GERMANY: May 15, 2008


FRANKFURT - The economic slowdown, regulatory conflicts and competition from China pose the main risks to future growth of the solar industry, the head of the European Photovoltaic Industry Associations told Reuters.


"The two key elements for me are the regulatory conflict in Europe, particularly in Germany with the revision of the feed-in law, and globally the economic slowdown," Adel El Gammal, secretary general of EPIA, said in an interview.

He expects the US solar market, home to industry heavyweights such as thin film company First Solar and cell maker Suntech Power, to take off in 2009 and beyond.

EPIA forecasts the United States will overtake Germany as the largest solar market in 2012.

Strong public as well as political support for green energy paired with high electricity retail prices at peak times worked in favour of the US solar market, El Gammal said.

"The only limiting factor I see there is really the impact of the economic slowdown that probably is more severe than one expects, in particular in the United States," El Gammal said.

He expressed dismay at a Washington Post report that Chinese silicon manufacturers were polluting the environment with production waste.

"We are condemning very strongly these practices," El Gammal said, adding such practices damaged the industry's reputation and unsettled the market by undercutting production costs.

The European photovoltaic market grew at a rate of 41 percent in 2007 and is expected to grow 62 percent this year, reaching 7 gigawatt peak of annual installations by 2010, according to EPIA's policy-driven scenario.

Based on the association's so-called pessimistic scenario -- not assuming any major subsidies -- annual installation would only rise to 4.7 GW in 2010.


SIGNIFICANT DAMAGE

Support programmes have so far been key for the industry's stellar growth rates and El Gammal said they will continue to play an important role.

The widely copied German renewable energy law is under review as Berlin aims to drive up efficiency and lower costs.

Under the current plan, fees paid to producers of solar power -- which are above market prices to boost the still young technology -- will decline by about 7 percent plus one cent per kw/hour next year, 7 percent in 2010 and 8 percent in 2011.

A German economic research institute recently called for a cut of 30 percent over a period of 20 years from 2009.

"If we look at scenarios where (fee cuts are) very much higher than 9 percent I think that could very significantly damage the industry," El Gamal said. Faster consolidation of the industry would be the result, he said.

"The drawback is that we may then put an end to small actors which could introduce alternative and diverse technology," he said, adding that it was important at this stage of market development to have a variety of players.

(Editing by Elaine Hardcastle)


Story by Eva Kuehnen


REUTERS NEWS SERVICE