Solar power may face dim future due to German government

Germany became a solar panel leader through a feed-in-tariff (FIT) program but things may be changing.

Individuals in the cloudy nation that used their solar panels to feed back into the grid got a big bonus in the form of subsidies. Power companies had to pay back twice as much for that solar powered kilowatt hour than a normal consumer shelled out for coal powered juice. People collected fees for the life of their system, about twenty years.

The program was a win for the government and solar adopters. The incentives made Germany a world leader ahead of other nations like the US because consumers could make a green profit off of their solar panels. Citizens paid for the increased rate with a 3% addition to their power bills.

The FIT program is cut by a modest rate every year but the government is looking to go even further. They cut the FIT rate by 10% on the first of the year but are looking for another cut in 2010 of 17% to 18%. Other conservatives are pushing for a massive 30% cut.

It’s no wonder that Germany has taken the move under Chancellor Merkel’s new coalition government. Not only are solar prices dropping faster than the annual FIT cut, but a traditional center-right value may be at work. Germany wants to take a hands-off approach believing that the solar companies can stand by themselves without state support. Generous subsidies helped the industry to a point that government can’t continue to be their backers.

German solar firms are flipping out over the proposed cuts. Solar power is big business with twenty publicly traded companies in the country. The industry employs about 50,000 people, up from around 3,000 ten years ago. Solar companies believe that double digit cuts in the FIT will result in big job losses.

One clear point is that competition will be fierce if the FIT cut passes. Smaller companies may fail, larger companies may hold onto market share, or the growing power of Asian solar companies may score a win. The world will sit back and wait to see if this is an experiment worthy of Frankenstein or Edison.