12 July 2012
In a session at Intersolar North America panelists discussed the German solar model, funding schemes to jumpstart and sustain the industry and realities versus fantasies of industry expectations.
Dr. Winfried Hoffman, President of the European Photovoltaics Industry Associaton (EPIA) in Belgium, discussed Germany’s “Energiewende” or Change of the Energy System. He said that this is a new name for an ambitious energy program that has a history dating back to 1991 when one of the big achievements was a ruling in Germany that electricity from renewable energy have priority access to the grid. With such forward thinking it’s no wonder that the German solar market grew to become the world leader. But he said with all the forecasting and predictions, “No one could see capacity build, overcapacity and dropping prices.” Despite the challenges, he said he’s looking for a world that gets 30% of its energy from renewable sources by 2020.
Market support mechanisms in Europe and US
Daniela Schreiber, Executive Vice President USA EuPD Research/Hoehner Research and Consulting acknowledged that the solar industry is showing some impressive numbers and that it is largely due to two dominant support mechanisms: the feed-in tariff and the power purchase agreement.
The feed-in tariff, first introduced by the Carter administration in the US in 1978, became the driving force behind the installed capacity in Europe, which dominated the global market last year with 75% of all installations. Investment security is the prime benefit of the FiT, according to Schreiber. She said that FiTs create a secure and stable market, help to grow local industry and create jobs. But downsides are that it is difficult to control overall policy costs because it is difficult to predict the rate of growth in the markets. They also create cost burdens for tax payers and may distort wholesale electric prices.
Schreiber briefly described the power purchase agreement, which is a financing scheme used in some US markets. Under this arrangement, a third-party developer operates a PV system and hosts the customer site on his property. A great benefit is that the developer or partner may be eligible for both tax incentives as well as accelerated depreciation. And, unlike the FiT, there is minimal risk to the government.
If policy isn’t there
Sheldon Kimber, Chief Operating Officer of Recurrent Energy, took a different tact and asked, “What if policy isn’t there?” He said that, “In North America we’ve talked about how policy is going to deliver this big growth, but I’m not sure policy will deliver this big growth.” He suggested that anytime you see policy projections you have to ask at what price?
He also suggested that it’s time to stop talking about getting to scale. “It seems to me we have and yet we’re all pretty scared about it.” He said that he sees the solar industry as a pretty big success story. The problem is that the cost declines happened faster than anyone thought and the industry was left with poorly prepared suppliers.
He suggested that in looking at the nature of oversupply that we understand that it’s the quality of new capacity matters most. “We’re a commodity industry and we should begin to behave as such. Overbuilds happen. “
Kimber said that the industry now has a choice to make: it can move forward and other is a return to “the bad old days”. He said that we shouldn’t rely on “going door to door” for business, but that if we want to move forward we need to be bold and endure some pain. Manufacturers as well as developers are “absolutely at the bone to crack open new markets,” he said, and that what the industry needs to do is to establish ourselves in that utility wholesale market, and to understand that we are in a higher volume but potentially lower market business. Finally, he suggested that instead of saying that prices are artificially low (something we’ve heard a lot of this week at Intersolar), but that they are where they need to be. And what is really needed is to bring costs in line.
Written by Anne Fischer, Managing Editor, Solar Novus Today