German Solar Cuts Lead To Renegotiation Demands As States Oppose Move

by Trefis Team
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Several German states are pushing for a renegotiation of the country’s proposed cuts on solar subsidies. [1] The proposed measures, which will implement a one-time cut in feed-in tariffs of up to 30% and an increase in the frequency of future revisions, has met stiff resistance from regional governments worried that the struggling local solar industry may be unable to grapple with the cuts. Cheap imports from Chinese solar players like Trina Solar (NYSE:TSL) and Yingli Solar (NYSE:YGE) have eroded the profitability of German solar equipment manufacturers, many of whom have filed for creditor protection over the past few months.

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Opposition

The German government imposed a 30% reduction in feed in tariffs earlier this year in an effort to rein in the number of solar installations in the country. Despite frequent subsidy cuts over the past year, dropping panel prices pushed players to install record levels of capacity in 2011. The government is hoping to cut total installations in 2012 to 3 GW, less than half the capacity that came online last year. The cuts have already started taking hold of the industry as players like First Solar have announced the closure of their manufacturing facilities in the the country. Global demand for solar panes is set to fall this year on the back of lower demand from European markets.

Local governments are concerned that the cuts could result in job losses, and are demanding that the bill be renegotiated. The bill is likely to be sent to arbitration shortly; if the proposed cuts are made less stringent in the renegotiation, it could impact panel sales for companies like Trina Solar. Panel sales in the German market constitute an important driver of Trina Solar’s revenues.

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Notes:
  1. German Solar Subsidy Cuts Face Renegotiation on State Opposition, BusinessWeek, May 2012 []
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