Germany’s government is making life more difficult for solar farms that it often has to subsidize

Sheep graze between the panels of a solar park in Waghaeusel, 20km southeast of Karlsruhe, March 21, 2011.

An overload of solar power in Germany has piled up costs on the government, prompting a new draft law that would limit subsidies for the country’s industry players, Bloomberg reported.

The outlet cited fresh plans to restrict which producers will receive subsidies when energy falls below a fixed price. Given how often wholesale power prices have dropped into negative territory, this has been an issue for the state.

The government has previously estimated that German renewable subsidies would reach $21.6 billion this year.

That’s as the country’s solar buildout has brought so much renewable energy online that wholesale power prices have frequently fallen below zero. This trend is especially evident during the sunny summer months and has been ongoing throughout Europe.

However, since German producers are guaranteed to receive a minimum strike price, the government is responsible for covering the difference in prices. This so-called “feed-in tariff” reimburses renewable companies for contributing to the public grid.

The new draft law seeks to limit which solar producers are required to sell their output to electric exchanges and, by extent, who is eligible for feed-in tariffs. Currently, plants with 100 kilowatts of capacity are required to participate. By the start of 2027, this will drop to 75 kilowatts.

Also implemented is an earlier law that allows the government to withhold payments for mid-sized and large solar projects, anytime wholesale market prices turn negative, Bloomberg said.

This could trigger uncertainty in a market that has ballooned since Russia’s invasion of Ukraine, an event that caused Europe to search for alternatives to Moscow’s energy supply.

Meanwhile, analysts have noted this year that supplementary investments in battery technology and the electric grid are needed if renewable energy is to escape negative pricing.