Solar-power subsidies spur growth
The growth of the German and Spanish solar industries is tailing off, but other countries are taking up the slack, writes Ian Lewis
A FLURRY of activity late in 2009 bolstered Germany's photovoltaic (PV) solar-energy capacity after a difficult year for the sector globally. But the role of the world's leading market as a demand driver is set to diminish.
Project developers have been rushing to launch solar farm projects in Germany before power tariffs for the sector were reduced by around 10% from this month. Carsten Koernig, head of BSW, Germany's solar industry federation, said recently that new capacity may have reached as much as 3 gigawatts (GW) in 2009, double the amount added in 2008.
"The tariff reduction is not catastrophic for the German solar market, given modules are now so cheap, but it does mean that if you had a project in the planning stage, it was worth paying a premium to start it up before the end of the year," says Jenny Chase, head of the solar energy team at New Energy Finance (NEF), a consultancy. NEF estimates that the amount of new capacity built in Germany this year will be only slightly higher than 2009 at around 3.2 GW.
The German solar industry has been worried that the recently re-elected government of Angela Merkel might seek to cut federal spending by making further substantial cuts in solar-sector subsidies in mid-2010. It would be a tempting option, even with this month's tariff cut, given that the price of solar modules has halved since 2008, making projects much cheaper to develop. Those concerns seem to have been assuaged to some extent by indications from the government that it would not make tariff cuts that would damage what it regards as an important part of the economy – Germany plays host to some of the world's leading solar-panel makers and project developers
Blunted prospects in Germany and Spain
Besides the blunted prospects in Germany, the collapse of demand from the Spanish market must also be factored into manufacturers' plans. Spain added 2.5 GW of new solar capacity in 2008, making it the global leader at that point (see Figure 1), but probably struggled to add a tenth of that amount in 2009, following the government's abandonment of a costly subsidy scheme, which resulted in far more capacity being built than it had expected over the last two or three years.
A 500 megawatts (MW) a year cap was put in place for 2009, but a combination of strained finances and bureaucracy prevented more than around 250 MW of capacity being built, analysts say. Spain's role in the global market is certain to remain limited in 2010, as the 500 MW cap remains in place.
However, other markets are poised to take up the slack, with global capacity set to rise by 9 GW in 2010, after rises of around 6 GW in each of the previous two years, according to NEF.
Italy has moved into second place in the global league table, adding some 600 MW in 2009 and it should add over 1 GW more this year. A landmark barrier may well be broken in 2010, as the price of solar power before subsidies in Italy is expected to reach parity with that of power supplied from the grid. The relatively high cost of grid power in the country plays a role in levelling out prices, in addition to Italy's low cost of capital and the rapidly falling input costs across the solar industry.
The US market managed to add some 450 MW of PV capacity in 2009, less than some had hoped at the start of the year when the apparently green-oriented administration of President Barak Obama moved into the White House. Restricted financing and the time taken to put government incentives into place dampened growth, although, here too, the low silicon price is expected to bolster the market in coming months.
Renewed US momentum
There was also some succour for the US market from the federal government's November announcement that it would fast-track large-scale renewable energy projects in California, such as Chevron's planned 500 MW solar facility. If these projects can be started by the end of 2010 they will be eligible for part of $15bn in stimulus funds set aside for green projects. This renewed momentum could see fresh demand in the US rise to around 860 MW in 2010.
China has said it will spend billions of dollars on renewable energy projects in the coming years, and is one of the world's leaders in solar technology manufacturing (PE 12/09 p7). But those factors will not necessarily translate into large-scale use of solar power, compared with other energy sources.
NEF's Chase says that, in view of China's ambitious targets for carbon-emissions cuts, the country is more likely to spend heavily on other forms of power, such as wind, geothermal and biomass, which can make a bigger environmental impact more cheaply. NEF forecasts Chinese capacity will expand by 700 MW in 2010, compared with 50 MW or less added in 2009.
"Solar power has nearly unlimited resource potential, which is why people get excited about it, but in terms of carbon emissions saved per dollar spent, it is not generally the best option," she says.
The best chance for a rapid expansion of solar power in China would be if Chinese manufacturers' export markets weakened to the point where the business could survive only through the creation of domestic demand instead. Impressive results continue to emerge from Chinese firms with US listings, such as Suntech, Trina Solar and Yingli Green, suggesting that situation will not arise in the near term.
Strong growth is also expected in heavily subsidised markets, such as Canada and the countries of central and eastern Europe, as well as Japan. In addition, solar firms servicing residential and other rooftop applications in smaller markets are likely to benefit because of the fall in the price of systems over recent months.