Nation cuts support for photovoltaic installations; can Germany, Italy and the U.S. compensate?

Although the weather outside was hot at the European Photovoltaic Solar Energy conference held in Valencia, Spain, in early September, the atmosphere inside was decidedly chilly, as concerns mounted over lowered demand and oversupply in 2009. The burning topic at the event was the number of photovoltaic (PV) systems that are expected to be installed in 2009. The government of Spain announced it will reduce its support tariffs for solar energy drastically. Starting in November, only 29 cents per kilowatt (KW) will be paid instead of 45 cents previously. Furthermore, newly installed annual capacity will be funded only to an upper limit of 300 MW, which is less than half of the country's expected market size in 2008.

On Sept. 12, the Spanish Ministry of Energy submitted another version of its PV policy with an upper limit of 500 MW instead of 300 MW. A definitive decision is expected around early October. In any case, the Spanish market is expected to shrink. These moves could have a major negative impact on PV demand in 2009, given that Spain is a hot spot for solar energy, with 600 megawatts (MW) worth of PV systems installed in 2007 and another 800 MW expected in 2008.

With the Spanish PV market expected to slow, fears of an oversupply are clouding the market's previously sunny outlook.

So how gloomy is the forecast?

In Europe, the most realistic hopes for driving continued strong market growth are with Germany and Italy. Germany is expected to stay at the lead in Europe with 1 to 1.5 gigawatts (GW) of newly-installed PV systems annually during the coming years. However, the Feed-in-Tariff (FIT) will drop and thus drive suppliers' margins down.

Italy has a very dynamic PV industry. The country's FIT has been raised to 36 cents for systems larger than 20 KW and 49 cents for 1 to 3 KW. However, many potential customers are confused by installation procedures. Also, political support for renewable energy is challenged by nuclear energy since the Berlusconi government announced at least one nuclear power plant will go on line in Italy by 2020.

Other European nations with strong solar potential, like Greece, France and Portugal are not expected to play a major role in driving PV system demand during the next 24 months. The biggest unknowns in the global PV industry are the United States, Japan and South Korea.

All three nations are eagerly looking at alternatives to fossil fuel. In the United States, both Republicans and Democrats seemed to have united around this idea. The United States eventually may become the largest PV market in the world since the solar radiation, the expertise, the purchasing power and the political support now are all there in abundance.

Because of this, the United States is likely to be the place where the sun breaks back through the clouds in the global solar market.

About the author:
Henning Wicht, PhD, is senior director and principal analyst, MEMS and photovoltaics, for the market research firm, iSuppli Corp., El Segundo, Calif.

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