In Q4 2011, Germany saw another boom in solar installations – due both to the crashing prices of crystalline silicon (x-Si) modules and the previously scheduled feed-in tariff (FiT) rate reduction on January 1 (a seasonal trend). Those factors contributed to 7.5 GW of new installations in the country during 2011.

That record market prompted German politicians to seek limits on the installation market in order to save money for their constituents. Feed-in tariffs for renewables in Germany are funded entirely by ratepayers – not just solar customers – who currently pay a 0.035 €/kWh premium on their energy to fund the program. Grid operators have said that premium could rise as high as 0.047 €/kWh in 2013. But the government’s goal is to preserve the current level.

Further, solar installations account for 50% of the cost of the renewables FiT program, but only 18% of the generation. While some claim that Germany will continue to install solar to meet its stated goals of moving away from nuclear power, the government is likely to push for more lower-cost sources of generation – notably wind power.

Outside of its scheduled annual rate reductions, FiT levels are written law – meaning the German parliament must approve other changes. In late March, Parliament voted to reduce the subsidy with between 15% and 29% – depending on the volume of new installations over the past four quarters, using 2011’s standard of 7.5 GW as the maximum reduction threshold. The government targets 2.5 GW to 3.5 GW of new installations annually. More notable perhaps is that the new law did not give complete power over FiT levels to Germany’s Ministries of Environment and Economy, thanks to a last-minute change. That would have meant that new FiT reductions could be more spontaneous, and would not need approval from Parliament – allowing the government to more easily regulate demand.

In any case, the German government is making a strong effort to curtail new installations. Given similar efforts across Europe, expect suppliers to take their business to emerging markets like India and South Asia. For more on new demand markets and updated subsidy information, see the upcoming Q1 2012 Solar Demand Forecaster.

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