A commentary by our author Klaus Bastian:
For 26 years, Germany has promoted solar energy through state-guaranteed revenue. Operators receive a fixed feed-in tariff for the electricity they supply to the grid—a rate that is, in some cases, significantly higher than the actual market price. This price differential is now covered by the federal budget, and thus by the taxpayer. For 2027, transmission system operators project a financing requirement of 17.52 billion euros under the Renewable Energy Sources Act (EEG), with 9.6 billion euros of that amount expected to be attributable to photovoltaics alone. Nevertheless, the solar industry is warning of the potential loss of tens of thousands of jobs, as the federal government intends to phase out long-term subsidies for new, small-scale installations starting in 2027. At the same time, the number of insolvencies is rising. After more than a quarter-century of state support, the economic dependence of large segments of the existing subsidy system has become clearly apparent.
Image: Shutterstock
Feed-in tariffs guarantee revenue – regardless of the actual market price
The fundamental problem lies in the structure of the subsidy scheme. Numerous plant operators receive legally guaranteed payments over a period of approximately 20 years. If the price of electricity on the exchange falls, the entitlements arising from these subsidy commitments remain in place. Consequently, the state must cover the difference. This becomes particularly problematic during periods of high solar power generation, when market prices drop sharply due to an oversupply.
On sunny days, the market price can fall to zero or even below. Nevertheless, many older installations retain their statutory payment entitlements. The specific payments depend on the particular subsidy model in place and the rules governing negative prices. The underlying economic issue, however, persists: while market prices reflect supply and demand, state-backed subsidy commitments guarantee specific revenue. This shields the operator from a significant portion of price risk, while the general public is left to bear the resulting funding gap.
€17.5 Billion in Subsidies Required – Taxpayers Face Higher Costs Once Again
The current forecast for 2027 reveals just how expensive this framework has become. The four transmission system operators anticipate a funding requirement of €17.524 billion under the Renewable Energy Sources Act (EEG). In contrast, the federal budget had only allocated approximately €16.5 billion—leaving a shortfall of roughly one billion euros in the planning stage alone. Particularly notable is the large share attributed to solar energy, with photovoltaics expected to account for €9.6 billion.
Since 2023, the federal government has financed EEG subsidies through tax revenue. While this means the costs no longer appear as a separate “EEG surcharge” on electricity bills, they have by no means disappeared. Instead, these subsidy payments now compete with other items in the federal budget. The lower the market price for subsidized electricity, the higher the government’s compensation requirement may become. Consequently, taxpayers bear significant price risks for a subsidy system whose economic benefits primarily accrue to the operators of the subsidized installations.
Solar Industry Warns of Job Losses – After 26 Years of Subsidies
Against this backdrop, the warnings issued by the solar industry are especially striking. The federal government intends to phase out long-term feed-in tariffs for new, small-scale installations with a capacity of less than 25 kilowatts. Instead, operators will be expected to market their electricity themselves or increase their own consumption. While temporary payments are planned for the transition period, the German Solar Association (Bundesverband Solarwirtschaft) anticipates a sharp decline in demand—potentially putting tens of thousands of jobs at risk.
These warnings highlight the extent to which segments of the industry remain dependent on a state-organized subsidy model. After all, Germany has supported photovoltaics since the year 2000 through long-term, guaranteed remuneration commitments. Nevertheless, the loss of this safety net appears to pose an existential threat to numerous companies. Yet, a business model that relies exclusively on state-guaranteed revenue is not, in itself, proof of competitiveness. For decades, political subsidy objectives have propped up sales; now, the challenge of adapting to actual market prices is becoming apparent.
Insolvencies reveal economic vulnerabilities despite years of subsidies
These difficulties are by no means merely theoretical. In early October, several entities belonging to the Leipzig-based solar provider Energiekonzepte Deutschland filed for insolvency. Around 400 permanent employees are affected, and the futures of numerous sales partners are also at risk. Insolvency proceedings have likewise been initiated for Next2Sun and Calor Energy. However, these cases stem from different causes and cannot be directly attributed to the planned phase-out of subsidies.
Even so, these developments expose the economic fragility of certain business models. Many companies have geared their staffing, sales operations, and capacity toward a market driven by political support. When subsidy conditions or financing options shift, these structures falter. Consequently, calls for the permanent continuation of state support are particularly problematic, as they effectively shift economic risks onto the public. While successful operators benefit from guaranteed income, it is the taxpayers who must foot the bill through additional public expenditure.
Cheap solar power on paper – expensive subsidies in reality
The solar industry frequently points to the low production costs of modern photovoltaic systems. It is true that solar modules have become significantly cheaper. However, low levelized costs of electricity do not guarantee equivalent revenues in the electricity market. When sunlight is abundant, many systems produce power simultaneously; as a result, market prices often drop precisely when the supply of solar power is at its peak. This problem intensifies as capacity continues to expand.
The economic challenge, therefore, is not merely to generate electricity as cheaply as possible. The crucial factor is whether that electricity can be sold profitably at the time it is produced. Furthermore, the power system requires grids, storage solutions, and dispatchable power plants to cover periods of low generation. These system costs do not disappear simply because solar modules are inexpensive. Consequently, citing low generation costs alone as proof of economic viability is insufficient. In the long term, any technology must be able to hold its own under realistic market conditions.
Guaranteed profits are not guaranteed—but the price risk is borne by others
Naturally, the remuneration provided under the Renewable Energy Sources Act (EEG) does not guarantee corporate profit. Operators must still cover their own investment, financing, and operating costs. Nevertheless, many subsidy models ensure a significant portion of their revenue. This is precisely what distinguishes them from businesses that must sell their products without state-backed price guarantees. After all, an industrial firm cannot demand that the state cover the difference between its desired selling price and the actual market price.
After 26 years of subsidies, a fundamental restructuring is long overdue. Those who can generate, store, and sell solar power economically can succeed even without a permanent feed-in guarantee. Conversely, business models that rely solely on state-guaranteed prices must adapt. Existing statutory commitments remain protected. However, new installations should increasingly take actual market conditions into account. The financing model under the Renewable Energy Sources Act (EEG) already demonstrates the burdens that arise when the state promises long-term revenue while market prices are significantly lower.
Author: Klaus Bastian – Blackout News
Sources: t-online (27.10.26) – Netztransparenz (26.10.26) – Reuters (26.10.26) – ZfK (26.10.26) – taz (27.10.26)