Date
08/06/2012
PDF
A midyear subsidy change approved by Germany for PV (photovoltaic) installations on rooftops will continue to drive solar demand for the remainder of the year, even though no year-end rally is expected that will boost overall PV capacity for the country, according to an IHS iSuppli PV Perspectives brief. The new FIT (feed-in-tariff), approved June 27 and retroactive to April 1, means the pattern for solar installation in Germany will change this year. In 2011, 55 percent of annual installations took place in the fourth quarter after the government introduced feed-in-tariffs late in the year, and the market rushed to take advantage of the subsidies before the year was over. With the new legislation, IHS iSuppli analysts expect no such scrambling, and only 28% of installations slated for 2012 will take place in the fourth quarter. Overall PV installation capacity this year in Germany, the world's largest solar market, continues to be pegged at approximately 7.3 GW, a volume comparable to that in 2011. PV installations in the second half of this year, however, won't match the scale undertaken for the same period last year, largely because of timetable differences in subsidy implementation and customer response. Moreover, no overall increase in PV capacity growth is expected for this year after installations of 7.4 GW in 2011. Annual installations of approximately 7 to 8 GW have been the norm since 2010, when the German solar market was deemed to have reached maturity after six years of development. That level is likely to decline in 2013, and then is forecast to rise from 2014 when investments pay off, even without tariffs. The current new subsidy will have the effect of making the residential rooftop segment more appealing. Rooftop systems up to 10 kW will receive a FIT of €0.195/kWh, while those up to 40 kW will obtain a FIT of €0.185/kWh. Tariffs ranging from €0.135/kWh to €0.166/kWh will also apply to rooftops sized 1 and 10 MW, respectively; FITs will not be applicable to any system larger than 10 MW. An important element of the new legislation is the introduction of monthly tariff degressions—or a gradual descent in stages—starting on May 1. The new regulation will replace the annual FIT cut that typically occurs in January, and the amount of the monthly FIT change will be variable as well, depending on how the market is to be regulated toward a target corridor. The maximum annual degression is fixed at 29 percent. All told, the subsidy program will cap at 52 GW of cumulative installations, which IHS iSuppli expects will have reached 27 GW by the end of June, contributing 5.3 percent of electricity supply in Germany. Before reaching the cap, the government will reevaluate the subsidy scheme, the new law stipulates. While the pull-forward effect in the residential segment due to the FIT constitutes good news, a warning is also in place. With the change in installation patterns expected this year because of the tariffs, PV module suppliers should not ship the same amount of goods that they did in the past. To do so would incite another cycle of price declines—a development that the industry can ill afford. Outside of Germany for the rest of the global solar industry, PV participants continue to face arduous operational and financial challenges, including ongoing oversupply, volatile pricing, and drastic subsidy cuts. In particular, a decline in average selling prices accompanied by slimming margins has thrown even top-tier manufacturers into turmoil. Arizona-based First Solar, for instance, is shutting down its German module factory by the fourth quarter and will idle four of its 24 production lines in Malaysia. Meanwhile, SunPower of California has announced the closure of its factory and manufacturing site in the Philippines. The latest casualties to be added to the list of companies vacating the PV space include Abound Solar, which has closed its facilities in Colorado, and Schott Solar, which has shuttered operations in Europe and US. Of the Top 60 companies operating in the PV space, the number of PV manufacturer closures and bankruptcies so far this year has now reached 12—20 if project developers are included. IHS iSuppli analysist expect a solar rebound next year when they project demand will increase—but the benefits of the market uptick will extend only to those who endure and see the year through successfully. IHS iSuppli
