German solar groups could thrive on subsidy fears

FRANKFURT Wed Feb 1, 2012 5:34pm GMT

Related Topics

Quotes

   

FRANKFURT (Reuters) - Fears Germany will cap or cut green energy subsidies is boosting demand for solar panels, and uncertainty about the shape of the measures could give the country's battered solar sector an advantage against Chinese rivals.

Installations of solar panels have boomed in Germany over the last two years due to feed-in tariffs, lavish subsidies utilities are forced to pay by the government to those who generate their own solar power. Ultimately power companies pass on the costs to their customers.

But as the burden on energy consumers soars, Berlin now wants to tighten its grip on the market and is scrambling for ideas over how best to curtail demand. Proposals range from monthly cuts in feed-in tariffs to an outright cap on subsidies.

December saw a massive installation rush and some executives and analysts are predicting a bumper first quarter -- seasonally the weakest as bad weather makes it harder to install panels on roofs -- as people sign up for current schemes ahead of impending cutbacks.

"I think the first quarter could be very big, if nothing is done (in terms of legislation). But I believe something will be done," Xavier Chollet, who co-manages the Pictet Clean Energy Fund, said.

"We have seen good demand in the first weeks of the year," Pierre-Pascal Urbon, chief executive of SMA Solar (S92G.DE), Germany's largest listed solar company, said on Wednesday.

Any pick-up in demand, however, will be fiercely contested.

Germany, the world's largest solar market until Italy overtook it last year, has helped domestic and foreign solar companies alike flourish as the feed-in tariffs are paid regardless of the panel's origin.

Low-cost Asian module makers now dominate the $82 billion (52 billion pounds) global photovoltaic PV.L industry. Chinese companies such as Suntech STP.N, JA Solar (JASO.O), Yingli (YGE.N) and Trina Solar (TSL.N), have all been helped by incentives in Germany, which accounted for 27 percent of the global PV market last year.

Meanwhile, some German solar companies have been forced out of the market, most notably Solon SOOG.DE, Germany's first listed solar group, and Solar Millennium S2MG.DE.

"We very much see potential for customers bringing forward their orders ... Whether or not German module makers can benefit from a possible boom depends on inventory levels. So far, there is only very little data," HSBC analyst Christian Rath said.

"But it seems many foreign companies have benefited from the boom in December."

CHINA OFF GUARD

However, prolonged debate about the shape and timing of subsidy cutbacks could give German companies a short-term advantage, with China's geographical distance causing that country's panel suppliers to lose out on a potential pickup in demand in the first weeks and months in Germany.

"There is a possibility ... that booming demand in December may have caught off guard some Chinese players that are now unable to meet stronger demand in Germany," Pictet's Chollet said.

Silvia Quandt analyst Sebastian Zank said the strong fourth quarter had likely driven down inventory levels quite significantly, making a surge in panel deliveries unlikely.

"Even Chinese manufacturers would have to produce and ship their modules to Europe first, which would then take until March," he said.

Shawn Qu, chief executive of Canadian Solar Inc (CSIQ.O) -- which is based in Ontario, Canada, but has most of its operations in China -- told Reuters late on Tuesday it was scrambling to ramp up production of solar panels to meet an unexpected surge in demand from Europe.

"It's true, European producers have a certain advantage regarding delivery periods and availability," a spokesman for China's Suntech, the world's largest maker of solar cells, said.

"Us and most of the big producers, however, have warehouses in Europe that serve as a buffer and can partly offset such a development."

German producers such as SolarWorld SWVG.DE, Q-Cells QCGE.DE and Centrosolar C3OG.DE could fill the supply gap and benefit, albeit for a limited time, until fresh Chinese supplies hit Germany's shores.

"German solar companies will now play out their advantage," said a source at one of the world's largest solar companies, on condition of anonymity.

(Additional reporting by Nichola Groom in Los Angeles; Editing by Jon Loades-Carter)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.