BERLIN (Reuters) - Germany's government and federal states have agreed cuts to incentives for the solar power industry after a weeks-long dispute, under which incentives will be capped for installed capacity of 52 gigawatts (GW), parliamentary sources said.
A parliamentary mediation committee set up to negotiate between the lower and upper houses of parliament could approve the deal on Wednesday, participants in the working group said.
Opposition parties and some federal states had in May opposed the plans to slash so-called feed-in tariffs in Germany's upper house of parliament, forcing the proposals drawn up by Chancellor Angela Merkel's center-right coalition to be suspended and a mediation process to be launched.
Under the compromise, one-off cuts in incentives from 20 to 30 percent from April are to remain and incentives will be capped for installed capacity of 52 GW.
Solar power will still have to be fed into the grid, but at market prices.
In addition, medium-sized plants of 10-40 kilowatts (KW) will receive compensation of 18.5 cents per kilowatt hour.
Germany is the world's biggest market for solar, with installed capacity of 24.68 GW as of 2011 accounting for more than a third of the world's total.
But several German firms have been left struggling in the last few months largely due to stiff competition from China and companies have warned against cutting the incentives too dramatically.
States run by the Social Democrats (SPD) and Greens, and some areas of Germany where solar power provides jobs and growth, had defended the subsidies that have helped Germany become the world's top market for power converted from solar radiation.
Merkel's U-turn on nuclear power a year ago following the Fukushima disaster in Japan has made Europe's biggest economy more reliant on alternative energy sources.
(Reporting by Markus Wacket; Writing by Madeline Chambers and Alexandra Hudson; editing by Jason Neely)