German econ min considers phasing out subsidies for new small-scale solar PV

Germany’s economy minister, Katherina Reiche, is considering to phase out the subsidy system currently in place for small-scale photovoltaic (PV) installations which feed electricity into the grid. “New, small PV systems are already profitable on the market today and do not require subsidies,” Reiche told newspaper Augsburger Allgemeine in an interview. She replied to a question about private PV installations, such as on homeowners' rooftops, and did not further define their size. 

In an answer during a press conference, an economy ministry spokesperson said that “there are no such plans” to completely abolish subsidies for small-scale household solar installations completely. They added that renewables “are still urgently needed” but they needed to take on “more system responsibility” to achieve the target of covering 80 percent of power consumption with renewables.

So far, homeowners with a solar rooftop system have been guaranteed a fixed remuneration per kilowatt-hour of electricity fed into the grid for a period of 20 years, depending on the size of their systems and when they were commissioned. This feed-in guarantee has gradually gone down in recent years. It is credited with powering Germany’s renewables growth. Without such a mechanism, renewables would have had a hard time competing with other sources, such as coal. Existing solar installations would continue to receive the agreed remuneration, Reiche said.

The renewable energy act (EEG) is continuously reviewed and reformed, particularly in relation to price developments, the spokesperson said.

Plan would “severely damage” solar industry

Solar industry association BSW said such a plan would "jeopardise climate targets and severely damage the industry". The group called on the government to tackle tasks such as the rapid expansion of photovoltaics across all market segments, as well as storage and grids, "instead of engaging in harmful debates about slowing down the pace of the energy transition in photovoltaics".

Deputy Green Party chair Sven Giegold criticised plans to “pull the plug” on private solar installations. “Instead of distributing the cost advantages of renewables to everyone, the big players will be subsidised and the small ones slowed down in future,” he wrote on LinkedIn. “If the incentives for feeding into the grid are removed, roofs will no longer be covered with PV modules.”

Ramona Pop, head of the Federation of German Consumer Organisations (VZBV), told Tagesspiegel Background that it was “incomprehensible that billions of euros are to be poured into new gas-fired power plants while feed-in tariffs for private households are to be abolished.”

Renewables should help cover system costs

The government parties had said in their coalition agreement that they wanted to ensure that renewable electricity installations could fully finance themselves on the market in the long term. The further expansion and the installation of adequate storage capacity likewise should be achieved through “a greater use of market instruments”.

Energy economist Lion Hirth from the Hertie School in Berlin told Tagesspiegel Background that abolishing feed-in tariffs for new small-scale installations made sense. “Scarce tax revenue should only be used to promote renewables ‘where we get the most return per euro’,” the newsletter service quoted him as saying. “Only technologies with ‘extraordinary social added value’ should be subsidised with taxpayers' money,” he added.

Philipp Schröder, head of energy management provider 1KOMMA5°, also said it made sense to discontinue the subsidy, but only after smart meters – which allow customers to adapt their electricity demand to optimal times – were installed across the board. “The costs in the EEG [the feed-in tariffs] are mainly caused by old plants that feed into the grid fully and uncontrolled,” Schröder wrote on LinkedIn.

Minister Reiche wants to change the regulatory framework so that renewables feed their electricity into the grid in a controlled way. This would mean, for example, equipping even small PV systems with storage units, and requiring them to market their electricity. Many small rooftop systems currently feed their electricity into the grid in an uncontrolled manner, putting the network under pressure.

“Onshore wind and solar power plants will have to contribute more to the costs of grid expansion in the future,” Reiche told Augsburger Allgemeine. Moreover, the expansion of renewables should be aligned with grid expansion, as not accounting for this “makes our electricity system unnecessarily expensive,” the minister said.

To this end, the economy ministry commissioned a “reality check” – a research report assessing energy system elements such as the country’s future electricity demand, meant to put cost-efficiency and energy security at the centre of Germany’s energy policy. However, a growing number of critics have voiced concerns over the report and its conclusions, worrying that the government might plan to slow down renewables expansion.