German renewables sector needs faster cost cuts-execs

* Money still tight in the sector - DII's van Son

* Better distribution grids needed - German watchdog

By Christoph Steitz

BERLIN, Aug 31 (Reuters) - Germany's renewables industry needs faster cost cutting to attract investment necessary to make solar, wind and other forms of alternative power a reliable part of the energy mix, senior executives said.

The industry, particularly the solar sector, has had to swallow drastic price cuts over the past two years, and even Germany's decision to abandon nuclear power by 2022 in response to the disaster in Fukushima in March has not changed that trend in a significant way.

"We now have a market risk premium (in the renewable sector) and we're trying to switch this system depending on feed-in tariffs into one that is market-oriented," said Matthias Kurth, president of the German network agency at a renewable energy conference in Berlin.

"Bringing the sector closer to real market rules will be the challenge we're facing in the next year," he added.

The dilemma faced by renewable energy is that it is still not competitive when compared to fossil-fuel based power. As a result it depends on so-called feed-in tariffs, through which investors receive a guaranteed return on generated energy output.

Those, however, need to be lowered to force companies in the sector to cut their production costs at the same rate, if politicians answering to a critical public have their way.