut solar power subsidies by a further “double-digit” percentage this year, the German Solar Industry Association said today on its Web site. “Large parts” of the German solar industry wouldn’t survive a cut of that magnitude this year, the lobby group said.

Merkel´s government aims to implement the measures on July 1 before parliament’s summer recess, said the people. Roettgen wants to give industry adequate time to adjust to the changes, they said. The steps still have to be approved by lawmakers, leaving the possibility of amendmen