Solar Industry Gets Jitters as Spain Plans Retreat
SWITZERLAND/UK: July 10, 2008
ZURICH/LONDON - A Spanish bonanza of solar power subsidies may hit a serious
brake in September as Madrid prepares to curb support, risking squeezed
margins for the global industry, say investors and analysts.
Spain is an especially bright spot in the Mediterranean "sun belt" and
lucrative subsidies have made it easily the fastest growing solar power
market worldwide this year, analysts say.
But Madrid has proposed to cap subsidised installations at roughly one third
this year's level, which could dent a global industry which is nearly
doubling year on year. A final announcement is expected in coming weeks.
Solar panel prices and profit margins could drop dramatically, said Michael
McNamara, analyst at US investment bank Jefferies. That depended on whether
other countries could replace demand, he said, with Italy one possibility.
"Spain has been a growth engine for the solar industry," said a fund manager
who declined to be named.
"If growth was to be capped it could have a significant impact on the
industry. This would mean a lot of competition on pricing and that will
bring margins down."
In a recent meeting between the government and solar power industry the
government had suggested a 300 megawatts (MW) cap but nothing was concrete
yet, a Spanish solar power industry source said.
Such a cap, enough to power about 100,000 homes in daylight hours, compared
with up to 1,000 MW or more subsidised installations expected this year.
Market expectations had been for a continuing 1,000 MW market in Spain, said
McNamara. Madrid's renewable energy department was unavailable for comment
on Wednesday.
A loophole has allowed installers to far exceed a current cap, using a
12-month grace period to complete installations and rush through new
applications which were granted locally, not centrally.
"Local authorities were more than happy to see a new source of taxable
income," said McNamara.
Subsidies are paid per unit of electricity generated by solar panels for 25
years and the latest installation rush has left Spain with a roughly 1
billion euros (US$1.57 billion) annual liability, McNamara estimated.
Industry prices and margins were already expected to fall over the next 18
months as a result of new capacity to manufacture the raw material
solar-grade silicon. A big Spanish subsidy cut may exacerbate that.
A 300 MW cap would swallow up less than 4 percent of estimated global
production in 2009 while Spain accounted for rougly a quarter of demand in
2007 and 2008, estimates Jefferies.
But price falls will have the benefit of bringing solar power closer to
parity with conventional power prices and help trigger wider adoption of a
renewable energy source which still makes up a tiny fraction of global
demand.
Spain's photovoltaic industry association, ASIF, has called for a cap of 480
MW for 2009. (Reporting by Eva Kuehnen; additional reporting by Anneli
Palmen in Frankfurt and Martin Roberts in Madrid; writing by Gerard Wynn;
editing by James Jukwey)
REUTERS NEWS SERVICE
|