Solar power companies face end of Spanish subsidies

Reuters
Published: September 3, 2008

VALENCIA, Spain: Growth in solar power installations in Italy may not be enough to offset shrinking global demand, Italian industry experts say.
Part of that reduced demand could come in Spain, where solar power companies face a drastic slowdown next year because the government is preparing to sharply reduce subsidies.
Some companies are now pinning their hopes on the Italian market, but manufacturers and government officials in Italy are cautious over growth prospects.
Gerardo Montanino, operations director at Gestore dei Servizi Elettrici, the agency overseeing the rates paid for electricity fed into the grid, said he expected modest growth.
The agency forecasts that no more than 450 megawatts of solar power will be installed in Italy by the end of next year, and Montanino told an energy conference here that a 1,200-megawatt cap on Italian subsidies would probably be reached in 2012. A megawatt, or MW, is equal to a million watts.

Italian manufacturers said they faced considerable bureaucratic hurdles. Angelo Nogara, managing director of one of them, Solkraft Italia, said many Italian solar plants had to wait a year after being built to be connected to the grid. He also cited the case of a local authority's asking for a study on the acoustic impact of a solar plant, which is silent in its operation.
"I hope we can have 1,000 MW, but I am not sure because of bureaucratic problems," said Nogara, who is also international affairs officer at Assosolare, an industry group.
Generous subsidies in Spain will expire this month after the subsidies encouraged the installation of 1,000 megawatts in new solar plants this year. That has made Spain the world's biggest market after Germany, where the government expects 1,350 megawatts of new solar plants to go online this year.
Now the Spanish government wants no more than 300 megawatts of new plants to be eligible in 2009 for so-called feed-in tariffs under which producers are paid at fixed rates for electricity generated from renewable resources and are designed to make solar power competitive. Those tariffs will be reduced.
David Wortmann, head of renewable energy at the German government investment agency, said he was cautious about growth prospects in Germany. The country has no cap on feed-in tariffs, but they are set to slide and will depend on how much is installed.
"It is adventurous to make predictions, but we could say around 1,500 MW next year," Wortmann said at the conference.
That would keep Germany as the world leader but implies growth of just 150 megawatts, or not nearly enough to offset an expected drop of 700 megawatts in Spanish demand.
On a brighter note, an investment banking firm, Piper Jaffray, said it expected strong growth in France in 2009 and 2010, partly because of an expected decline in the price of solar panels and partly because of subsidies introduced in 2006 making themselves felt.
"'We believe France should be a key driver for solar together with Italy during 2009-2010," the firm said in a report. Piper Jaffray said it believed that France would add 500 megawatts of capacity in both 2009 and 2010. France has just 50 megawatts of solar power capacity now.
Some solar power companies said they were still pinning hopes on a swift expansion in Italy next year, from 170 megawatts currently installed to 1,200 megawatts, the level where the government said it will cap feed-in tariffs.
"That sort of growth you could almost say it's compensating entirely for the slowdown in sales into Spain," said Steve Chan, chief strategy officer at Suntech Power Holdings, a Chinese manufacturer of solar panels.
Spain accounted for 40 percent of Suntech's second-quarter sales this year.
Analysts estimate that Spain will account for 30 percent of sales for another solar panel maker, SunPower, which is based San Jose, California. The company's chief executive, Thomas Werner, said he was confident that sales in Italy would make up for the sharp drop in the Spanish market.
"We are able to replicate our entire Spanish business in Italy, year-on-year," Werner said. "We have a presence in Italy already."
Chan said he also saw opportunities in Germany, where his company had not been able to meet demand this year because of the high volume of its sales in Spain.