European PV demand to stagnate; Italian backlash begins

Speaking at the OTTI PV Symposium, held in Bad Staffelstein, Götz Fischbeck, senior equity analyst for PV stocks at BHF Bank AG, a private institution in Germany, stated that the legislative amendments in Germany, France, the Czech Republic and Italy will mean companies across the supply chain are likely to face "significant challenges".

Italy backlash

Having come under scrutiny last week, it is said that Italy in particular will impact the market. Commenting on the government’s decision to introduce a new decree on June 1, Fischbeck stated: "All cell and module manufacturers, as well as wholesalers and project developers will immediately be negatively impacted by this political decision.

"Yet, as demand in Europe for PV components is bound to slow down significantly on the back of these decisions, we believe that also the order intake of the PV equipment suppliers will see a strong decline from the second quarter of 2011 onwards."

He goes on to say that it is expected that all PV projects either under construction or in development will be "stopped immediately", while there will be no financing available for new projects before April 30, by which time the government must have worked out the new decree.

Furthermore, Fischbeck believes the decision will end the "frenzy" in the country’s PV market, which has resulted in the strong pricing environment for PV component suppliers. "This special situation is now over," he says, "so that prices will rapidly converge to levels making installations financially attractive again in markets such as Germany and France, which have just recently lowered their incentive rates by 13 percent and 20 percent respectively."

Astonished

GIFI, the Italian PV association has also hit back, stating that its companies are "astonished" by the government’s announcement. "As it has been approved by the Council of Ministers," declared GIFI president Valerio Natalizia, "the Decree on Renewable causes negative effects to the sector: 10,000 direct employees are made redundant, the halt of something like €40 billion of investments, the halt of hiring and the loss of qualified job places especially in the R&D."

He continued: "Amongst further negative aspects related to the Decree, I would like to highlight that already orders worth €8 billion are now blocked as the related contract are. Companies, however, are obliged to pay the supplier, but without any financial support from banks, which in turn have promptly revoked any financing agreement. Finally, national and international investors are now in standby and they are waiting for the adoption of the 4th Conto Energia."

GIFI, along with APER, Assosolare and Asso Energie Future, which represent almost all of Italy’s PV sector, have launched an appeal asking the President of the Republic Giorgio Napolitano not to sign the decree. They say it will "plunge the renewable sector into uncertainty and pave the way for a crisis that will not stop at the companies involved in solar and wind energy".

Pietro Pacchione, chief executive of the APER association, which represents 480 renewable firms stated: "The framework of the legislative decree adopted by the Cabinet is clearly unconstitutional in that it violates both key principles of the Italian legal system, namely the certainty of law and the protection of reasonable expectation, and the international provisions of the European Convention on Human Rights."

Annual cap

While there may be a collective sigh of relief over the fact Italy’s Government will not be placing an eight gigawatt (GW) cap on its PV market, there are fears the new decree will not provide much respite.

Fischbeck said the reason why the industry cannot rest on its laurels includes the fact that the new regulations are expected to include an annual market cap of between one and two GWp, while all ground-mounted systems installed on farmland will be limited to one megawatt (MW) in size.

According to Andreas Lutz of New Energy Projects, the second point is still up for debate by the government, but if it is applied, it could mean ground-mounted installations up to one MW located on agricultural areas will only receive a feed-in tariff when the system takes up less than ten percent of the total agricultural area. An exception will reportedly exist, however, for areas that have not been farmed for more than five years. It is also expected that installations which received approval before June 1, 2011, or for those installations which obtained approval before 31.12.10 and are grid connected by 31.05.2012 at the latest, will be exempt.

Furthermore, both parties state that a mechanism will be developed, in order to progressively lower tariffs in line with production costs and price developments in other European PV markets. However, as Fischbeck states: "What could turn out to be a deadly blow to all PV systems currently under construction is the provision that [they] have to be grid connected by May 31, 2011 in order to benefit from the current tariff regime."

GIFI is calling for the changes to be delayed until December 31, 2011, and for a working group to be set up with the appropriate Ministries.