Germany's decision to slash subsidies on certain types of solar installations will result in a dramatic demand reduction and price plunge in the country for PV panels and systems in the second quarter of 2010, according to iSuppli.
The government in Germany has pre-announced plans to reduce its subsidies for new roof and open-field sites installed after April 2010 by 16% and 17%, respectively. The final decision is planned within the next 10 days.
This reduction is on top of a just-implemented, pre-planned, feed-in tariff reduction of 9% for smaller rooftops and of 11% for large rooftops and ground installations, said iSuppli. The announcement is dramatic compared to the 5% to 10% decrease that had been expected.
"Germany's decision to cut its solar subsidies in the second quarter will make installations less attractive for the country's consumers," said Henning Wicht, senior director and principal analyst for iSuppli. "Because of this, German consumers will rush to make solar installations in the first quarter and then stop in the second quarter."
German solar installations will surge during the first quarter, starting at 200MW in January and then rising to 300MW in February and 500MW in March, iSuppli estimated. However, installations will plunge to 50MW in April and remain at the 100MW level in May and June.
"As a result of the decline in installations, solar system prices in Germany could decline by 7.5% from April through the end of 2010, compared to less than the 5% normal rate of decline," Wicht said.
The German government was prompted to reduce its rates because solar system prices declined more than expected in 2009 due to the country's aggressive subsidies during the year. With Germany being the world's largest market for solar installations – Germany accounted for 51% of global solar system installations in 2009 – its reductions could have a worldwide impact, iSuppli believes.
To put the size of Germany's domination into perspective, the second-largest solar nation, Italy, accounted for only 9% of global installations, iSuppli noted.
"The massive oversupply and downturn seen in the global solar cell industry in 2009 was largely due to Spain's decision to change its policies, which led to a collapse in demand," Wicht noted. "Germany's move could have a similar impact on the global solar market during the second quarter of 2010. However, there is a major difference: the German tariff does not limit the size of solar installations, whereas the Spain restricts installations to 400MW to 500MW per year. Assuming that solar system prices will drop more, installations in Germany will have an opportunity to recover, unlike in Spain."
3Q10 rebound
Conditions in the German market will recover in the third quarter as lower prices lure consumers and as consumers decide to buy before a further tariff reduction in 2010, according to iSuppli. After holding steady at 100MW in July (which is only one-fourth of the installations forecast in March), installations will rise steadily until November when they could reach 400MW.
Source: iSuppli, compiled by Digitimes, January 2010
Article translated by Jessie Shen
