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Diminishing government subsidies mean overall revenues in the European PV solar market will shrink to €6.57 billion by 2015, a study by market research company Frost & Sullivan has estimated.
Over the same period the European concentrated solar power (CSP) market will expand from €2.1 billion to €5.2 billion, but significant cuts in government support for solar power in key markets and indications of further cuts have created considerable uncertainties in the market. As a result, Frost & Sullivan said investors are now hesitant to proceed with planned solar projects.
France, Italy, Austria, Bulgaria and Switzerland, amongst others, have all made cuts to its feed-in tariffs. However, in some cases proposals have been made to replace the FiTs with other forms of incentive schemes. For example, France announced earlier this month that it would be adding a domestic content requirement of 10% to module manufacturers to qualify for a bonus. Austria has cut FiTs for installations under 500kW, but at the same time doubled its renewables budget.
"To moderate the unsustainable growth of the PV solar market and citing a sharp drop in solar module prices, several European countries are scaling back the feed-in tariffs, while placing limits on annual capacity additions," stated Frost & Sullivan research. "Continued government support will be vital if the nascent CSP technology sector is to develop further."
Maturing PV solar technology and declining energy costs are being accompanied by scaled-back subsidies. Nonetheless, Frost & Sullivan’s report said that despite the diminishing tariffs, the industry is attracting several investors that want to benefit by including solar technology in their portfolio.
The company said that system prices continue to plummet due to pricing pressures on European manufacturers from their Chinese counterparts, which in turn has forced inefficient companies to exit the market, as evidenced by a number of top players being forced to close their factory gates at the end of 2011 and beginning of 2012.
However, in the CSP market, technology developers continue to innovate and focus on reducing the cost of energy. Its potential to produce low-cost solar electricity on a larger scale has proved attractive to investors.
"Overcapacity and plunging solar panel raw material and component prices are driving solar module costs and prices down, thus making the investment more attractive to buyers," the Frost & Sullivan report noted. "In order to counter the effect of diminishing incentives and stimulate demand, manufacturers along the value chain are expected to continue lowering solar module prices even further."
As profit margins become thinner, it will be imperative for PV solar module manufacturers to produce more efficient modules, the report said. The overall market will receive a further boost if energy from CSP, which can be stored or combined with gas, could become competitive in the next decade through technological innovation and economies of scale.