GERMANY: Solar subsidies are victim of their own success

A subsidy system promoting the installation of solar panels on houses in Germany has had to be revised because too many people have been applying for interest-free loans. The new loans will charge two percent interest, but demand is expected to remain high.

“We could sell many more panel systems, but we are already working under a heavy workload,” Andreas Pawlik, general business manager for Shell Solar in Germany, told edie.

Demand for residential solar panel installation has soared in Germany since the government agreed to increase the amount it pays to households selling solar-generated energy to the grid (see related story). In addition to being paid DM 0.99 per Kwh entering the grid, households installing solar panels have been eligible for interest free loans. The loan programme was introduced to support the country’s 100,000 Roofs programme that aims to have 100,000 homes equipped with solar panels.

But excessive demand for loans has led to revision of the loan system. New loan approvals will require households to begin repaying their 10-year loans in year three, with two percent fixed interest rate charged. Under the original loan regulations, if the solar panels were still generating energy in year 10 of the loan that year’s loan repayments were eliminated. Now, households will be obliged to pay during the final year of the loan as well.

The loan programme will end in 2003, instead of 2004 as originally planned, and the Government has set a cap on the amount it will loan each year.

Shell’s Pawlik is critical of the cap, arguing that caps create a “stop and go situation” with loan money running out toward the end of each year and meaning that the loan programme fails to take full advantage of demand.

Nevertheless, Pawlik is generally pleased with the solar boom in Germany. Changes to the loan programme have led to a backlog of 10,000 loan applications and Pawlik hopes that the approval process will speed up, allowing Shell installers – who sign exclusive contracts to install only Shell solar panel systems (see related story)

– to move beyond securing applications and onto installation.

Competition in the residential solar market is fierce in Germany, thanks to the large increase in feed-in payments and Shell says it has achieved 55% market penetration, with 70% the target for the end of the year.

Households installing grid-connected solar systems before 2002 will be guaranteed DM 0.99 per Kwh entering the grid for 20 years. For those installing systems after 2002 they will be guaranteed a slightly lower 20-year subsidy, at 95% of DM 0.99 per Kwh.

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