Analyst’s report: How will the FiT cut affect Germany’s PV market?

Share on facebook
Share on twitter
Share on linkedin
Share on reddit
Share on email

Since the recent announcement of Germany’s FiT cuts, sector analysts have begun speculating on what the impact of this will be on the solar PV market. Vishal Shah of Barclays Capital Solar Energy reports that this could likely affect both volume and pricing trends in the German market, yet not necessarily in a negative way.

“We believe the current announcement is better than street expectations for several reasons.”

1) There will be no change to free-field subsidies until July. “With free-field installations accounting for roughly 30% of German demand, this proposal only impacts 70% of German demand in Q2 (vs. prior expectations of impact on 100% Q2 demand).”

Barclays also expects some of the Q2 weakness to be offset by demand from other markets such as Italy, France, Canada and the U.S. The positive aspect of Q2 free-field installations, since planning/permitting takes 4-6 months, is that most new projects can start now and expect to complete construction by July.

2) Subsidy changes in 2011 are less severe than previously anticipated.

3) Prospects of additional subsidy cuts from 2011 could likely lead to reacceleration of demand from 2H10.

In terms of IRRs, Barclays is currently modeling unlevered IRRs of 7.2% and 12.4% in the free-field and rooftop segments respectively. The analyst expects IRRs to decline to 6.2% and 10.2% in the new scenario (assuming pricing assumptions of US$1.75/W in Q2, US$1.65/W in Q3). At US$1.50/W module prices, they expect Q3 IRRs in the free-field segment to reach 6.7%.

Finally, assuming 2.5%/5% additional subsidy cuts in 2011, Barclays expects IRRs to decrease to 5%/4.7% respectively in the free-field segment (assuming US$1.50/W ASPs). “Within the rooftop segment, we expect unlevered IRRs to decrease from 12.4% in Q1 to 10.2% in Q2 (assuming current street models/pricing assumptions of $1.75/W). At $1.50/W module prices, we model Q2 IRRs in the rooftop segment of 11.8%. Finally, we expect 2011 IRRs to decrease to 9.7% and 9.3% assuming 2.5% and 5% additional subsidy cuts at $1.50/W ASPs.”

When speaking about supply and demand Barclays no longer expects a rooftop rush in Q2 and since free-field installations require 4-6 month lead times, it sees limited upside in this segment. “We expect a pause of new capacity additions by Chinese solar manufacturers (positive, in our view) and expect a faster reduction of uneconomic capacity in Europe, Japan and other parts of the world.”

Barclays also estimates that poly, cell, and panel pricing will be affected by the FiT cuts. “Panel prices could potentially decline to ~$1.50/W (vs. our prior expectation of ~$1.75/W) in order to reflect the reduction in rooftop subsidies from April. Cell pricing is likely to decline less meaningfully (perhaps $1.15/W) whereas poly prices could correct to ~$45/kg (vs. $50-$55/kg levels currently) in order to adjust to the new subsidies.”

21 September 2021
C&I consumers currently source only about 7% of their power requirement directly from renewables. Indian corporate renewable market has grown rapidly and holds huge growth potential as companies look to reduce power purchase costs and cut carbon emissions. BRIDGE TO INDIA has built significant expertise in the corporate renewable business by working on over 30 consulting assignments and various research reports. We are organizing this conference to bring all stakeholders together and delve deeper into various market aspects. The conference will be held on a virtual platform with excellent networking opportunities for all participants.
22 September 2021
To commemorate the World Energy Storage Day(WESD) on 22 September, being recognized worldwide, Customized Energy Solutions (CES) and India Energy Storage Alliance (IESA) is organising the 5th global conference and virtual expo, which will be held virtually on 22 September 2021. WESD is a global movement initiated by various apex trade bodies working to promote and adopt energy storage, e-mobility & green hydrogen technologies for a sustainable future. The forthcoming edition of WESD is expected to attract global participation with an intent to facilitate bi-lateral trade, market development and new research and innovation, which will invite 100+ countries, 100+ regulators & policy makers, 100+ International speakers,1000+ organisations, 100+ partners & exhibitors and 20,000+ global delegates.
28 September 2021
Solar Solutions International is the largest trade show for solar energy in Northwest Europe. Now the solar market has grown up, it's time for the next step. Solar Solutions International displays more than 500 innovations and over 100 practical seminars concerning the latest in energy storage, smart products, and an ever evolving array of solar panels. As an exclusively B2B trade show, Solar Solutions International offers both exhibitors and visitors the chance to network at the highest level. Duurzaam Verwarmd, the largest trade show for sustainable HVAC technology in the Benelux, is held simultaneously. This way your one visit gets you up to date with all of the developments in both sustainable energy and heating.
6 October 2021
Intersolar Europe is the world’s leading exhibition for the solar industry. It takes place as part of The smarter E Europe – the continent’s largest platform for the energy industry. Under the motto “Connecting solar business,” manufacturers, suppliers, distributors, service providers and project planners and developers from around the world meet in Munich every year to discuss the latest developments and trends, explore innovations firsthand and meet potential new customers.
6 October 2021
The future is bright for a new era of US solar and storage, and the 8th annual Solar & Storage Finance Summit will provide opportunities to discuss solutions to the industry’s challenges and provide a networking platform designed to bring together the top minds in the industry to do business. With a mix of high-level, informative presentations and panels, a stellar cast of speakers and audience members with deal-making capacity, the 2021 edition of the event will be a sell-out success.
18 October 2021
Intersolar South America, South America’s largest exhibition and conference for the solar industry, takes place at the Expo Center Norte in São Paulo, Brazil on October 18–20, 2021, and has a focus on the areas of photovoltaics, PV production and solar thermal technologies. At the accompanying Intersolar South America Conference, renowned experts shed light on hot topics in the solar industry.

Read Next

September 21, 2021
New York’s governor has proposed an expansion of the NY-Sun distributed solar incentive programme and revealed plans for two transmission projects that will transport renewable energy to New York City to help the state reach 70% renewable electricity by 2030.
September 21, 2021
German solar installer Enpal has raised €345 million (US$405 million) in debt financing to fund the deployment of more than 15,000 household solar PV systems
September 21, 2021
India added 521MW of rooftop solar in Q2 2021, an increase of 517% compared to the 85MW added in the same quarter last year despite a slight increase in costs, according to a Mercom India report.
September 21, 2021
Private equity firm American Securities has secured a deal to acquire US solar engineering, procurement and construction (EPC) provider Swinerton Renewable Energy and its operations and maintenance (O&M) subsidiary SOLV from Swinerton Incorporated.
September 21, 2021
FIMER has launched two new platforms for the utility-scale solar sector, the PVS-350-TL string inverter for decentralised applications and the PVS-260/PVS-300 modular conversion solution designed for centralised applications.
September 20, 2021
A subsidiary of Indian utility Tata Power has received a letter of intent to set up a 250MW grid-connected solar project in the state of Maharashtra.

Subscribe to Newsletter

Upcoming Events

Solar Media Events
October 6, 2021
Solar Media Events
October 19, 2021
Solar Media Events
December 1, 2021