Chancellor Angela Merkel's cabinet as expected has agreed to a proposed cuts to state-mandated solar power incentives in July, a government source told Reuters on Wednesday.
The government wants to cut the incentives for rooftop solar power by a one-off 16 percent from July 1 while incentives for conversion sites like dumps and unused army bases will be dropped by 11 percent.
After passing the cabinet, the measure will head to the Bundestag, or lower house of parliament, later in March where Merkel's center-right coalition has a comfortable majority.
Merkel's government also agreed to entirely eliminate support for converted farmland. The cuts in the so-called feed-in tariff will also include a 15 percent cut for non-agricultural fields.
Feed-in tariffs (FIT) -- prices utilities are obliged to pay to generators of renewable energy -- are the sector's lifeline until grid-parity, the point where renewables cost the same as fossil fuel-based power, has been reached.
The tariffs have made Germany the world's largest market for photovoltaic installations, accounting for about half of all installations in 2009 in the 18 billion euro ($24.5 billion) global market.
Last year, Germany added a record 3 gigawatt of new capacity to bring its total of installed capacity to about 9 gigawatts.
The center-right government wanted to cut the FIT further in 2010 because an overall decline in prices outpaced the annual FIT cut of 8-10 percent in recent years due to the rapid growth of the industry and a global oversupply of solar panels.
Environment minister Norbert Roettgen wanted steeper cuts for rooftop systems to take effect even sooner, on April 1.
Roettgen's plans faced stiff opposition from within the center-right coalition as well as from several states where the solar power industry has flourished. They fear hasty and radical cuts over 10 percent will harm the fast-growing sector.
The FIT was already cut by 9 percent in January -- and has dropped by 8 to 10 percent per year since the Renewable Energy Act was created by the last center-left government in 2000.
SolarWorld, the country's biggest solar company by sales, and Q-Cells, one of the world's largest makers of solar cells, have said Roettgen's cuts were too steep, too fast and would kill jobs in Germany.
Utilities are obliged to pay 39 euro cents per kilowatt hour of electricity produced for a period of 20 years for systems installed in 2010, down from 43 cents for those built in 2009.
That has gradually fallen from 57 cents per kwh in 2004. Utilities pass on the higher costs to consumers.