German Solar Soap Opera's Finale to Air?

Germany moves closer to ending the debate over cuts to solar energy subsidies.
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NEW YORK (

TheStreet

) -- Solar energy stocks have moved up and down violently since January on the long-running solar soap opera in Germany, as the sector's biggest market debated cuts to its solar subsidies.

Late on Thursday, the finale in the long-running solar sector saga began to air.

The ruling coalition of the German government is expected to only make tweaks to the feed-in tariff cuts already expected, according to a report from

Reuters

, citing anonymous government sources in Germany.

Rooftop solar installations will be cut by 16% from July, as planned.

Most ground-mounted installations will be cut by 15%, with support for solar projects on contaminated land cut by 11%, and support for farmland solar to be eliminated, as previously expected.

The lone ongoing point of debate seems to be if the cuts to ground-mounted solar will be made in July or October.

In March, there had been reports that Germany would move back the implementation of cuts to ground-based solar projects to October, but that wasn't clear from the latest reports on Thursday night.

The timing of the ground-mounted solar project cuts could be of the most significance to

First Solar

(FSLR) - Get Report

, which has the largest ground-mounted solar business in Germany, among the big public solar companies.

A 1% soft cap on solar installations in would be implemented in 2011, if capacity exceeds 3.5 gigawatts annually. The soft cap will be ratcheted up another 1% if installations reach above 4.5 GW.

Of course, given the changes that have taken place in the German political battle over solar, another report citing anonymous sources has to be taken with at least a measure of cautiousness. The measures still require approval from the lower house of parliament.

Various reports from solar analysts in the weeks preceding the latest report have come to the same conclusion: that the feed-in tariff cuts would see little changes before July implementation, and the only open question was the timing of the cuts in FITs for ground-mounted solar projects.

In at least one respect, it's a good thing that little change is expected in the level and timing of the FIT cuts in Germany.

Solar shares are volatile enough during earnings season, and it could help remove some lingering uncertainty as solar management attempts to guide investors about the second half of 2010 in upcoming earnings conference calls.

Additionally, the latest date from Germany that demand in December had reached 1.4 GW, and for 2009 was at a level of 3.8 GW, had set off renewed fears that the massive solar installations could up the political ante as the parliamentary debate reached its final stage.

Collins Stewart solar analyst Dan Ries was out with a note on Friday morning saying that it looks to him as if the proposals will go through as expected, and even though the lower house of parliament in Germany still has to vote on the FIT cuts, "the final law will be similar to the current proposal."

The Collins Stewart analyst wrote "the real news is that they are NOT making major changes to earlier plans. We believe the coalition government was clarifying that while it heard some people calling for larger subsidy cuts (due to the 3.8 GW installed during CY09) and others calling for smaller cuts (often those trying to aid the domestic producers), the Government decided against making meaningful changes to its plan."

Trading in solar shares seemed to reflect the German solar soap opera coming to an end without a major plot twist on Friday morning.

The only solar stock moving significantly on Friday was

Yingli Green Energy

(YGE)

, and Yingli's 5% gain was due to a buy rating from Oppenheimer & Co.,

the latest in a series of optimistic calls on Yingli shares from the Street.

-- Reported by Eric Rosenbaum in New York.

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