Spain Dims Solar-Power Sun

By GEOFFREY ROGOW July 23, 2008;

Solar companies aren't waiting for a worst case-scenario in Spain; they're betting on it.

Solar companies have quickly jumped into that country in the past several years, lured by subsidies from the Spanish government directed at making solar economically viable. But a proposed cap on the program could cut total solar installations by a quarter next year, and even with a decision weeks away, solar companies are already looking to bolt.
In 2008, solar companies will install roughly 1,100 megawatts of power in Spain, thanks to the subsidies that propelled companies across the world to enter the market. The Spanish government expected some gains in solar installations, but when megawatts nearly doubled from 600 in 2007, the subsidies bill became larger than the government would like.
Starting Oct. 1, Spain could put an annual cap of 300 megawatts on the feed-in tariffs that first pushed growth in solar. The executive branch is expected to decide on the cap by the end of August.
"Everybody targeted Spain because of the tariffs. Now, everybody is doing an aboutface," said Brion Tanous, clean-technology analyst for Merriman Curhan Ford.
With the move away from Spain, several countries are likely to pick up the slack, including Greece, Italy, France and South Korea. Several companies are making plans to enter those markets.
Canadian Solar Inc. is one company stung by Spain's potential policy change. From June 18 to July 1, as rumors of the subsidies reductions surfaced, Canadian Solar lost 29% of its value on the Nasdaq without reporting any major news of its own.
Already this month, the company has signed solar sales agreements in Italy, the Czech Republic and the United States.
While executives say the subsidy caps in Spain are unlikely to be imposed at rumored levels, the new contracts reflect an enhanced outward focus.
Canadian Solar "has already positioned itself by diversifying our geographic footprint," said Alex Taylor, the company's director of investor relations and special projects. "We will continue to look at new European markets."
But the best-positioned companies may be the ones that didn't jump in headfirst into Spain.
Suntech Power Holdings Co., listed in the U.S. but with headquarters in China, maintained significant operations throughout Europe, particularly Germany, even if that meant missing some revenue in Spain.The company kept a strong foothold in Germany, with the largest solar market in the world expected to add about 1,600 megawatts of modules this year.
Write to Geoffrey Rogow at geoffrey.rogow@dowjones.com