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German Solar Subsidy Cuts: Boon or Bust to Chinese Manufacturers?

Germany's Environment Minister Norbert Roettgen announced that the German government has proposed a 15% cut in solar feed-in tariffs, or subsidies given to solar power providers, effective in April for roof installations and July for open field sites, Dow Jones and others reported on January 20. The cut is smaller than the 16-17% decrease rumored last week, and would come in addition to a 9-11% decline, effective in January, that was originally set out in Germany's Renewable Energy Act.

If enacted, the new policy is likely to have a material impact on the Chinese solar industry, including Yingli Green Energy (NYSE:YGE), Suntech Power Holdings (NYSE:STP) and Trina Solar (NYSE:TSL), which have some of the most significant exposure among first-tier Chinese solar product makers to the German market. Germany also represents about half of Canadian Solar's (Nasdaq:CSIQ) 2010 shipments, expected to come in between 600-700MW, according to a Chinese-language interview with the company chairman on January 20.

But will the impact be as negative as it is at first glance? The goal of the policy is to reduce the long-term cost of solar power, and it offers some opportunities both in the immediate future and the longer term. Companies that have available capacity may benefit in Q1 as customers rush installations before FIT reductions take effect, and the policy may allow some Chinese manufacturers, whose vertically integrated business models and favorable cost structures allow them to withstand greater pricing pressure from downstream customers, to capture market share from their higher cost Western counterparts.

For a more detailed breakdown of the impact of FITs on a first-tier cost leader Yingli Green Energy and other Chinese manufacturers, Pacific Epoch clients can refer to our January 19 Yingli Q4 09 and 2010 Preview and other forthcoming solar industry reports.


Posted by Ana Swanson on 2010.01.22 10:14 in GuestBlog | Link | Views (713) | Comments (0)
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