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Chinese solar to gain on subsidy cuts in Europe

A ccording to Reuters, “Subsidy cuts throughout Europe promise more business for Chinese solar companies at the expense of European and American peers as customers seek lower cost products to protect profits.

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Governments in major European solar markets such as Germany and Italy are paring back support regimes for photovoltaic (PV) appliances this year and next, arguing they require fewer subsidies due to increases in technological efficiency.

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Analysts have predicted German companies such as Q-Cells, Solon and SolarWorld could be among the worst hit.

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“Developers are definitely going to be looking at the most cost effective ways to install photovoltaic projects which in many cases would include sourcing from Asian manufacturers which have lower cost structures in general,” said Cassidy DeLine, European solar energy analyst at U.S. Emerging Energy research center.

“We expect a renewed focus on lowering sourcing costs at each stage of the value chain,” said UniCredit analyst Michael Tappeiner.

Chinese manufacturers undercut their European peers’ prices between 30 and 40 percent, researchers say.

According to a study by investment bank UBS, Chinese companies sell modules at about 1.20 euros per watt, while European panels sell at nearly 2 euros per watt.

Customers such as project developers and power generators will use cheaper Asian products to preserve as much of their profit margin as possible despite a “perceived lower quality,” Tappeiner said.

Companies such as Yingli Green Energy and Suntech Power already get more than half of their annual sales from solar panels from Germany.

Chinese manufacturers have an added advantage over overseas peers in that they buy polysilicon, the key material to make solar cells, from manufacturers with lower electricity and labor costs.

SUBSIDY CUTS

Germany, last year responsible for about half of European solar installation, is cutting feed-in tariffs, the price power distributors have to pay generators for renewable energy, by 16 percent from June in addition to the annual cuts.

Italy, Europe’s third-biggest solar energy market with about 900 megawatts of PV capacity installed at the end of 2009, plans to trim the generous feed-in tariff gradually by up to 20 percent in 2011 and by an annual 6 percent in 2012 and 2013, according to a draft decree obtained by Reuters.

France plans to cut feed-in tariffs by 24 percent this year and the Czech Republic will reduce subsidies next year.

Europe is the most important market for solar products. Sales of photovoltaic appliances reached 16 billion euros ($22 billion) in 2009, about three quarters of the world market, the Brussels-based industry association EPIA estimates.

It expects that combined installation volume in France, Italy, Spain and the Czech Republic will total up to 1.96 gigawatts in 2010, or 18 percent of estimated global 2010 output, compared with 2.8 gigawatts for Germany.

Manufacturers using lower cost thin film technology, such as U.S. First Solar and Japan’s Sharp, are also likely to benefit from the expected Europe-wide shift to cheaper modules, Emerging Energy’s DeLine said.

All the cuts mean “the end-customer has to be more price conscious because the returns are slimmer,” said Alastair Bishop, analyst at Piper Jaffray in London.

According to UBS analysts, Chinese manufacturer LDK Solar believes markets outside Germany — in Europe as well as in the Americas — will fill the gap left by the cuts on the German market.

The share prices of Chinese companies do not yet seem to have factored in these opportunities and despite an improved business outlook, Chinese producers have fallen more than their peers from abroad since the cuts in Germany were announced in January.

Yingli shares have declined 28 percent and Suntech 29 percent, while Q-Cells has dropped 20 percent and the FTSE Clean Tech index of European renewable energy companies has slipped 14 percent.

U.S. producers Evergreen Solar fell 29 percent and Sunpower slid 23 percent.

NEW MARKETS IN EUROPE

New markets opening up for these producers include Britain, one of Europe’s largest economies, which introduces feed-in tariffs for renewable energy generation on April 1.

The country currently gets around 5.5 percent of its electricity from renewable sources but needs to increase this to around 30 percent to meet its 2020 targets.

The rates offered for solar PV installations range between 29.3 and 41.3 pence ($0.46-$0.64) per kilowatt hour and have been calculated to offer a 5-8 percent return on initial investment.

“With those feed-in tariffs there’s no reason why the market couldn’t develop to the size of Germany. The weather’s not that different,” PV Crystalox Solar CEO Iain Dorrity told Reuters.

He said that as Britain lacks homegrown solar cell manufacturers, modules will have to come from other countries.

However, in a further sign of Chinese ascendancy, PV Crystalox has lost its title as the largest listed solar company in London to China-based ReneSola.

Nomura Code analysts say the winners in the solar industry will be those companies that can scale up and get cheaper, such as ReneSola.

“They are bigger and cheaper,” they said. “They may not be bigger and cleverer, but bigger and cheaper is the key.”"

Source: Reuters

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One Response to “Chinese solar to gain on subsidy cuts in Europe” Subscribe

  1. okorie novelthy May 7, 2010 at 1:32 pm #

    i need solar company that can partner with my cooperative and i will makart and distribute their product their.

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