NCPA - National Center for Policy Analysis

Solar Industry Faces Subsidy Cuts in Europe

March 20, 2012

Across Europe, governments are slashing public spending to cut their deficits, and green energy subsidies are a target, says the Washington Post.

  • German policymakers indicated last week that they planned to cut once-generous subsidies as much as 29 percent by the end of the month, on top of a 15 percent cut in January.
  • Britain and Italy have made similar moves, and in January, Spain abandoned its subsidies altogether.

Advocates say that in sunny regions, solar energy is within several years of becoming cost-competitive with fossil-fuel power -- if solar companies can stay in business in the meantime.  Several companies have already declared bankruptcy.  Others say they'll give up on Europe and focus on developing countries, where poor infrastructure makes solar panels that work off the grid a cost-effective competitor to diesel generators.

While many concede that the subsidies have become overly generous at a time when solar panels have dropped dramatically in price, they insist that governments are reneging on their pledges to go green and argue that the rollbacks are happening too abruptly.  Some question whether countries will still be able to boost renewable energy's share of the power supply in 2020 to their goals of 20 percent in Britain and 35 percent in Germany.

  • Yet alternative-energy experts suggest that with the solar panels' declining prices, subsidy cuts are not only acceptable, but to be expected.
  • Though they criticize governments for offering woefully short notice, they suggest the cuts are inevitable as the solar industry becomes more competitive with fossil-fuel energy production.

Companies that generate renewable energy get a guaranteed above-market rate for 20 years.

  • The subsidies for renewable energy cost German consumers about $14 a month for a family of four.
  • Though solar energy supplied 3.1 percent of Germany's electricity needs in 2011 -- hampered in part by the country's famously dreary weather -- the industry consumed closer to half of the overall renewable subsidies, which also support other energy sources such as wind and biomass.

Source: Michael Birnbaum and Anthony Faiola, "Solar Industry Faces Subsidy Cuts in Europe," Washington Post, March 18, 2012.

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