Falling prices for solar photovoltaic (PV) modules have been unable to stimulate the faltering European solar market, according to a new report.
The latest Solarbuzz European PV Markets Report says the market was showing signs of gaining strength in June, but was hampered by unexpected adjustments to the feed-in-tariff in Germany.
Alan Turner, Vice President of European Market Research for Solarbuzz, explains that more frequent policy adjustments in the European market are creating uncertainties for investors in PV systems.
While Germany ultimately strengthened incentives for renewables across the board, tariffs in other European countries are being dialed down, and it is yet to be seen whether growth in the European PV market will return to the torrid pace set in 2010.
"For the past decade, Europe has played a dominant role in creating the demand growth that has fueled global manufacturing capacity expansion," notes Alan Turner, Vice President of European Market Research for Solarbuzz. "This was underpinned by aggressive, uncapped feed-in tariff (FIT) programs that are now being scaled back to reduce costs."
The downturn in major European markets in the first half of 2011 left module shipments from manufacturers running well ahead of end-market demand. The resulting increase in downstream inventories quickly spread to the upstream, causing production plans to be reined in. As a result, crystalline silicon module price offers have reached new lows of €0.75-1.00 per watt.
PV Incentive Tariff Policy Changes Shape Market Growth
Market growth of 169% across Europe in 2010 was led by three countries: Germany, Italy and the Czech Republic. Each country delivered gigawatt-scale markets and, combined, represented 89% of European demand.
Italy’s market share is forecast to rise from 32% in 2010 to 39% in 2015 to become the largest market in Europe, while the combined share of the two largest markets, Italy and Germany, is forecast to fall to 71% in 2015 from 80% in 2010.
Growth of the Italian market in 2010 came despite installed system prices up to 33% higher than in Germany, depending on system size. Even with high prices, solar PV project investment returns up to 20% could still be realized, a clear indicator both of the generous level of incentive tariff rates and the headroom for future tariff reductions, the report states.
Based on an assessment of countries over the next 18 months, incentive tariffs for residential systems are set to fall by at least an average 17%, with commercial roof-mounted systems of 100 kW falling by 23% and ground-mounted 1 MW installations falling by 34%.
Residential tariffs in Greece and the UK show the least reduction among the major markets in Europe through 2012, according to current policy plans, while tariffs for large ground-mounted systems fall to the lowest levels in Belgium, Spain and France, according to Solarbuzz.
Solar Industry Projections
Solarbuzz predicts that, over the next five years, customer segmentation changes across Europe will see the residential PV segment double its share. In addition, investor groups’ share will fall by almost half, while commercial (including agricultural) customers remain the dominant market segment for PV installations.
Longer term, major regulatory challenges lie ahead before grid parity can stimulate self-sustaining markets, despite fast reducing solar electricity costs, the report concludes.
Solarbuzz also forecasts a significant cell manufacturer shakeout phase from 2012-2014 because of over-expansion during 2010 when revenue grew 84%.
They expect PV equipment spending for c-Si ingot-to-module and thin-film panels to decline sharply in 2012 to $7.6 billion, down 47% from a record $14.2 billion in 2011, according to the latest their "PV Equipment Quarterly" report.
The decline in equipment spending will impact revenues in the second half of 2011 and result in lower corporate guidance for 2012.
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