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We attended Intersolar 2008 in Munich, Germany, along with Suntech Power Holdings '  analyst event on Friday, June 13. The fair expected over 40,000 visitors over the three-day event with approximately 900 exhibitors. Ahead of the conference was a two-day photovoltaic (PV) forum, which we also attended. With the industry shortfall in modules and panels along with capital necessary for expansion and growth, we suspect that a number of the smaller and less well-capitalized industry participants are likely to face significant competitive challenges ahead as industry consolidation helps to build scale.

PV projects in Germany show no signs of slowdown despite change in feed-in-tariff. Our discussions with various cell and module manufacturers during the trade fair seem to indicate that business activities in Germany and Spain have not showed any material slowdown. Germany adopted the amendment of the Renewable Energy Act (EEG) on Friday, June 6 with the aim of driving renewable energy to approximately 30% in 2020. Of note in the new feed-in-tariff (FIT) rate schedule is that solar systems greater than 1,000 megawatts (MW) are a separate FIT category and show a 25% decline in 2009 with the majority of categories seeing an annual drop in the range of 8%-10% over the next couple of years.

Uncertainty of Spanish FIT likely to impact back of 2008/early 2009 installations. We could not find anyone willing to forecast what the Spanish FIT rate will drop to from its plush €44 cents per kilowatt hour (kWh); however we surmise that expectations are for the rate to drop closer to 30%, implying €31-34 cents per kWh after September 2008. Thereafter, the annual decline in the FIT could be in the range of 8%-10%.

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