12 March 2012
Feed-in-tariffs (FiTs), initially implemented to stimulate the use of renewable energy, are now used to measure governments’ long-term commitment to green energy. Indecision and changing policies have led to an often confused situation and are having a detrimental impact on the PV industry.
In the UK, for example, recent, proposed reductions to FiTs were deemed unlawful. The cuts would have led to a downturn in solar installations and thousands of job losses. In Germany, one of the largest PV markets in the world, huge cuts were just announced. But prior to the cuts going into effect, there was an unprecedented rush to install new systems. In Spain the Council of Ministers implemented a temporary suspension of FiTs earlier this year. There are also plans for FiT reductions above those originally planned in Greece, a country in financial turmoil, and also in France and Switzerland.
One of the most significant problems is the impact that the “stop-go” nature of changing FiTs is having on the PV system suppliers and installers.
Outside of Europe, China introduced its first FiT in August 2011, which is currently set at about $0.15 per kWh and augments the previous “Golden Sun”. The Japanese situation has been plagued by indecision, although Parliament approved the FiT last August in the wake of the Fukushima crisis and the scheme is expected to come into force this July. Nevertheless, this has led to at least one company, MEMC Electronic Materials, to re-appraise its Japanese strategy.
The Swiss surprise
Looking at some of these cases in more detail, one of the greatest surprises was the Swiss decision to further reduce its FITs. This country is normally largely immune to global financial events, but according to the Department of the Environment, Transport, Energy and Communications (DETEC), a new 10% cut will be added to the annual 8% reduction, which came into effect on 1 January, 2012, on 1 March, leading to an overall FiT reduction of 18%. The new rates can be seen here. The DETEC stated that the rates will again be reviewed mid-year, due to the “large uncertainties concerning the price development of modules”.
The Spanish suspension of FiTs has attracted strong criticism from the European Commission, which issued the statement that, “The suspension of all new renewable energy projects will also have a disturbing impact on investment in this sector. How can we plan to reduce dependence on fossil fuels and develop new industries and jobs if we create such a volatile investment climate?”
The Germany FiT changes announced 23 February are much steeper and sooner than anticipated. (See “German FiT Debate Comes to an End”.) There are now only three categories of installations depending on their size, there will no longer be any subsidy for installations above 10MW, only 85 to 90% of the energy produced will be supported, and the FiT will regress on a monthly basis--resulting in a total cut of as much as 33.7% for large installations in the year 2012. The German PV industry is rightly concerned that this would benefit Chinese suppliers of low-cost modules and inverters.
The French solar association claims that the industry has already lost half of the 25,000 jobs that had been created.
It seems quite probable that cuts to FiTs staggered across the year could be brought forward and after that a monthly, low, single figure regression would be implemented. This would at least avoid year-end surges as seen in December 2011, when new installations with a total capacity of 3GW were reported, or about 40% of the year’s total. Clearly, the situation remains fluid but there is little to encourage the country’s PV industry, bar the National Renewable Energy Action Plan in which the Federal Government stated to the European Commission that it was expecting an installed capacity of 51.75 GW by 2020.
In France the tariffs continue to fall and those for new installations in the first quarter of 2012 will decrease by between 4% and 10%, depending on the type of system, compared to the last quarter of 2011. Earlier FiT reductions have had a dramatic impact on the country’s PV industry and Enerplan, the French solar association, claims that the industry has already lost half of the 25,000 jobs that had been created.
Supplier and installer uncertainty
These are clearly challenging times for the PV industry. In addition to the issues highlighted above, one of the most significant problems is the impact that the “stop-go” nature of changing FiTs is having on the PV system suppliers and installers. How can these companies plan budgets, control cash-flow and maintain staffing levels when demand fluctuates so dramatically?
In a presentation at last year’s 26th European Photovoltaic Solar Energy Conference and Exhibition, a speaker from the European Directorate-General for Energy stated that, “Bad practices, including retroactive changes to support schemes, have already been roundly criticised by the Commission. The entire legal framework for renewables needs to provide regulatory certainty (or reduce the uncertainty) to encourage investment and technological development. Reneging on support or any other matter contributes nothing to the growth of the sector.” These sentiments are to be applauded, but it is believed that, in addition to providing electrification to rural areas, the Chinese FiT has been introduced to boost the market for the country’s PV suppliers in the wake of falling export sales caused by the global economic crisis. What the industry most needs now is stability. But if the Chinese FiT stimulates production, prices will fall even further, leading to greater demand in Europe and elsewhere, which will inevitably lead to more unscheduled FiT reductions. It is difficult to see how this vicious circle can be broken.
Written by Rob Bogue, Contributing Editor, UK Solar Novus Today