A midyear subsidy change approved by the German government for photovoltaic installations in rooftops will continue to drive solar demand for the remainder of 2012, although no year-end rally is expected that will boost overall PV capacity for the country, according to a new report from IHS iSuppli.
The new feed-in tariff (FIT), approved June 27 and retroactive to April 1, means the pattern for solar installation in Germany will change this year. In 2011, 55% of annual installations took place in the fourth quarter after FITs were introduced late in the year, and the market rushed to take advantage of the subsidies before the year was over.
With the new legislation, no year-end scramble is expected to occur, and only 28% of installations slated for 2012 will take place in the fourth quarter, the company predicts.
‘Overall PV installation capacity this year in Germany – the world's largest solar market – is forecast to amount to 7.3 GW, down just slightly from 7.5 GW in 2011,’ says Henning Wicht, director for PV advanced products at IHS. ‘However, PV installations in the second half of this year won't match the scale undertaken for the same period in 2011.
‘This is largely because of differences in the timetables for the implementation of subsidies between the two years – and how customers respond to these changes,’ Wicht continues.
Annual installations of approximately 7 GW to 8 GW have been the norm since 2010, when the German solar market was deemed to have reached maturity after six years of development. That level is likely to decline in 2013, and is forecast to rise in 2014 when investments pay off, even without tariffs.
The current new subsidy will also have the effect of making the residential rooftop segment more appealing, according to the report. Rooftop systems up to 10 kW will receive a FIT of 0.195 euro/kWh, while those up to 40 kW will obtain a FIT of 0.185 euro/kWh.
Tariffs ranging from 0.135 euro/kWh to 0.166 euro/kWh will also apply to rooftop projects sized 1 MW and 10 MW, respectively, while FITs will not be applicable to any system larger than 10 MW.
An important element of the new legislation is the introduction of monthly tariff degressions – or a gradual descent in stages – starting on May 1. The new regulation will replace the annual FIT cut that typically occurs in January, and the amount of the monthly FIT change will also be variable, depending on how the market is to be regulated toward a target corridor, IHS explains. The maximum annual degression is fixed at 29%.
Overall, the subsidy program will be capped at 52 GW of cumulative installations, which IHS expects will have reached 27 GW by the end of June, contributing 5.3% of electricity supply in Germany. Before the cap is reached, the subsidy scheme will be re-evaluated, the new law stipulates.
Although the pull-forward effect in the residential segment due to the FIT constitutes good news, there is also cause to take warning, according to the report. With the change in installation patterns expected this year because of the tariffs, PV module suppliers should not ship the same amount of goods as they have in the past. To do so would incite another cycle of price declines – a development that the industry can ill afford.
Outside of Germany, for the rest of the global solar industry, PV participants continue to face arduous operational and financial challenges, including ongoing oversupply, volatile pricing and drastic subsidy cuts, the report adds.
Of the top 60 companies operating in the PV space, the number of PV manufacturer closures and bankruptcies so far this year has now reached 12 – or 20 if project developers are included. A solar rebound is expected next year, when demand is projected to increase, but the benefits of the market uptick will extend only to those that endure and see the year through successfully.
