A Bloomberg report released on February 22 claims that German chancellor Angela Merkel’s government will again revise the subsidy cuts for farmland converted to take solar systems. According to an unpublished draft put together by the government, this kind of installation will no longer receive financial support.
This change comes days before the government is due to meet on the 26th. Lawmakers in the federal parliament in Berlin, the Bundestag, will then discuss the planned changes to solar subsidies as part of a debate on renewable energies.
Try Premium for just $1
- Full premium access for the first month at only $1
- Converts to an annual rate after 30 days unless cancelled
- Cancel anytime during the trial period
Premium Benefits
- Expert industry analysis and interviews
- Digital access to PV Tech Power journal
- Exclusive event discounts
Or get the full Premium subscription right away
Or continue reading this article for free
The Bloomberg article also outlined that the halt on subsidies for converted farmland would take place from July 1, 2010, a month later than the expected cuts for all other solar PV installations in the country.
Vishal Shah, senior analyst at Barclays Capital, said, “This news flow matters to all solar companies.”
“Bulls would argue that a 100% cut is as negative as a 25% cut (prior expectations) and this development should not alter the longer term thesis. Bears would point to the increasing risk to 2010 guidance (~5% risk just from this development) and tougher 2011-growth outlook. All things equal, farmland subsidy cuts could negatively impact 2011 earnings by ~15%.”
Barclays Capital’s view is that this news also impacts all Chinese companies that are likely to see more pricing pressure from companies such as First Solar. The analysts wanted to make it clear, however, that this is just a draft and could be contested when the cabinet meets on the 26th. “Nevertheless, given the market confusion from intraday positive updates from Bloomberg yesterday, we see some downside pressure on solar stocks,” said Shah.
