BERLIN/FRANKFURT - Germany may trim incentives for solar power producers next year but still aims to double the proportion of energy it generates from renewable sources by 2020, despite overcapacity and a subdued economic outlook.

Senior government and industry officials told Reuters both sides want to work together in January to reform the Renewable Energy Act (EEG), which regulates a gradual annual drop in feed-in tariffs, to reflect a steeper overall slide in costs.

Officials from both sides said any added reduction in the state-mandated fees that utilities pay for photovoltaic power would be moderate and designed to prevent damaging a fast-growing sector that has created tens of thousands of jobs.

Industry analysts and stock markets have been nervously watching the moves from Berlin, fearful that any steep cuts could hit the sector and prices, as happened in 2008 when Spain -- another major producer -- slashed incentives.

Germany is a world leader in green energy with a 15 percent share of all electricity produced and wants to double that to 30 percent by 2020.

There won't be any radical changes, one senior government official said.

There's been over-promotion (of solar) in some areas. Some big systems now being set up in fields isn't really what the law was designed for. We'll have to take a look. The sector has even come to tell us there's been too much incentive in some areas.

Germany's photovoltaic industry has boomed since the EEG was created in 2000. More than half the world's solar power is produced there and some 80,000 jobs have been created. A record 3 gigawatts of capacity could be added in 2009.

Utilities are obliged to pay 43 cents per kilowatt hour of electricity produced for 20 years for systems installed in 2009. That rate has been falling by about 8 percent per year and will fall about 10 percent in 2010, or possibly more.

I am confident that we will be able to find a moderate solution that satisfies everyone, Carsten Koernig, head of Germany's BSW solar industry association, told Reuters.

We've signaled to political leaders that thanks to rising capacity and technological developments there's scope for modest adjustments to ... tariffs ... But it's important to get the framework right so it won't be debated or changed every year.

The share prices of German firms such as Q-Cells, Solarworld and Conergy have gyrated on alternating media reports of steep or modest cuts.

Koernig said the solar industry could absorb an additional one-off reduction of about 5 percent in the feed-in tariffs in mid-2010 and has offered that to the government.

If the sector continues to grow as strongly as it is now, this reduction could be permanent.

Shortly after the September general election, some senior politicians in the conservative Christian Democrats and their new coalition partners, the Free Democrats, called for steep cuts of up to 30 percent for the CO2-free energy.

But Conservative leaders in states with major photovoltaic industries -- Saxony, Thuringia, Saxony-Anhalt, Bavaria and Baden-Wuerttemberg -- voiced opposition, which put the issue on the back burner.

(Additional reporting by Anneli Palmen in Duesseldorf)

(Writing by Erik Kirschbaum; editing by John Stonestreet)

Germany Energy Renewable energy Solar