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A German national flag is pictured in front of solar panels in Bad Hersfeld May 14, 2013. (REUTERS/Lisi Niesner) A German national flag is pictured in front of solar panels in Bad Hersfeld May 14, 2013. (REUTERS/Lisi Niesner)  

Europe’s Green Energy Industry Faces Collapse As Subsidies Are Cut

European countries are cutting back their solar subsidies to rein in energy costs and cut debt. The solar industry in Germany, Italy and Spain are all facing huge problems due to subsidy cuts and power rate hikes.

Germany plans to tax solar generation

The German solar demand is in freefall with only 818 megawatts of photovoltaic (PV) solar panels in the first five months of this year, a 45 percent drop from last year. This comes after a 60 percent decline in PV solar demand between 2012 and 2013.

Solar power set record levels of energy generation in June, but more is needed to meet Germany’s goal of getting at least 55 percent of its power from green energy sources by 2035. Even as the solar industry touts record generation levels, falling demand amid rapidly rising German energy costs have gotten the government to crack down on solar generation — which could cause solar demand to plummet even further.

To make things worse for the solar industry, PV Tech reports that Germany plans to levy charges on residential solar panel owners. Germany has been looking for ways to reform their green energy laws in order to lower power prices and still meet their global warming goals of cutting carbon dioxide emissions.

Germany’s planned energy reforms would force industries and households self-generating green energy to pay high surcharges to offset the energy costs of other consumers. Currently, energy-intensive industry have been exempted from green energy taxes so they can remain internationally competitive, meaning households and businesses bear the brunt of the high energy costs.

Earlier this year five million German households were hit with higher electricity bills after the government raised green energy taxes. The energy-price tracker Verivox said the “result for a typical household will be additional annual costs of 44 euros [$60.5] a year. Some 5 million households are affected [over the three months].”

Italy’s $272 billion problem

Italian Prime Minister Matteo Renzi’s left-wing government has angered solar companies by proposing a 10 percent cut in power prices to spur economic recovery.

But the move intended to help struggling households and small businesses will lead solar companies to see their subsidies cut, reports Reuters. Renzi’s reform means solar producers will have to “extend the term of their subsidised tariffs from 20 to 24 years, effectively thinning them out, or accept a straight 8 percent cut.”

Solar power is subsidized in Italy through tariffs charged to consumers. These tariffs have raised energy bills in the country and is projected to cost Italians $272 billion (200 billion euros) over the next 20 years — even with the planned subsidy cuts.

“That’s a lot of money for consumers to pay. Retroactive cuts have happened in Spain, Greece and Bulgaria. The operators can’t not have seen this coming,” a manager at a top energy trading association told Reuters.

The Italian government says solar companies have gotten enough subsidies and will have to live with lower tariffs. But the solar industry warns that subsidy cuts will drive away green energy investments and trigger legal action against the government.

“You can’t penalize operators halfway through their investments; they won’t come back,” said Pietro Colucci, CEO of Kinexia, an Italian-based green energy firm.

Renzi’s energy reforms and other cuts to taxes and bureaucracy have earned him the nickname, Mr. Demolition Man, according to Reuters. Italy’s subsidy cuts will affect 8,600 solar producers that get about 60 percent of the subsidies.

“Renzi is destroying a whole industry and causing problems for the banks which will find themselves with more non-performing loans to write off or else take over plant,” the Italian head of an European infrastructure fund told Reuters.

Spain’s new energy rate signals end to green subsidies

Spain new energy rates for green energy producers signal an end to subsidies for renewables that have been in place since the 1990s. The new rates are based on a “reasonable return” and are meant to rein in spiraling energy costs and an overproduction of green energy, reports Bloomberg.

The country became a poster child for green energy production after spending $68 billion (50 billion euros) over 25 years to boost wind, solar and other green energy generation. But subsidies and power costs spiraled out of control, costing the country more than $12 billion (9 billion euros) in 2013 alone.

On top of that, Spain didn’t actually appropriate enough money to actually fund all of their green spending, meaning the country took on huge amounts of energy debt — which reached more than $35 billion last July.

Last year, Spain began to dismantle its green energy subsidy system as energy debts grew and the economy continued to lag. New laws were introduced to “achieve an economic and financial stability of the electric system and avoid the incorporation of new costs,” according to the Spanish government.

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