Does the European Debt Crisis Mean Anything to the Solar Industry?

I asked Al Velosa, Director of Research at Gartner, what the solar industry should watch for as the European debt crisis unfolds.
By Raj Prabhu

Do you see any impact from the current debt crisis unfolding in the European Union (Portugal, Ireland, Italy, Greece, Spain) on the solar industry….not to forget Germany was already forecasted down in 2Q?
This definitely raises the uncertainty in the industry as a whole. However, the central question is what impact it will have on the credit markets and interest rates. If we see government’s increasing their rates to finance their debt, it may have a ripple effect and increase the cost to financing PV projects.

Has the current debt crisis in the European Union made you rethink your solar forecast for 2010 in any way?
We have already trimmed our forecast for 2010 based on proposed changes for the incentive program in Germany. The crisis in Europe complicates the assumptions for our forecast a bit, but its central effect is to just lower the forecast a little more and to increase the error bars on our forecast for the year.

Is the current crisis bad enough to affect subsidies?
That depends on how the crisis extends throughout the region. However, remember that European governments have acted strongly to support domestic employment. So unless the budget crisis becomes so acute that most programs are cut, we should see the governments continue to support their current level of subsidies and the employment that they bring.

Are there any implications from the downward pressure on the Euro?
Between potential changes in interest rates due to government borrowing, the change in the Euro, and a bit of a drop in demand, we may see a stronger drop in average selling prices than we expected. Thus we could see a stronger increase in demand from developing geographies as they look at options to support both renewable energy programs and local employment.

Al Velosa is a Research Director at Gartner, Inc. focused on the photovoltaic solar market.