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Germany aims to cut solar power subsidies

The German government wants to slash its support to the solar energy industry to prevent the market from overheating, a member of Chancellor Angela Merkel's Christian Democrats (CDU) said on Tuesday.

Germany aims to cut solar power subsidies
Protests against the cuts in Berlin on Monday. Photo: DPA

Berlin currently guarantees good prices for solar panel owners who sell electricity, but the subsidies diminish progressively over 20 years and would be cut more sharply and eliminated altogether in certain cases under a new law, said Peter Altmaier, a CDU member that follows the sector.

Germany is the world’s leading market for solar panels, but the aid led to farmers installing them on arable fields and boosted the global market, which has in turn helped Chinese producers that have begun to hurt German rivals.

Under a draft law to be considered by Merkel’s cabinet on March 3, state guaranteed prices would be cut by 15-16 percent for panels installed on the ground and on roofs.

Support would be eliminated altogether for those planted in fields that could also be used to grow crops.

In late January, Environment Minister Norbert Röttgen, also a CDU member, raised the idea of a 25 percent decrease in subsidies for panels on arable land, but in the end, policymakers decided to cut them completely.

“There must be no more panels installed on arable land,” Altmaier said following a meeting of government coalition partners, the CDU and the liberal Free Democrats.

Experts say the subsidy fails to spur competition in the industry, which represents less than one percent of all electricity production in Germany, Europe’s top economy. Solar collectors would still be encouraged in industrial zones and along motorways and railways, however.

Producing electricity with solar energy has become a lucrative business in Germany, with the guaranteed prices underwritten by fees shared by all consumers.

That costs consumers a €1 billion ($1.36 billion) per month according to Hans-Peter Friedrich, a leader of the CDU’s Bavarian sister party, the CSU. And German manufacturers are seeing less and less benefit from the policy.

On Tuesday, the German group Q-Cells posted a 2009 net loss of €1.36 billion, on sales that fell by 35 percent to €801 million owing to plunging prices and increased competition.

The German group and rivals had enjoyed strong growth until now, with Q-Cells posting sales of just €17.3 million in 2002, a figure that topped €1 billion in 2008. Last year it was forced to cut 500 jobs from a total workforce of 2,600 and move some production to Malaysia.

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ENERGY

KEY POINTS: Everything Germany is doing to help relieve rising energy costs

It can be hard to keep track of all the relief announcements Germany has made to help people with rising costs. That’s why we’ve gathered all the info you need in one place.

KEY POINTS: Everything Germany is doing to help relieve rising energy costs

The German federal traffic light government of Chancellor Olaf Scholz’s Social Democrats, the Greens, and the liberal Free Democrats have passed €100 billion worth of relief bills to help tackle rising inflation and higher energy costs.

But a lot of that money hasn’t been spent yet. The last package – totalling €65 billion – was only agreed about two weeks ago.

Meanwhile, Germany spent the first few months of this year registering inflation rates not seen since WWII. In August, the country recorded 7.9 percent inflation. Electricity prices have doubled.

As winter approaches, here’s the relief that’s already planned – as well as a few things some politicians have suggested in addition.

Direct One-Off Payments

In perhaps the simplest measure, the German government is giving certain groups of people direct money transfers.

German Chancellor Olaf Scholz and Finance Minister and Free Democrats Party (FDP) leader Christian Lindner address a press conference on the government coalition’s relief plan to cope with soaring energy costs, on September 4, 2022 at the Chancellery in Berlin. (Photo by Tobias SCHWARZ / AFP)

For starters, everyone employed in Germany will get up to €300 (the payment is taxed) added to either their September or October wages, depending on how often their companies pay wage taxes. Employees at companies that pay monthly will get the extra cash in September, while those who pay quarterly will get it in October. For more information, read the linked piece below:

READ ALSO: What you need to know about Germany’s €300 energy relief payout

People who are employed do not have to apply for this. They’ll simply get it added to their payslip that month. The one-off is adjusted for income, so those who make less will get more. Those who make more will get less of an addition.

People who are unemployed can still receive the payment if they worked sometime in 2022. Like the self-employed, they can claim this on their tax return. People on sick pay and parental leave are also entitled to receive the payment. For more details on this, read the linked piece below.

READ ALSO: Reader question: Do I get Germany’s €300 energy relief payment if I’m out of work?

Once again, employees do not have to apply for the energy relief and the unemployed and freelancers can simply deduct it from the tax they pay the government.

Several scams are currently making the rounds claiming that you must apply and provide personal information to receive the payment. We’ve detailed some of them in the linked piece below:

READ ALSO: EXPLAINED: The €300 energy relief payment scams to watch out for in Germany

From this month through December, the number of people eligible for housing benefits in Germany will increase to two million. These people will receive a one-off top-up to their existing benefit payments, specifically to pay for the higher cost of heating. After that, the amount of benefit they receive will be increased to reflect higher energy costs.

A €200 one-off payment is also planned for students, although each federal state may end up paying the amount slightly differently in a process that’s still being defined.

Pensioners will receive a €300 payment on December 1st. They do not have to apply for this, it’ll simply be added to the payments they receive from their pension insurance funds.

Finally, parents will see an increase in the amount of child benefit (Kindergeld) they receive, up to €237 per month, per child, up to and including the third child.

READ ALSO: Germany to raise child benefits for families with up to three children

Cheaper public transport

Perhaps the most famous government measure passed in the last support package was Germany’s hugely successful €9 monthly ticket for all regional public transport everywhere in the country.

Given the ticket’s popularity, the federal traffic light government has set aside €1.5 billion aside for a successor ticket to begin in January 2023.

Designed to incentivise public transport to reduce energy demand, lower people’s transport costs, and even spur summer tourism, many economists credit the €9 ticket for having prevented German inflation from getting even worse.

After the ticket expired at the end of August though, federal and state governments argued about what to bring in as a successor.

Berlin has already gone ahead with a successor of its own starting in October and lasting until the end of the year. People with an “AB zone” subscription—which covers everything within Berlin city limits – will pay just €29 a month. That’s less than half the regular cost.

A person buys the €9 ticket in Frankfurt.

A person buys the €9 ticket in Frankfurt. Photo: picture alliance/dpa | Boris Roessler

READ ALSO: What we know about Berlin’s follow-up to the €9 ticket

Although the federal and state governments have been arguing about what the nationwide successor ticket should look like, they intend to present a plan after a meeting together on October 12th. Word is a new nationwide ticket would be around €49.

READ ALSO: Germany to set out plans for €49 transport ticket in October

Saving money through tax credits

Apart from subsidising public transport and giving certain money to people directly, the federal government’s measures are also designed to help people save more of the money they earn through tax credits.

The ‘Home Office’ tax credit, for example, has been made permanent in order to help alleviate the higher energy demands of working from home, up to a maximum claim of €600 per year.

And while the price of gas itself keeps going up, the government has cut the VAT on gas consumption to 7 percent.

Depending on the size of a person’s home, that cut could help save anywhere from €140 to €650 per year, according to one projection. But keep in mind that gas bills are rising and there is a gas levy coming in too (more on that below).

READ ALSO:

The government is also planning to allow employees to deduct pension insurance contributions from their taxes, leaving them with more money leftover each month.

Finance Minister Christian Lindner is also working on proposals to increase the tax-free exemption, or the amount that a person earns annually that is exempt from tax. Under current proposals that amount would go up from €10,348 to €10,633 next year and then to €10,933 in 2024.

Meanwhile, so-called ‘midi-jobbers,’ or people who work certain part-time jobs, will now see the first €1,600 they earn a month exempt from taxes, rather than the current €1,300.

READ ALSO: How Germany’s Finance Minister wants to ease inflation with tax relief measures

Energy price caps, brakes, or profit clampdowns?

The government has so far ruled out a cap on the price of gas, and has approved a gas levy that passes on some of the increased costs to consumers starting in October. That levy will add 2.419 cents per kilowatt hour to the price of gas, which around half of all German households use for heating. We’ve broken down what kind of cost increase that might mean in the linked piece below.

READ ALSO: EXPLAINED: How much will Germany’s gas levy cost you?

However, Chancellor Olaf Scholz noted that some energy companies that don’t primarily use gas, including those that might generate electricity through wind, solar, or coal – are taking advantage of the higher energy costs caused by gas shortages.

electricity pylons at sunset

Energy prices have soared in Europe as Russia has slashed natural gas supplies to the continent. Photo by Matthew Henry on Unsplash

He has vowed to introduce a windfall tax that will skim excess profits, likely through action at the European level. The coalition also wants a price brake for a basic level of electricity consumption. Anything consumed above that level though, would be more expensive.

Although there’s details still to be worked out, Finance Minister Christian Lindner said last week the government expects to be able to get €10 billion in windfall tax revenues from these excess profits.

READ ALSO: What’s in Germany’s support package for rising energy bills

What else is planned?

In addition to the above, German politicians have made a few more pledges for ways to help out both individuals and businesses. That said, many of these measures are only now being discussed, so we’re a long way from knowing precisely what they would look like.

Following criticism from the Federation of German Industries (BDI), Economics and Climate Minister Robert Habeck pledged to provide support to small and medium-sized businesses coping with rising costs during a meeting last week.

READ ALSO: Germany pledges to help small businesses with high energy costs

Meanwhile, the Social Democrats are preparing a measure to suspend the requirement for bankrupt firms to apply for insolvency proceedings, giving them additional time to apply for government relief programs.

READ ALSO: How Germany wants to help small businesses stay afloat

Finally, Germany is planning to increase its natural gas imports from countries other than Russia through the construction of five liquefied natural gas (LNG) terminals, with the first temporary facilities coming online at the end of this year.

It is hoped that this will help relieve the overall energy supply situation and bring down bills to a more stable level.

READ ALSO: Germany plans more LNG capacity as Russian gas dwindles

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