Germany proposes tax on ‘self-consumption’ of solar for commercial & industrial users

Proposed changes to Germany’s renewable energy support mechanism could result in a further deceleration in the country’s uptake of solar PV, with some warning that they could bring about the death of the country’s solar industry. Among the most controversial of the changes includes the plan to levy a tax on ‘self-consumption’ of solar energy–i.e. a tax on electricity generated and consumed on-site. The surcharge would apply to commercial & industrial electricity users who build on-site renewable energy plants of their own after the policy comes into effect.

The amount of new solar capacity being built in Germany slumped in 2013, totaling less than half the 7.6 gigawatts (GW) installed the previous year. This came as a surprise for many given the dramatic pace at which new solar was built in previous years when it enjoyed strong support through the country’s EEG, or ‘energy change’ policy. As such, it is not surprising that some would find it strange that a country which had shown such strong support of renewables would go from incentivising them to taxing them.

Over the past few years incentives have been gradually scaled back in Germany, however, with feed-in tariff rates now well below the cost of retail electricity. This means that self-consumption of solar power is the new normal for those who install a system in order to save money on their power bills. Although less financially attractive than installing a system in order to access the generous feed-in tariffs previously on offer, the low cost of solar PV installations in Germany meant that solar for self-consumption was still a smart economic choice for many.

The next step of the wind-back of incentives is actually more of a partial ‘un-exempting’ of commercial & industrial customers from the country’s renewable energy surcharge. The surcharge is levied on all of the country’s electricity users, but large electricity users had hitherto not been obligated to pay it. Now, any commercial or industrial body with a system with a capacity of 10 kilowatts (kW) or more will be obliged to pay up to 70% of this tax–or roughly 4.4 Euro cents per kilowatt-hour (kWh) of electricity that they self-consume. This will impact return on investment and payback periods for those who do opt to go solar under the new policy.

Forbes Magazine’s Trefis Team were among those forecasting a dour outcome for Germany’s solar industry as a result of the policy. “We believe that the plan to tax self-consumption could hurt new solar installations since it would increase the cost of solar generated electricity and lengthen the payback period of investments,” they wrote. They also noted that the Germany Solar Energy Association has estimated that under 17% of the self-consumption market had systems under 10kW and that some of the biggest players in Germany’s solar industry would take a hit.

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