By: Raj Prabhu, Managing Partner, Mercom Capital Group
As we started putting together a global consensus forecast,
traumatic events in Japan and the “wait-and-see” situation in Italy reminded us
of just how interconnected our solar markets are and how quickly the world energy landscape can change when
events such as a nuclear meltdown changes attitudes across the globe. This could be a turning point for renewable
energy as speculation heats up about that the potential for 50-60gigawatts (GW)
of nuclear power capacity being delayed or outright cancelled.
The political impact of this is just unraveling and needs to
be watched on a country by country basis.
Nowhere was this more true than in Germany, the world’s largest PV
market, as it idled seven nuclear reactors which resulting in a jump in forward
electricity prices, and Chancellor Angela Merkel’s Conservative Christian
Democrats suffering a major electoral defeat. The nuclear situation in Japan and Chancellor
Merkel’s reversal on nuclear power plants were directly attributed to the
There have been calls from Germany, France, China and other
countries to switch to renewable energy faster.
China announced that it is looking to double its solar energy goals and
more countries are expected to go down this path in the near future.
The actual installation numbers for 2010 are still trickling
in and by all estimates the markets are forecasted to have grown over 100% in
2010 compared to 2009, making 2010 solar industry’s best ever year.
Following Japan’s earthquake, numerous countries are
rethinking their plans about nuclear energy.
This has created a high level of uncertainty which may turn out to be a net
positive for solar in the long run. This
means that forecasting the rest of 2011 and 2012 will be extremely difficult as
visibility is extremely low under current political conditions.
Current situation in some major markets:
Germany finished 2010 with 7.4GW of installed solar which was
lower than earlier estimates. There was
a slowdown in the second half of 2010 due to successive cuts in the feed-in-tariff,
making returns unattractive to investors.
Chancellor Merkel’s reversal on nuclear plants led to the government shutting
down seven nuclear plants, affecting an increase in electricity futures
prices. This in turn caused the ruling Conservative
Christian Democratic Party to lose state elections in the Southwest state of
Baden-Wurttemberg, the implications of which will be evident in the near
future. There have been calls to move toward renewable
energy faster after the nuclear crisis and this may have a positive impact on
There is still confusion as to the capacity that was
installed in Italy in 2010, mainly due to a lag time of 3-4 months between
installations and official registrations.
One thing most analysts agree on is that installations will far exceed
the estimates, mainly fueled by a rich incentive scheme. These very attractive investment returns have
caused a “rush” of installation. A
revised solar policy will be announced the first week in April (after this
article has gone to print) following meetings by the Council of Ministries. Though the outcome is unclear, the goal is to
continue the development of solar without an increase in the electricity prices
for rate payers.
Regardless of the outcome, it looks as though Italy’s best solar
days might be behind it. Italy is currently
the second largest solar market in the world, but their uncertain solar policy
is having a huge impact on world solar markets.
The hunt is on find the next “replacement market(s).”
The United States (US) does not have a FIT system, nor does
it have a federally mandated goal for solar.
Instead, the market is driven by the federal 30% investment tax credit
(ITC), which expires at the end of 2016. This includes a 30% treasury cash
grant (which was extended through 2011).
Then there are state renewable portfolio standards and state and
municipal rebate programs. The
development of the US solar market has moved towards large utility-scale
projects due to the nature of incentives available. The 30% treasury cash grant is extremely
popular and is fueling a lot of growth but it is scheduled to end in 2011
unless congress passes a bill extending it as they did in 2010. Currently, the US is projected to be the top
solar market by 2015.
The tsunami in Japan continues to impact world solar markets
in many ways. Nuclear power producing
countries have called for a review of nuclear plants before allowing any
permits for new nuclear power plants.
Japan is estimated to have grown over 100% year-over-year in
2010 as the government reenergized the solar industry by reintroducing
attractive subsidies for residential installation and also by implementing net
metering. With the loss of at least six
nuclear reactors that produced about 7-8GW of electricity, many are of the
opinion that this is a net plus for the solar industry. This point was confirmed this week as the
Japanese Minister of Economy announced a raise in preferential tariff for
surplus solar power produced by businesses and schools by 67% starting April
1. More of these types of favorable
solar policies may be announced by Japan in the near future given the current
After the recent events in Japan, China has made an
announcement that it will increase its target for solar power from the previous
goal of achieving 20GW by 2020. After
China announced that it will revise its nuclear plans significantly, there has
been speculation that this goal will as much as double. As the largest energy consumer in the world,
any move from China towards solar will be a huge boon to the markets.
France recently suspended subsidies for solar for a three
month period for non-residential installations mainly to limit growth in the
sector following a surge in installations in 2010. Solar has come under increased scrutiny as
the cost to state utilities is on the rise.
The new French framework is designed to achieve its goal of 5.4GW by
2020. A flexible FIT for 20 years has
been introduced that changes every quarter according to volumes installed. A reverse FIT (auction) system has been introduced
for large rooftop and ground mounted systems where lowest bid wins.
Even with targets to install 500MW in 2011, installations
may be much higher because of grandfathering from the previous FIT program.
This consensus forecast includes data from numerous research
firms as we wanted to present a combined view which better predicts the
movement of the markets with multiple insights and market knowledge. With the world energy markets currently at a
turning point, a lot may change in the next three months - we predict that it
will be in a positive direction for solar.