Germany plans to cut solar power incentives

The German government is planning to reduce incentives for new solar installations, but the market in the country remains attractive for photovoltaics (PV) in 2012, according to IHS iSuppli.

The two German ministries for the environment and the economy have published a proposal to cut feed-in tariffs (FITs) and to simplify the tariff system. The proposal still must pass the German parliament and the upper house, but is likely to be accepted. 

“The reductions in the FITs mean that the success of the German PV market in 2012 will hinge on its capability to generate an attractive ROI based on free-market dynamics, rather than on government incentives,” said Dr. Henning Wicht, director and principal analyst for photovoltaics at IHS.

“To justify investments, those who install solar systems must pay their own way to a much larger degree than before, either through their own consumption of electricity, or from power sales to others. Although this is likely to lower the ROI on solar installations in Germany, returns are likely to remain attractive enough to attract financial support,” said Wicht.
After the change in the FIT, IHS iSuppli calculates that residential systems in Germany will still generate an ROI of 10 percent on equity capital (20 percent) if system prices are at €1,850/kW, even though the self-consumption bonus will be omitted. 

Prices have already fallen to this level in the market. Therefore, the residential segment will continue to offer attractive investment conditions even after the reduction in the FIT.

However, for large rooftop systems up to 1,000kW, attaining a worthwhile ROI will depend on how much of the generated electricity can be consumed locally or sold via PPAs.


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