Eurozone crisis ignites solar industry fears

With the considerable concerns about the precarious financial position of various Euro zone nations, there are fears for the health of the solar energy industry.

Europe is one of the leaders in photovoltaic (PV) panel implementation, and accounts for 75 percent of the world’s installed capacity.

Germany is way ahead with 7.2 gigawatts of installed capacity, with Italy and the Czech Republic both following in second and third places.

With the threat of contagion spreading across the continent, as Greece appears close to defaulting, there are fears that the PV industry, which has made so much progress, will be affected.

TechEye caught up with IMS Research PV industry expert Ash Sharma, who told us that there’s a chance of tough times ahead for the industry in Europe.

“The main concern is that banks will tighten lending to projects with greater risk,” he told us, referring in particular to those countries with financial or political instability.

Despite the fact that feed-in tariff (FiT) payments should be guaranteed for 20-25 years, many countries are introducing austerity measures which have already cut FiTs considerably.

“Some countries have even made retrospective cuts or taxes to existing plants which has done the most damage to the PV industry.

“It spooks investors and banks who may no longer view PV as low risk, if return on investments can be cut overnight despite already having made the investment.”

The effect, so far, has seen slowing demand as the business and consumer returns lose their seduction. In turn, PV prices have dropped rapidly, says Sharma.

While Greece is in the most obviously dire situation, as always, there is a looming threat of a knock-on, domino effect.

“Greece is a problem, however, the market is still growing well this year.

“I expect the damage to happen next year as project financing takes several months, even up to a year in some cases. So there is a lag between the effect really being seen. 

“Luckily Greece is small PV country so won’t have too big an impact on the PV industry.

“Italy, Spain and Czech Republic are much bigger PV markets and their cut backs – partly linked to austerity measures – have really hampered growth thus far in 2011.”

While it sounds like bad news for the European market, Sharma believes that the downturn could offer a boost to PV in countries operating outside the Eurozone.

“The cuts have slowed the European market considerably and as such prices have fallen very rapidly in 2011.

“This means that systems prices are lower around the world and PV is more attractive. Suppliers are also more aggressively targeting new markets like the UK and USA and turning their attentions away from Germany and Italy.”

Sharma notes that the downside is in damage done to investor confidence.

“The UK will certainly benefit from the lower systems prices, though it’s unclear how much of these savings will be gained by the end-customer.

“It is difficult to say the longer-term outlook – other than lower investor confidence.”