NEW YORK ( TheStreet) -- When it comes to debate in Germany about additional solar feed-in tariff cuts, it's déjà vu all over again.

A report in the German Financial Times indicates that Chancellor Angela Merkel's Christian Democratic Union wants to add an additional feed-in tariff cut in 2011.

Solar shares were all down on Monday morning. The report from the Financial Times Deutschland was picked up by Bloomberg.

In the Financial Times article, a letter sent by Merkel's energy-policy expert Thomas Bareiss to Environment Minister Norbert Roettgen makes the case that the government should cut the guaranteed FIT kilowatt hour for newly installed solar panels by an additional amount on Jan. 1.

The rationale for the additional FIT cut is that the rising cost being passed along to consumers could actually create a backlash against alternative energy. It's a twist on an old argument, in this regard, with the constant pushback against the high cost of solar being here linked with a potential backlash against alternative energy more generally.

The renewed political battle in Germany over feed-in tariff cuts may come as a surprise to some solar bulls. Recently, with a slowdown in the German market after a frenzied pace of installation in June, solar bulls were making the case that the feed-in tariff cuts were working to slow the growth of solar to a manageable level. The latest unrest between Germany's warring parliamentary factions over solar means that volatile trading in solar could be the norm for weeks to come.

Indeed, the letter from Merkel's environmental deputy doesn't just mention an additional FIT cut in January, but additional middle of the year FIT cuts also.

Bearishly inclined solar analyst Gordon Johnson of Axiom Capital wrote in a research note on Monday morning, "Based on our discussions this morning with our contacts in Germany, the possible amendments to the EEG being suggested from the government's side include the following: (a.) an additional Jan. 1, 2011 FiT cut, on top of the 13% cut that is currently set to take effect Jan. 1, 2011, (b.) an additional mid-year 2011 cut, based on the rate of installations in 1H11, and most importantly, (c.) a 3GW installations cap in 2011 and thereafter (we will remind our readers that 3.806GW of solar PV was installed in Germany in 2009, and 7GW-9GW is expected to be installed in 2010)."

Most concerning is talk of a 3 gigawatt cap on solar installations in Germany. The cap has always been the political wild card in Germany, and of late, with the rate of installations slowing in Germany, solar optimists have been making the case that a cap won't be needed because the FIT cuts are doing their job to create an acceptable level of solar installations.

It has to be said, here we go all over again in Germany, and it has to be remembered that Germany's Environment Minister Roettgen began 2010 with ambitious plans to cut solar incentives, leading to steep losses across the sector. Yet, in the end, Roetggen's plans were chipped away at by the opposition, in particular the political block representing Bavaria, which employs a big portion of the German solar labor force. Roetggen didn't get his cuts when he wanted them, or at the size he wanted them in 2010, and not without going through a lengthy political give and take.

So while the battle is back on in Germany over solar, and the stocks will suffer, it has to be said that whether the latest salvo will reflect the actual lawmaking that comes to pass in Germany in 2011 is anybody's guess -- and will likely be anybody's guess for weeks, if not months to come.

The one positive for solar stocks on Monday morning with the news out of Germany is that solar stocks have fallen steeply over the past few weeks, so the damage done by the latest news out of Germany did not create losses as steep as the news might have otherwise created.

Solar stocks have been under pressure from the Euro Zone debt crisis and the depreciation of the euro in recent weeks, from a high of $1.42 now down to $1.30 on Monday, the European currency's lowest level in months.

All the major solar stocks were down between 3% and 5%. ReneSola ( SOL - Get Report), Jinko Solar ( JKS - Get Report) and JA Solar ( JASO) were leading losses, down between 4% and 5%. First Solar ( FSLR - Get Report) was down 3% in morning trading on Monday.

-- Written by Eric Rosenbaum from New York.

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