German Solar Installations Continue to Increase: Growth Despite Tariff Cuts

 |  Includes: FSLR, RNWEY, STP
by: Energy and Capital

The German government has decided to implement significant cuts in solar feed-in tariffs, but the nation’s solar market kept up unimpeded growth in September as Europe’s largest economy appears set to hit a new record for installations this year.

For the month of September, around 1GW of solar capacity was installed. Between January and September this year, a total of 6.2 GW has been installed.

Berlin’s vision is for 2.5-3.5 GW each year, but installations have been out-pacing that annually. In 2010, capacity increased by 7.4 GW, and in 2011 it was 7.5 GW, Reuters reports.

Due to the unprecedented growth of solar in Germany, the government decided to slash the feed-in tariffs, which are guaranteed to be paid for a 20-year period to solar power generators.

This, of course, has been the backbone of emergent renewables markets in many nation (eg., Japan’s aggressive FITs for the renewable sector). FITs for the German solar market — specifically the new solar installations — will drop by 2.5 percent per month between November this year and the end of January next year.

The tariff reduction will cause the solar equipment industry to reduce prices and the government to stave off rises in energy bills for both corporations and individuals. Germany has seen an explosion of renewables growth since the Merkel-led government swore off nuclear power completely after Japan’s nuclear disaster.

Major companies like First Solar (NASDAQ:FSLR), Suntech (NYSE:STP), and Renewable Energy Corp. (OTCPK:RNWEY) have all been involved in the nation's projects.

But a side-effect of the frenetic pace of expansion into renewables has been the higher-than-expected cost to households, as they bear the brunt of subsidizing the emergent industry. It hasn’t helped that the Merkel government exempted heavy industries from green energy and network usage tariffs.