By Kari Williamson
The surge was amplified by the slowdown in solar PV module price decline over the past month. But the flip-side of the success is that it could accelerate the tightening of solar PV incentive policies that is gripping Europe, most notably in the key German market and most recently in Spain with announcement of a moratorium on new renewable energy plants.
In the first quarter of 2012 European solar PV demand is forecast to show an increase of 10% year-on-year. Belgium, France, Spain, and Greece will have their highest quarterly shares, and the UK could accelerate into a short-term boom in Q1’12 depending on the legal ruling on incentive tariffs.
Major cuts in solar incentives and a weak project financing environment were offset by collapsing solar PV module prices, leading the European market to grow 18% year-on-year in 2011.
The fact that factory gate prices fell continuously through 2011 caused developers to install as late as possible (and before the announced tariff reductions in 2012, particularly in Germany). In addition, funding scheme control mechanisms failed to react in time in major markets such as Germany, Italy, and France.
Furthermore, the unusually mild autumn and early winter, especially in Germany, meant that market activity was hardly constrained by weather conditions toward year-end.
German solar PV market up 63%
The German solar PV market soared 63% quarter-on-quarter in Q4’11, but the UK and Belgium also contributed over 370 MW of growth in the quarter.
However, Italy and France both dropped quarter-on-quarter due to scheme installation deadlines and flexible tariff cuts implemented throughout the year. Solar PV module prices fell 40% year-on-year at the distributor level in Q4’11, but have shown some evidence of stabilisation in January 2012.
Solar PV module shortages?
“Tier 1 Chinese module manufacturers are predicting module shortages by the end of Q1’12, but the evidence for this is not totally compelling. The path for module prices in 1H’12 will largely depend on the extent to which wholesalers are confident enough to build inventories in the face of continued policy uncertainty. Germany’s role will be critical, especially because its demand profile will be significantly smoothed by its proposed change to monthly rather than biennial tariff adjustments,” says Dr. Alan Turner, Vice President of NPD Solarbuzz Europe.
Ground mounted solar PV installations, while down 13% in 2011, had a 35% share of the European market in 2H’11. Non-residential building mounted solar PV systems had a 55% share in 2011, while residential share rose slightly to 16%.
Need for flexible market strategies
Two of the key solar PV markets in Europe, Germany and Italy, face a marked decline in 2012, with a reduction of 37% in their combined market size. The strongest growth in smaller markets over next one to two years, based on current incentive policies, will be in Austria, Bulgaria, Czech Republic, and Romania, the analyst predicts.
Two factors are triggering new growth. As incentive tariffs follow prices downward, less public funding is needed to build significant country markets. In addition, as solar PV becomes more competitive with retail electricity prices, investors become less dependent on public funding schemes for viable economics.
As a result, new solar PV markets are emerging, particularly in East and Southeast Europe. Following two 100 MW solar PV plants built in Ukraine in 2011, Serbia is now planning the construction of two 150 MW plants, as well as a 1 GW project to be carried out between 2013 and 2015.
Prospects for the development of projects based on self-sustaining economics have been boosted in France, with a 60 MW solar PV project to be carried out by a major French developer based on a 30-year power purchase agreement with a local utility.
Similar concepts are also being discussed in Greece at the government level. However, prospects for comparable projects in Spain have been dented by recent exposure of its very large electricity generating capacity overhang, which has reduced the impetus for capacity expansion of any sort and has culminated in a moratorium on any new renewable electricity plants.