TechPulse 360

Britain has been welcoming of wind turbines and a new generation of nuclear plants. But in solar, it lags. (Photo source: The Guardian)

After several months of tough news for the solar panel industry, there were some good tidings Tuesday: the announcement of a British feed in tariff for solar.

The solar business has been reeling from deep cuts in Germany’s aggressive tariff and worries that subsidized Chinese manufacturers will cut prices to the bone – or just above breakeven.

The British initiative drew immediate criticism from those in the UK who believe it didn’t go far enough. But it is a bright spot for manufacturers eager to move product.

The scheme unveiled by the beleaguered Labour government is built on the goal of generating 2 percent of the nation’s energy from distributed sources, such as solar panels on a rooftop, by 2020. Some had urged a more ambitious target, but welcomed any boost to one of Europe’s most under developed solar market places.

The United Kingdom has moved rapidly to install wind turbines and to promote a new generation of nuclear plants. But renewable power is still just about 5 percent of the mix, compared to the European average of 14 percent.

According to IMS Research, the tariff could lead to 250 MW of solar panels installed in 2011. This is a drop in the bucket compared with the roughly 2,000 MW installed in annually in Germany. But that should rise when Brits realize they will see a payback on their investment in 12 years with a product that should last for 25, says IMS. The short-term limitation on the market will be a lack of qualified rooftop solar installers.

The tariff guarantees residents up to 65 cents a KWh for electricity they generate and sell to a utility. A 5 MW cap means it is not designed for large-scale solar farms.

Clearly the tariff could have been larger. Estimates suggest it will add 3 pence to the average utility bill. But at least it is a step in the right direction. Perhaps Americans who still doubt global warming will begin to see the writing on the wall and come to terms with the notion of a tariff in the States.

Germany’s proposed cut in solar feed-in tariffs is likely to take the market on a ride: first up, then down.

Germany's proposed cut to its feed-in tariff will send the solar market on a roller coaster of a ride.

The proposed reduction on roof-mounted systems is to go into effect in April, followed by a 15 percent cut for ground mounted system in July and a 25 percent reduction for large-scale ground mounted systems, also in July.

The dwindling subsidies will make solar less attractive to building owners and utilities. Many will rush to complete rooftop installations by the end of March. Then the market will come to a stop.

The fact that Germany accounts for 50 percent of the world’s solar purchases will weigh heavily on the industry. When Spain slashed its tariff in 2009, that red-hot market quickly cooled. Massive oversupply resulted and prices were cut almost in half.

Some analysts suggest dire consequences will flow from the German change. ISuppli said Thursday it expects a first quarter surge, with 200 MW of solar modules sold in January, 300 MW in February and 500 MW in March. Then the plunge. April sales will amount to 50 MW, says iSuppli Principal Analyst Henning Wicht.

Prices in Germany could fall 7.5 percent after April, he said.

Ironically, these lower prices could lead to another surge in demand before a second round of tariff cuts.  The market could grow from 100 MW in July to 400 MW in November, iSuppli says. Then, in roller coaster fashion, another drop.