Market disconnect over German PV installs for 2011

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The news that the German feed-in tariff rate cut for 2011 is to be 13% and just that is a strong signal that PV installations should remain strong next year. Indeed, the very fact that there is no cap or structural changes to the EEG as was seen mid-year is also a boon to the industry, as it kills any fear, uncertainty or doubt (FUD) about the most important market for the PV industry.

However, there is an apparent disconnect between the good news emanating from the Bundesnetzagentur statement and what the market in many cases is saying about expected demand for PV in Germany next year.

As we are in the quarterly financial season, I have seen a growing number of financial analysts research notes mention the possibility that installations in Germany could decline from the expected highs of 6 – 8GW in 2010.

Recently, First Solar executives also highlighted in their conference call to discuss third quarter results that they expected 7.2GW of installations in Germany this year but expected this to fall to 5.9GW in 2011.

Much of the justification for a decline was put down to the 13% regression as ROI would be less as there has been a significant series of cuts that are not expected to be absorbed in module price declines. Indeed many pricing forecasts currently see no more than a 10% reduction in module prices.

I don’t think this holds-up under scrutiny as the latest planned regression isn’t heavy and module prices have proved more elastic in the last few years than many people expected.

Indeed iSuppli Corp is forecasting module price declines of between 12-15% in 2011 and they have a rather compelling reason for expecting such declines.

Talking with Senior Analyst at iSuppli, Stefan de Haan he is also not expecting the German market to decline next year and doesn’t understand why there is talk in the industry too the opposite.

He noted that iSuppli will release a new forecast next week and will highlight the expected growth in installations globally and importantly further growth in Germany.

De Haan believes that the first half of 2011will be characterized by softening demand in Germany but lower prices will be a consequence and as with previous years spurs the next wave of PV installations.

To stimulate demand prices would have to drop to €1.9-2.7 per Watt (depending on system size), according to the market researcher. This he noted would start to happen in the course of the second quarter.

Importantly, he believes that the FiT decline and price declines keep the investment ROI for the main residential market intact and until that dynamic really changes, then he expects the German market for 2011 to remain very strong.

As will be detailed next week in a press release, iSuppli expects the German market will reach 9.4GW, indicating that a sharp rise in installations can be expected through the second-half of the year. As was proved this year and late last year, German PV installers can achieve significant monthly install figures when pushed to do so.

Unlike the shortages of both modules and importantly inverters this year, production capacities have grown significantly and component shortages are not expected to cause problems in 2011.

There is also a direct consequence of the booming German market and that means global installations will soar again in 2011. The market research firm expects total installs to reach 19.3GW next year.

It will be interesting to observe what other major PV manufacturers say about the expected demand in Germany next year as the financial reporting season gathers pace.

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