Sunny Days for Solar Homes

European Subsidies Spur Business Boom; Selling Back to Grid
By EMMA CHARLTONAugust 7, 2008

LONDON -- High oil and gas prices have made residential solar energy more economical, sparking a jump in European demand.
With the price of crude oil up 64% from a year ago, Germany, France and other European governments are underwriting the shift to solar by allowing consumers to sell the energy they produce using photovoltaic cells -- which convert sunlight directly into electricity -- to the national grid at a profit.
"It's a clear trend. People are trying to get away from using oil and gas, where prices have risen a lot," said Uwe Trenkner, secretary general of the European Solar Thermal Industry Federation, or Estif. He estimated that the European market for solar thermal technology will expand by 20% to 30% this year as residential demand for solar panels grows.
Solar-power companies have taken note. China-based Suntech Power Holdings Co., the world's biggest maker of photovoltaic panels by revenue, said it plans to double production in 2009 from 2008. Germany's Q-Cells AG plans to increase production of solar cells by more than 60% by 2010.
Continental European governments have been pushing hard to increase solar technology use.
Germany has seen a sharp rise in the use of solar energy since the government introduced subsidy plans in the late 1990s. The country represents more than a third of the European solar thermal market and is still growing at a rapid pace, adding 33% in sales in the first four months of 2008, according to Estif estimates.
German solar-industry association Bundesverband Solarwirtschaft expects the sector's sales in Germany alone to almost double by 2010, rising to more than €13 billion ($20 billion) from about €7 billion in 2007.
The government's enthusiastic backing of the industry has resulted in Germany's producers claiming 20% of the global solar market, behind China and Japan.
The success of Germany's subsidy system has prompted other governments to follow suit, with France, Greece, Italy and Spain allowing consumers to sell power to the national grid.
Under these programs, commercial and residential consumers can sell the electricity they generate for about 40 to 50 European cents per unit, double what they pay for it, pocketing the difference.
Matthias Fawer, a sustainable-investment analyst at Bank Sarasin, said such programs will bolster the European solar industry in coming years, with Spain set to be the biggest growing market in 2008 as solar thermal technology becomes compulsory in new buildings.
In Greece, which boasts 274 sunny days per year on average, the solar-energy market is booming and the country expects to expand its 10% share of the European market rapidly in the coming years.
George Gounalakis, a Greek property developer and a director of Europlan-Crete, includes solar panels in all plans for new homes. He said they will allow homeowners to reduce their energy bill by at least 20% in the summer and 10% in the winter.
"Before, the solar panel would only last for four to five years. Now you can have the same panel for more than 20 years and they generate hot water very, very quickly," he said.
There is eight times as much residential and commercial capacity to produce solar energy in Europe as in the U.S., according to estimates from Swiss private banking group Bank Sarasin.
Soaring energy prices are driving the shift. In the 15 countries sharing the euro, energy prices were 16% higher in June than they were in the corresponding month last year, according to European Union statistics agency Eurostat.
In Italy, Bank Sarasin predicts that solar production will increase by more than 70% in 2008 from last year. "Italy now has an attractive subsidy system linked with nice sunshine, and consumers can profit from adopting the technology," Mr. Fawer said. He predicts the French market will also double in 2008, albeit from a low level.
In the U.K., the government grants help with the cost of solar installation, but there is no national tariff system.
Still, Oliver Duckworth, a director of U.K.-based Solar Thermal Ltd., a retailer of solar-thermal and biomass heating systems, said sales have doubled since the start of 2008, and the company exceeded last year's entire turnover by the half-year point.
"It's not just the 'green brigade' ringing up anymore. It's anyone, just people who want to save money in the time of rising fossil-fuel prices," he said. "It's very much driven by the oil price."
U.K. energy providers this summer raised gas prices by as much as 35% and electricity prices by as much as 17%. A report from Centrica -- the U.K.'s largest utility by customers -- predicts the average U.K. gas bill will average £1,000, or nearly $2,000 at current exchange rates, per year by 2010, up from £600 in 2007.
Richard White, a 52-year-old information-technology manager from Stroud in Gloucestershire, installed a solar-tubing system to heat water this year for £2,099 and expects the system to pay itself off after five years.
"It's already successful," he said. "We get 100% of household hot water on sunny days, 90% on overcast days and we expect to get 20% in winter."
Mr. White said he plans to explore using other environmentally friendly technologies such as photovoltaic cells and ground-source heat pumps.
Write to Emma Charlton at emma.charlton@dowjones.com