Germany's next government is considering slashing subsidies to renewable energy industries, particularly solar, an energy expert with Chancellor Angela Merkel's Christian Democrats said Tuesday.
Michael Fuchs, an energy expert with the conservatives, told reporters after the committees for the environment and commerce met to hammer out the details of a new government contract said the most successful technologies would be the first to see cuts.
"Where it makes sense, will may have to make cuts — for example where technology has led to a reduction in price, as with solar energy for example," Fuchs said.
Investors expected Germany to cut back on solar subsidies this year as the recession sapped demand and tightened government budgets, said Benedict Pang, an analyst with Caris and Company in San Francisco.
"During the downturn, the wheels started to come off" in Germany, Pang said. "A lot of solar companies have weaned themselves off of that market."
First Solar, Inc., one of the largest American companies installing panels in Germany, spent much of the summer peddling its services in China. The Tempe, Ariz.-based company was rewarded last month with a massive 2-gigawatt project north of the Great Wall.
"You need to be able to go to wherever the business is and get the projects," Pang said.
A section of the proposed contract leaked to the Handelsblatt daily Tuesday said that government money for renewable energy industry "must be critically reviewed," noting that given the drop in the price of solar panel production, subsidies for solar energy could be cut as early as 2010.
The junior party in Merkel's new coalition, the Free Democrats, are against the subsidies, arguing that they hurt competition by driving up the price of energy. Merkel is forming a new government with the Free Democrats following Sept. 27 parliamentary elections.
Germany has guaranteed renewable energy generators fixed payments for the power they produce to encourage the production of solar panels and several of the world's leading producers of the technology are based here.
Shares of Solarworld AG dropped 2.39 percent to 16.32 euros ($24.26) on the news. First Solar gave up $5.68 to close at $155.02 per share and SunPower Corp. lost 27 cents to close at $32.55 a share.
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AP Energy Writer Chris Kahn contributed to this story from New York.
