NEW YORK ( TheStreet) -- Solar analysts have been talking about a variable feed-in tariff cut in Germany as the best way forward for the solar industry for at least a few weeks. New reports from Street analysts and foreign press desks suggest that a draft of new solar subsidy reductions will be introduced to Germany's parliament in the coming days. In December, the main industry lobby group for solar in Germany, the BSW, said it would not be opposed to a mid-year cut in the feed-in tariff rate, a big departure from the outset of 2010, when the German solar industry fought Germany's environment minister tooth-and-nail over proposed cuts -- and won some big concessions. One thing seems clear: the introduction of some kind of new feed-in tariff proposal to moderate growth in Germany's solar market is imminent. Jesse Pichel, analyst at Jefferies, has been talking about the introduction of a variable FIT for weeks, and from the other end of the solar analyst spectrum, Axiom Capital solar bear Gordon Johnson wrote at the end of last week that an FIT proposal would be sent to parliament in a matter of days. Pichel has previously stated that the German solar industry has reached across the table this year, as opposed to last year, as a preemptive negotiating tactic, because it wants to avoid a scenario where solar goes from a huge market to a hard-stop market in Germany overnight. The German solar industry had also said weeks ago that it would be willing to accept the move-up of a portion of the 2012 FIT reduction plan to 2011.
As Barclays lays out in its note about the variable FIT -- and as has also been discussed previously -- the level of a mid-year feed-in tariff cut in Germany would be based on the level of demand between March and May (normalized annually), and if demand rises, so would the FIT reduction. Barclays also indicates that the FIT reductions slated for 2011 would mean a 2012 plan that only reduced FITs by 9%, as opposed to 21%. The chart presented by Barclays shows a FIT formula as follows:
Less than 2.5 GWp: FiTs would be increased by 2.5%
Less than 3.5 GWp, no extra cut
Less than 4.5 GWp: 3% FiT cut
Less than GWp: 6% FiT cut
Less than 6.5 GWp: 9% FiT cut
Greater than 6.5 GWp: 12% FiT cut
Reuters reported on Monday that it has reviewed a draft of the FIT reduction plan, and in addition to the proposed cuts outlined by Barclays, there will be a 15% FIT reduction if installations through May reach above the 7.5GW mark.