The German government’s plan to reduce solar subsidies have met some opposition from the local solar industry and voices within the political parties that are against the cut.  Members of the ruling Christian Democrats as well as the opposition called on the Merkel administration to soften the proposed plan, arguing that such a move could have a serious impact on the local industry, which is already facing pricing declines. The German government plans to cut subsidies enjoyed by solar installers by up to 29%. Suntech Power (NYSE:STP) and Yingli (NYSE:YGE) are among the companies that earn a majority of their revenues from the German market.
We have a $4.43 price estimate for Suntech Power, which is at a 40% premium to the current market price.
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The German government plans to hasten the next round of cuts in subsidies to March from its earlier scheduled date in June. To exert greater control over the power generation capacity that comes on line, the government is looking to cut support and make future cuts more frequent in order to counter declining panel prices. Germany added 7 GW of solar installations last year, overshooting the government’s target of 3 GW, forcing lawmakers to tighten their policy and limit spending on subsidies. The announcement to cut subsidies by up to 29% in March hit solar stocks as concerns about another round of price cuts surfaced.
In the latest development, the German solar industry has come out strongly against the proposed cuts. Under intense price competition from players such as Suntech, German companies have been struggling despite a boom in capacity additions.  Their opposition to the latest cuts has found support from political leaders, and analysts are expecting that the government may temper down its plans to cut support. Sales from Germany constitute an important portion of Suntech’s overall sales of solar panels.
- German Government Plans to Speed Up Solar Subsidy Cuts (trefis.com)
- Government Uncertainty May Result in Solar Installation Rush in Germany (trefis.com)
- All Eyes on Germany as Cabinet Discusses Solar Subsidy Cuts (trefis.com)
- Germany Faces State Calls to Adjust Solar Subsidy Reduction Plan, Bloomberg [↩] [↩]