Launched two decades ago, Germany's effective and exemplary renewable energy feed-in tariff plan is slated for a cut-back, spurring near-term solar investment. As the July 2010 expiration, and a double-digit reduction near, investors are capitalizing on a last chance for the highest return on this eco-friendly asset. See the following article from Property Wire for more on this.
There is an increase in interest among property investors for German solar energy investments as a feed-in tariff cut approaches, it is claimed.
Germany is one of the world leaders in solar energy but a cut off up to 16% is expected for most solar photovoltaic installations from 1st July 2010, significantly reducing the incentive for investment.
Solar photovoltaic (PV) panel manufacturers have been inundated with orders not only from domestic homeowners but also from businesses and investment groups with larger roof spaces and qualified installers have been working around the clock to fit the panels in time.
‘With the 1st July deadline fast approaching we are sourcing additional roof space in order to meet the serious demand for solar energy investments in Germany. Investors know that plugging in by this date will maximize their returns over the next 20 years,’ explained Steven Worboys, managing director of Experience International who is marketing solar energy investments in Germany in the UK for the first time.
Feed-in tariffs (FIT) was first introduced into Germany in 1990 and required utilities to connect renewable energy generators to the grid and buy the electricity produced at a rate of 65 to 90% of the average tariff charged per unit to end-users. The model has been so successful in supporting the development of the renewable energy industry that is has been replicated all over the world, including the UK.
However, some 20 years later, the German government has decided that the feed-in tariff, currently at 32 to 43 eurocents/kWh, is over-subsidizing the renewable energy industry and costing the consumer too much so the FIT rate is to be reduced. The fall of up to a third in the production of solar panels and growth in cheaper imports, especially from China, has also influenced the decision.
By their very design FITs are intended to reduce over time and the cut is not unexpected, even if the double-digit nature is deemed somewhat severe by some. ‘The feed-in tariff has been integral in turning Germany into the largest and most successful solar energy producer in the world. It has installed 9 GW of PV capacity with government targets for 66 GW by 2030. The industry has a turnover of some €1.7 billion per annum, employs 20,000 people and analysts predict that solar energy can provide 25% of the nation’s electricity by 2050, said Warboys.
With such marked progress to date and new government targets for renewable energy production being made, the imminent cut in FITs is certainly not the end of Germany’s solar success story, he believes. ‘There remains a window of opportunity for investors to see returns of €21,501 net income in year one and 17% net ROI for years one to 20. Investment is from €50,000 and 90% non-recourse finance is available,’ he added.
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