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Germany allows Merkel to cut solar subsidy without vote

German Chancellor Angela Merkel‘s Cabinet has backed measures giving ministers authority to adjust subsidies for renewable energy in Germany, a move the industry says would destabilize its ability to finance plants.

Bloomberg reports that draft legislation from the environment and economy ministries endorsed by the Cabinet today includes a clause that would enable officials to change rates paid for solar power without fresh backing from parliament.

It would come into force should installations exceed a government target of 2.5 GW to 3.5 GW a year.

“The provision is dangerous as it would destroy investment security and may be expanded to subsidies for wind and biomass,” Carsten Koernig, the head of the BSW Solar industry group, said yesterday in Berlin. “We fear a rollback in clean- energy and climate policy at a time when Germany wants to lead.”

Germany, the world’s largest solar market, wants to cut in half the annual pace of installations after incentives for the industry pushed capacity past government targets. Merkel is encouraging renewables as a replacement for nuclear power stations that close by 2022.

The draft bill, to be debated by lawmakers next month, would make the biggest ever reductions in solar subsidies starting next month and eliminate them for the largest photovoltaic plants.

The provision enabling the government to quickly change subsidies “effectively serves as a hard cap,” Aaron Chew, an analyst at Maxim Group LLC in New York, said in an e-mailed note. “This yields a lack of visibility and uncertainty that complicates project finance.”

Environment Minister Norbert Roettgen said the proposals are meant to rein in costs linked to new installations and protect the stability of the power grid.

Germany added 7.5 GW of panels last year, more than double the government’s target. “We want photovoltaic energy but it has to grow at a reasonable level,” Roettgen said.

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