German solar market shines despite incentive cuts

March 1, 2012

The German government recently proposed cutting feed-in tariffs (FIT) for new solar installations to simplify the tariff system.

Despite the proposed reduction in incentives, some German markets will remain attractive for photovoltaics (PV) in 2012, including residential and large-scale systems, due to the return on investment (ROI), according to IHS. Even without incentives, IHS estimates that residential systems will still generate an ROI of 10 percent if system prices are at €1,850/kW, at which prices are currently.

"The reductions in the FITs mean that the success of the German PV market in 2012 will hinge on its capability to generate an attractive ROI based on free-market dynamics, rather than on government incentives," said Dr. Henning Wicht, Director and Principal Analyst for Photovoltaics at IHS.

"To justify investments, those who install solar systems must pay their own way to a much larger degree than before, either through their own consumption of electricity, or from power sales to others. Although this is likely to lower the ROI on solar installations in Germany, returns are likely to remain attractive enough to attract financial support."

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