Germany Plans Cuts to Subsidies for Small Solar Systems

Germany’s Federal Minister for Economic Affairs, Katherina Reiche, has signaled a shift in policy on subsidies for small private photovoltaic (PV) systems. She argues that with the steep decline in the cost of solar panels and storage technology, new small-scale installations no longer require the same level of government support to be profitable. Reiche stated that many modern systems already pay for themselves in today’s market conditions without extra subsidies.

The minister clarified that feed-in tariffs for existing systems will remain unchanged, ensuring homeowners who invested in the past retain their guaranteed rates under existing agreements. This so-called “grandfathering” principle means that the initial terms granted to a system, often lasting two decades, remain valid. However, for future projects, she believes funding models must adapt to the realities of a cheaper and more competitive renewable energy market.

How the Feed-In Tariff Works and Why It May Change

The feed-in tariff is a guaranteed payment per kilowatt-hour (kWh) of electricity fed into the grid, typically granted for 20 years. The exact amount depends on the system’s capacity, type of feed-in, and the date of commissioning. Smaller installations and systems providing full feed-in rather than surplus feed-in generally receive higher rates.

At present, a typical rooftop system with a capacity of up to 10 kilowatts receives around 7.86 cents per kWh for surplus feed-in. For full feed-in, the rate is higher, at about 12.47 cents. Two decades ago, rates exceeded 50 cents per kWh. The steady decrease reflects falling technology costs and the maturing renewable energy market. Rates for newly installed systems will continue to decline annually, meaning that those who install their PV systems sooner will lock in higher rates for the duration of their contract.

Push for Smarter Integration Into the Power Grid

Reiche insists that future PV systems must operate with greater coordination with the national grid. She advocates for mandatory connection of PV installations to storage systems and for them to be remotely controllable, enabling operators to regulate when and how much power is fed into the grid. The aim is to prevent uncontrolled surges of solar electricity, which can strain grid infrastructure, particularly during sunny periods when generation is high.

Under her plan, both solar and onshore wind operators would also contribute more to the cost of expanding transmission networks. Reiche points out that placing new installations without regard to grid capacity leads to unnecessary expenses for the energy system. She also wants to amend the rule that compensates operators when their systems are temporarily shut down to protect the grid from overload, stating that it has been in place for too long without adjustment.

Background: Rapid Expansion of Renewables

The policy rethink comes after years of rapid renewable energy growth. Under previous economic affairs minister Robert Habeck, the expansion of wind power and PV systems accelerated significantly. In summer months, solar generation now accounts for a large share of the electricity supply, creating challenges for grid operators, particularly in states like Bavaria, where the infrastructure is not always equipped to handle the influx.

Currently, up to 60 percent of Germany’s electricity originates from renewable sources, a figure that continues to climb. While this marks progress towards climate targets, it also underscores the need to balance generation with transmission capacity. Reiche’s approach seeks to align the pace of renewable deployment with the development of the power grid, ensuring stability and cost control in the long run.