Germany's solar subsidies subsiding – where to next?

As Germany winds down its solar subsidies, industry players will be scrambling to find the next big growth market, says Lux Research.

Germany currently represents roughly half the total global market for solar components – all thanks to explosive growth it fuelled over the past decade through attractive solar subsidies.

However, as the country is now dialling back its solar subsidy programmes, solar companies will be scrambling to find the next big growth market for 2011 and beyond.

Titled Global Subsidy Roundup: Solar Beyond Germany, Lux Research’s report provides a detailed overview of solar subsidy and regulatory structures for 15 markets, and provides guidance into which of them are most capable of fuelling future demand as Germany’s star fades.

“Component manufacturers looking to maintain margins in the face of rapidly falling prices will find short-term relief from markets offering attractive subsidies in 2011,” says Jason Eckstein, a Lux Research Analyst and the report’s lead author.

“However, to be able to plan for long-term solar growth, companies also need to consider other factors, such as the size of a country’s electricity market, what other generation sources it can tap, and the quality of its electrical distribution infrastructure.”

Based on their positioning in either axis, solar markets fall into one of four market classes: Fast Burners, Top Targets, Slow Movers, and Weak Prospects:

Cyprus, Israel, and Malaysia are Fast Burners. Although these solar markets offer some of the most valuable subsidies, they all face fundamental limits on the extent to which solar can grow. Cyprus in particular cannot support more than a few hundred megawatts of solar installations, while Israel and Malaysia are capped close to 3 GW;

India stands out as a Top Target, but South Africa and the UK could also be game-changers. India combines a heavily-funded solar subsidy scheme with a grid in great need of distributed generation and huge projected electricity consumption. South Africa has a significantly more attractive solar subsidy scheme but is limited to utility-scale applications and faces regulatory uncertainty. The UK has a comparatively weak solar resource, but faces tight natural gas supply, has a broad set of feed-in tariff (FIT) incentives, and boasts a potential market size over 20 GW; and

Russia, Brazil, and Mexico are all Slow Movers. All offer huge electricity markets with over 10 GW of solar development potential, but lack incentive schemes. Brazil cancelled a feed-in tariff policy early last decade, yet it’s one of the markets closest to grid parity and offers massive potential demand. Mexico has enforced a national net metering policy, making it a likely future champion of solar as a distributed resource. Meanwhile, Russia offers few demand drivers in 2011, but the largest potential addressable solar market at over 80 GW.

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Photovoltaics (PV)  •  Policy, investment and markets  •  Solar electricity