Germany’s Solar PV Industry; Lessons for India?

Germany has decided to accelerate the annual rate by which it will reduce the solar feed-in tariff from 5% to 10%. One of the reasons being the overwhelming success of the scheme has lead proliferation of solar installations that are becoming less affordable as the German economy enters recession.

The success of the EEG (Erneuerbare-Energien-Gesetz) scheme has meant many more installations than expected have secured support. This has taxed the allocated budget and with the economy in decline, generosity of the scheme has become less affordable. Consequently, the industry woke up to 10% cur in solar tariff (for new plants) on 1 January 2010.

More reduction in feed-in-tariffs were called for following the slump in silicon prices which in turn led to reduction in installation costs.  In response plans were released to reduce solar funding by a further 15 per cent in the summer of 2010 and by that amount again at the start of 2011 – this is in addition to reductions already planned.

Although the amendments are not yet law, reports in the media suggest that roof systems will receive 16% less in feed-in tariff in June, in addition to the January cut of 10 per cent. They will also suffer a two per cent cut per 1000 MW of newly installed capacity should the market raise above a certain limit.

These proposed changes have caused alarm in the country’s PV industry. Comment from Günther Cramer, president of the Bundesverband Solarwirtschaft (BSW), “Dozens of German solar companies would face insolvency or be forced to relocate their production outside of Germany. The excessive feed-in tariff cut endangers one of the most important driving forces of jobs and the economy in our country. If this were implemented, around 50 000 jobs in Germany would hang in the balance”.

To add to their woes, global PV industry has seen the rise of low-cost manufacturers in Asia, chiefly China.

A recent analysis paper by Landesbank Baden-Württemberg (LBBW) cited by the BSW states that a reduction of the solar feed-in tariff in the double-digit percentage range would mean: “that it is over for the European production location”.

With India just starting on the solar path, are they any lessons for us to learn from Germany’s solar journey?

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