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Deutsch Tariff Reduction Receives Support

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Agreement on flexible adjustments to solar feed-in tariff
Federal Environment Minister Norbert Röttgen and the German Solar Industry Association (Bundesverband Solarwirtschaft, BSW-Solar) have agreed to earlier reductions of financial support for solar power, in order to facilitate the further expansion of photovoltaics in Germany. The objective is to secure, on the one hand, an adequately large domestic market capable of offering photovoltaic companies in Germany sufficient scope for investment. On the other hand, the market should not grow too quickly in the coming years, so as to remain technically feasible and to keep to a reasonable level the amount of investment necessary to convert the energy system into a decentralised energy supply with renewable energy sources.



Röttgen presented the agreement together with BSW-Solar through the Federal Press Conference (Bundespressekonferenz). "We welcome this clear political commitment to expanding photovoltaics, to Germany as a production site and to the more than 130,000 jobs created so far by photovoltaic technology," said Günther Cramer, president of BSW-Solar.



The objective in expanding photovoltaics is to increase the proportion of Germany's power supplied by solar energy from around 2 percent currently to at least 10 percent by 2020, while simultaneously cutting costs by at least half during the same period. The solar industry has recently established nine goals that describe the path to be taken to reach this objective. These new "directions for the solar economy" are based on a current study of the same name by the consultancies Roland Berger and Prognos.



Environment Minister Röttgen and BSW-Solar have reached an agreement to further expand solar power in Germany and to make the industry competitive with conventional energy sources as quickly as possible.



Anticipating precisely how the market will develop in 2011 is not possible. The potential for cutting costs and reducing financial support, however, is highly dependent on newly installed photovoltaic capacities: Through targeted technological development and the increasing use of mass production as global demand grows, it is possible to achieve so-called economies of scale, lower production costs and thus further reduce the costs of photovoltaic systems. These pricing effects are taken into account in Germany's Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz, EEG), which determines the amount of financial support using a flexible adjustment mechanism. This ensures that feed-in tariffs are reduced more quickly when growth in the photovoltaic market is strong and more slowly when the market declines.



BSW-Solar has agreed with the environment minister to maintain this control mechanism and to readjust support levels as early as the middle of 2011 if growth in the German photovoltaic market is too strong.



More precisely, in the case of very strong growth in additional installations of photovoltaic systems this spring, part of the reduction in feed-in tariffs originally planned for the beginning of 2012 will be moved forward to July 1, 2011. This early reduction may amount to between 3 and 15 percent, depending on market growth. The basis for calculating this early reduction will be the development of domestic photovoltaic demand from March to May 2011, as determined by the Federal Network Agency (Bundesnetzagentur). If, however, the market slows and projected market growth for the entirety of 2011 is less than 3.5 GWp, the first feed-in tariff adjustment won't occur until the beginning of 2012, as previously planned.



"Moving these flexible portions forward sets the photovoltaic industry an ambitious goal of further reducing costs within a very short space of time, so that the price of photovoltaic systems remains attractive to consumers. This agreement on flexible adjustment to financial support makes it possible to avoid introducing a fixed cap to the market. A fixed cap would not only cancel out competitive market forces, but would also prove counterproductive to the objective of further reducing the price of photovoltaic systems," Cramer says. "Flexible adjustments to the feed-in tariff contribute significantly to attaining our goal of expanding installed photovoltaic capacity from 52 to 70 GW by 2020, while limiting the cost of solar power to around 2 cents/kWh."



The solar industry plans to expand module production and upstream production steps in Germany from 3.2 gigawatts to more than 8 gigawatts by 2020, helping to shape the global move toward an environmentally friendly energy supply with a substantial proportion of "made in Germany" photovoltaics. Cramer states, "Our objective in this is to become capable of competing with conventional energy sources as quickly as possible. Thanks to great successes in cost reduction, first market segments will be independent of financial support by 2017."



In addition to providing an important contribution to climate protection and to creating a secure and affordable energy supply, expanding photovoltaics also pays off economically for Germany, with savings of 25 to 70 billion euros, as recent calculations by the consultancies Roland Berger and Prognos show.
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