All Eyes on Germany as Cabinet Discusses Solar Subsidy Cuts

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The German government is set to release changes to the support mechanisms for solar power companies. [1] Ministers from Angela Merkel’s government are set to announce government policies to support renewables and reward energy efficiency in the world’s largest market for solar panels. According to sources, the government is looking to implement the next round of subsidy cuts in April, three months ahead of schedule. It looks like a hard installations cap could be avoided which was a concern for stocks like Trina Solar (NYSE:TSL) and Yingli Green Energy (NYSE:YGE).

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Subsidy cuts

Bloomberg news quotes a lawmaker in the Free Democratic Party, saying that subsidies could be cut by almost 25 to 35% and that the frequency of introducing cuts would be increased to curtail excess solar installations. [1]

In 2011 alone, around 7 GW of solar capacity came on line in the country despite subsidy cuts as panel prices dropped faster, making solar installations an attractive investment proposition with governments guaranteeing a strong rate of return despite lower support. To avoid future occurrences of such installations rushes, voices within the cabinet had proposed an installations cap. Fortunately for solar firms, the proposal however did not receive strong backing from the government.

According to Handelsblatt, subsidies for large ground based plants in the country could be cut by about 30% while rooftop systems could see support cut by 20%. [1] Large cuts could push panel prices further south with many players still stuck with large inventories. Trina Solar gets a significant portion of its revenues from sales in Germany.Industry executives are hopping that a cut in support in European markets will be countered by sales in China and the U.S.

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  1. Solar-Subsidies Cut in Germany May Come Three Months Earlier From April, Bloomberg [] [] []