Solar

Europe’s photovoltaics trends show low costs, but low incentives and uncertainty

The European PV market will see a 22% Q/Q jump at the end of 2011, a temporary boost for downstream solar companies. While the Q4 leap is significant, Y/Y numbers will decline 25%, struggling under solar incentive cuts, weak project financing, and a continuing module price collapse, says Solarbuzz.

November 14, 2011 — The European photovoltaic market will see a 22% quarter-to-quarter jump at the end of 2011, a temporary boost for downstream solar companies. While the Q4 leap is significant, year-over-year numbers will decline 25%, struggling under solar incentive cuts, weak project financing, and a continuing module price collapse, says Solarbuzz.

Downstream companies need to offload inventories or face significant write-downs at the end of 2011. The downstream challenge in 2012 will be effective photovoltaics company management of a new pricing environment, against a backdrop of declining incentives and still-to-be-realized grid parity economics.

Key points:

  • Italy will overtake Germany as the largest European (and global) photovoltaics market in 2011.
  • Non-residential building-mounted systems took 55% market share in 2011.
  • Ground-mount installations fell 27% in 2011, and totalled about 1/3 of the European market in H2 2011, following a seasonal increase toward the end of the year.
  • Grid parity aspirations are leading to grid-management actions by developers.

In Germany, the prospect of a 15% tariff cut due at the start of 2012 has finally given the market a large enough boost to secure the largest share of the Q4 2011 European market. The European markets are constrained, to varying extents, by tightening of PV incentive policies, bank-lending restrictions, and utility concerns over electricity grid stability as PV deployment spreads. Additionally, policy changes made by various European governments, most recently in the UK, have had some significant and largely unintended consequences.

There are balancing forces against these incentive cuts, namely, falling prices. “PV investment returns [are] still sufficiently attractive in almost all markets. However, the more important consequence of frequently changing incentive policies across Europe has been greater uncertainty and therefore higher risk for project financiers,” noted Alan Turner, VP of Solarbuzz Europe.

Figure 1. Q3 2011 European PV market segmentation (Total quarterly market 4.24GW). Source: Solarbuzz European PV Markets Quarterly.

In Q1 2012, Europe’s solar market will drop 72% Q/Q, with the ground-mount segment the hardest hit (down 81%) and residential least affected (down 41%). At the country level, Greece, Spain, and the UK provide the highest incremental market share growth opportunities. The German market is forecast to fall 11% Y/Y in 2012. Installed system prices are forecast to decline by an average of 17% in 2012.

Smaller markets offering the most stable volumes or growth potential over next 1-5 years are Austria, Belgium, Bulgaria, Greece, Romania, Spain, Ukraine, and the UK. Although the latter is facing severe proposed tariff cuts, its residential segment will retain attractive returns with prices continuing to fall. In the major markets, residential is the strongest segment in Belgium and the UK, while ground mount is strongest in Greece and Spain. The other major markets have a more balanced segment mix. France and Italy present the largest forecast quarterly variations in segment mix through 2012.

Developers need to focus on grid management challenges, Solarbuzz notes, as grid parity comes into the solar installation picture. This is particularly true of Southern Europe, as companies start to plan projects financed on the basis of power purchase agreements. Meanwhile, downstream companies in France and Italy are receding from the high risk project business to focus on the small rooftop sector or distribution.

The new Solarbuzz European PV Markets Quarterly report addresses the challenges and opportunities facing downstream companies in the face of slowing growth and falling prices to help them focus their marketing activities on the specific segments in certain countries that remain attractive in the near term.

Solarbuzz, an NPD Group company, is a globally recognized market research business focused on solar energy and photovoltaic industries. For more information, visit www.solarbuzz.com.

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