European PV outlook grim as Germany, Italy push new FIT cuts
A bill that would once again hack into Germany’s solar feed-in tariff (FIT) appears ready to sail through both houses of parliament after Chancellor Angela Merkel’s cabinet agreed to water down some of the most draconian measures.
Coming alongside a draft of Italy’s latest national energy plan – which may halve total support for new PV installations – the changes in Germany foreshadow a significant retraction in the European market in the years ahead, deepening the likelihood that many EU companies may be destined for the graveyard.
The proposed amendments to Germany’s landmark Renewable Energy Sources Act (EEG) are likely to pass both the Bundestag and Bundesrat by the end of the week after the cabinet softened some of the changes, including pushing back the date after which all projects larger than 10MW will receive no support whatsoever by six months.
The government also backed away from its plan to put in place provisions allowing it to unilaterally slash FIT rates further in future if new installations do not slow as much as it hopes.
But the industry says such changes are merely a short-term balm, and that after a final boom of activity the German PV market will collapse.
Instead of an initially proposed one-time FIT cut of as much as 29%, followed by monthly reductions of €0.15 ($0.20) per kWh, the government will instead introduce a “base degression” of 1% each month.
Beyond that it will stick with its “target corridor” strategy, whereby harsher cuts will automatically be made if the level of new installations exceeds a certain threshold. This annual threshold decreases from 2.5GW-3GW over the next two years to 900MW-1.9GW by 2017.
Merkel’s government has taken increasingly forceful steps to rein in the country’s PV expansion, which has notched up record year after record year.
The ability of the industry to continue boosting installations despite ever-waning FIT support has been due in large part to an influx of cheap Asia-made modules – making the industry’s position tougher to defend from a political standpoint.
Even pro-renewables members of Merkel's cabinet argue that the surge of capacity has left Germany with some of the highest electricity rates in Europe, threatening the country’s industrial prowess, and endangering the public’s still-broad support for renewables.
But the trade group BSW argues that the severity of the cuts “contradicts the technological learning curve and the cost trends around the world”, and will lead to a bloodbath at PV companies with workforces left in Germany.
Analysts expect 2012 to be a painful turning point for the global PV industry, with emerging markets in Asia and the Americas not yet able to offset diminishing markets in Europe. Some of the world's largest PV companies have recently acknowledged they are unlikely to return to profitability before 2013, and in many cases even that may be wishful thinking.
After an early-year spike that saw some solar stocks up more than 50%, many PV shares have since given back nearly all their gains and have returned to near-record lows.
Industry observers expect the oversupply situation to continue unabated this year, with many more bankruptcies expected.