Government Uncertainty May Result in Solar Installation Rush in Germany

by Trefis Team
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Differences within the German government over the plan to cut solar subsidies have resulted in a delay in the introduction of subsidy cuts, and this may lead to an installations rush in the German solar market. [1] Economic Minister Philipp Roesler’s plan to implement a one-time subsidy cut and put limits on installations have met resistance, which could result in delays for the government. With panel prices dropping, the present subsidy levels are making solar installations economically attractive. The German government is looking to limit the capacity that comes online to about 3 GW a year after the country added a record 7.5 GW capacity in 2011. Players like Trina Solar (NYSE:TSL), Suntech Power (NYSE:STP) and Yingli Green Energy (NYSE:YGE) are expected to benefit from an installations rush that will follow.

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Resistance Toward Cuts

The proposal from Economic Minister Philipp Roesler to implement a one-time subsidy cut of 35% and impose limits on the total capacity to be added failed to find unanimous backing, despite support from different parties. [1] If present subsidies continue, the country may add as much as 4 GW capacity by April. Voices within the government such as from Environment Minister Norbert Roettgen are opposed to imposing a fixed limit on the installation capacity and prefer increasing the frequency of subsidy cuts. Renewables now contribute a fifth of Germany’s electricity generation capacity and the industry is backed by strong government support. The country plans to replace nuclear power with low carbon sources by 2022.

Roesler’s plans to impose caps on installations have also met opposition from the solar industry. [1] Despite high installations, local solar companies in Germany are struggling because of severe competition from Chinese firms. Instead, lawmakers are suggesting putting incentives in place for the generation of solar power for self-consumption rather than provide feed-in-tariffs to feed in electricity to the grid. Proposals also include limiting support for utility scale installations and coming up with a fixed deadline to end all support for solar. An installations rush before the impending subsidy cuts could boost panel sales for solar companies in the first quarter of 2012.

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Notes:
  1. Germany Solar Rush Likely as Plans to Cut Subsidies Debated, Bloomberg [] [] []
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