Dec 27, 2011 - While there is hardly any doubt that companies in the solar power sector are happy to leave behind the market shakeout of 2011, few are hoping for a bright future in the coming 2012.
by Mariyana Yaneva
The past 2011 has been a tumultuous year in world politics and economics, and it has been no less turbulent in the arena of renewable energy generation and solar power in particular.
During the last 12 months the sector has seen a slashing of prices, subsidies cuts, and a near trade war between US and China. Dips in prices and the continuing economic woes in Europe and the US have hurt investment and led to the spectacular unravelling of flagship ventures, such as the California-based Solyndra. These big uncertainties are bound to carry over into 2012, accompanied by the economic uncertainty and glimmers of hope from emerging markets.
Falling module prices
Whether due to increasing supply or below-cost pricing by some market players, the price for solar modules went down by over 30 percent during the year. By November, some Chinese-made crystalline silicon panels were trading for just over USD 1 (EUR 0.765) per watt peak capacity. There are expectations that this psychological boundary may be breached well before the end of the first quarter of 2012, with the trend continuing further to add another halving of prices, following the roughly 50 percent slash since 2009. While surely ringing bells and bolstering hopes that the tables in electricity generation are finally turning to PV’s advantage, there are also fears in the industry that lowering prices further could threaten manufacturing jobs – particularly in America.
That fear is bolstered by a first-of-its-kind trade dispute between the US and China over the production of PV modules, which erupted during the last quarter of 2011. Starting with a claim submitted to the International Trade Commission and US Department of Commerce on behalf of a Coalition of American Solar Manufacturers, led by the American division of German company SolarWorld, the row escalated to an intergovernmental dispute, prompting action by US senators and congressmen and the attention of the White House. A counterclaim and accusations of price dumping and unfair American subsidies was issued by the Chinese Photovoltaic Industry Association. Another US-based solar association, the Coalition for Affordable Solar Energy meanwhile has tried to calm the two sides, in order to prevent what it views as the damaging potential of levying a tariff on Chinese PV module imports in the US, claiming more jobs would be lost in the non-manufacturing solar sector in result of the tariffs. The year 2012 will show how the dispute will play out, and whether it has the potential to bring on a trade war, which may be brewing between America, Europe and Asia in other sectors as well.
Whatever the outcome, an imposition of tariffs may only add to a clamp-down of new stimuli and reduction of subsidies that the solar sector is already experiencing. While this tightening has largely been an anticipated function of the solar industry’s own success, in 2011 it was also expedited by governments responding to the economic crisis by withholding scarce taxpayer money and avoiding electricity price hikes associated with feed-in-tariffs (FIT) and grid investments.
Cost-cutting hits FITs
In the UK, the conservative government is in the process of implementation of price cuts, which may effectively halve the feed-in-tariffs for projects constructed after New Year. Elsewhere in the EU, where FITs are implemented, the tariff rates are steadily declining with annual drops implemented in Germany and Bulgaria in 2011, on the heels of steep reduction in member states Spain, Italy and the Czech Republic. Broader government-driven incentives for the solar industry have been drying up since 2010, as some American states such as Florida and Idaho cut renewables projects citing high costs, and in February of this year the Netherlands became the first EU country to actually scale back its 2020 renewable energy target, mostly affecting wind power generation.
The general economic perspective
This cooling of the investment climate coupled with a sluggish to reversed economic recovery has led to major casualties in the solar market. The biggest shock without doubt has been the demise of US thin-film solar cell producer Solyndra, which caused the loss of more than one thousand jobs and a big embarrassment for the Obama administration, which had facilitated a USD 535 million federal loan guarantee from the Energy Department. This spectacular fall from grace has been accompanied by blows to other giants in the industry, notably the recent bankruptcy of Solar Millenium and the on-going tumble in market value of First Solar. The light at the end of the tunnel is unlikely to come from the West, with China and South Korea showing the greatest promise through continued corporate growth and firm governmental support.
So what lies in store for 2012?
A continued downward pressure on prices will lead to the first solar module selling under USD 1 per watt peak before March. A calming of trade rows may put international cooperation back at the forefront of the industry’s effort to secure a solar future. More and bigger concentrated photovoltaic projects (CPV), such as the 30 MW Alamosa will come online. This will prompt renewed competition between PV and CPV vying for cost efficiency and investor attention. But the biggest game changer of all would still lie beyond the industry’s control – the ever precarious state of the global economy whose cycles of expansion and contraction and its unbroken addiction to fossil fuels remain the biggest challenge ahead.
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