Germany's Federal Economy Minister Katherina Reiche (CDU) is standing by her plans to significantly reduce subsidies for private solar installations, despite weeks of intense criticism following the leak of early drafts. According to sources within Reiche's ministry, the guaranteed feed-in tariff for small solar systems is to be abolished, and operators of small installations will instead be required to market their electricity independently. A corresponding reform of the Renewable Energy Act (EEG) is now entering what the ministry calls the "early coordination" phase with other government departments.
Also finalised, according to the ministry, is the so-called Grid Package. Under the ministry's proposals, grid operators would be empowered to decide which renewable energy installations are granted a connection to the electricity network. In addition, under certain conditions, plant operators would no longer be entitled to compensation when their systems are shut down for reasons of grid stability, and they would be required to contribute to the costs of grid expansion.
The EEG reform is directed, according to the ministry, against what it describes as the current "oversubsidisation" of new solar installations. For small photovoltaic systems installed on private homes, the ministry argues the investment already pays off within a few years. "There is no need for subsidies at the expense of the taxpayer," the ministry stated.
Currently, the state guarantees operators of small solar installations a fixed price for 20 years when they feed surplus electricity into the grid. This feed-in tariff has already been substantially reduced in recent years. For new installations, it now stands at just 7.87 cents per kilowatt-hour and falls by one percent every six months.
That rate is already well below the market price for electricity, which means it is often more financially attractive for plant operators to use the electricity themselves rather than feed it into the grid. Thanks to smart home systems, electric vehicles, and energy storage solutions, this is increasingly what is happening in practice. Experts, however, continue to stress the importance of the feed-in tariff for investment security.
The Federal Economy Ministry's central argument is one of grid efficiency. The guaranteed feed-in tariff, it contends, leads to solar energy being pushed into the grid even when there is already sufficient electricity available. "We will only pay for what genuinely provides a benefit to the electricity system," the ministry said.
According to the ministry's own estimates, the reform could reduce subsidy costs for the further expansion of solar energy by more than 20 percent. However, it is worth noting that the subsidy share attributable to new installations is, in any case, relatively modest. The vast bulk of subsidy payments continues to flow to installations that were connected to the grid over the past two decades, when feed-in tariffs were considerably higher. Importantly, the reform will not affect existing installations, their guaranteed tariffs will remain in place.
Proposals from the Federal Economy Ministry regarding the EEG reform first became public in February in an initial version and immediately drew widespread criticism. Environmental and industry associations fear that the withdrawal of subsidies will bring the expansion of solar energy to a standstill. Critics have also accused Reiche, against the backdrop of the current oil and gas price crisis, of placing excessive reliance on fossil fuels.
The Grid Package, an early draft of which also leaked to the public at the end of January, similarly faced broad opposition. There are concerns that the package would significantly slow the expansion of wind and solar energy installations across the country.
Despite the controversy, both draft laws have remained largely unchanged since their earlier versions. Within the Economy Ministry, however, the leaking of the drafts at such early stages reportedly caused considerable internal unrest. According to a report by Der Spiegel, the email accounts of several ministry officials were searched as a result.
The Green Party has renewed its sharp criticism of the minister. "Katherina Reiche apparently wants to push through with her head against the wall," declared the party's co-chairman Felix Banaszak. "She is ignoring all objections from almost every branch of industry as well as consumer associations against her destructive energy laws."
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