The German government is set to pass the new regulation to implement the steep subsidy cuts on solar projects by July 7.  The cuts, which are applicable from the beginning of this quarter, are set to reduce solar installations in the country by more than 50%. The Merkel government proposed the new cuts after Germany added a record 7.5 GW of solar capacity despite reductions in government support. The new rules will curtail excessive installations despite the falling cost of solar power. The move has been opposed by some political figures who are concerned that the latest plan will put further pressure on the struggling solar industry. Germany is a major market for Suntech Power (NYSE:STP).
We have a $2.70 price estimate for Suntech Power, which is at a 65% premium to its current market price.
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The latest plan to cut support to the solar industry met with opposition from officials who were concerned that the bill could hurt employment by curtailing the green energy industry.  Due to the resistance, the bill is to be presented to an arbitration panel on June 13 for consensus. Federal officials have said that if the panel reaches consensus on the bill on the day, it can be passed by July 7. According to critics, the latest cuts would result in further deterioration of the solar industry in the country. German panel manufacturers have struggled to fight competition from low-cost Chinese firms such as Suntech Power.
Germany plans to cut annual installations in the country by more than 50% over the level last year. The government plans to add around 3 GW of solar capacity every year till 2020 to meet its plan of having 52 GW of solar plants by the end of the decade. Despite the cuts, industry executives say that solar will still be profitable for rooftop installations in the country. We expect the cuts to pass despite the presence of opposition.
Germany is a key market for Suntech Power and contributes to a significant portion of its sales. Despite a shift in solar demand to emerging markets, the changes to Germany’s clean energy policy will have an impact on the sector’s future prospects.
- Germany May Pass Solar Subsidy Cuts by July 7 After Bill Blocked, Bloomberg [↩] [↩]