The German solar industry went into defense mode yesterday, as Norbert Röttgen and Philipp Rösler unveiled their new feed-in tariff (FIT) proposals. Demonstrations were held across the country as people protested against the draft scheme, which includes a cap on system sizes entitled to receive a tariff and a clause where the ministry is seeking to make tariff changes, independent of the parliament.
According to Henning Wicht of IHS iSuppli, it is the engineering, procurement and construction (EPC) contractors who will be most affected by the proposed changes, as they will now have to find partners to buy the electricity. As he explained, they will have to adapt their business models, which until now have primarily consisted of installing a system and selling the power to the grid, to include selling the 10 to 15 percent of energy which is not receiving a tariff, on. "This is then a challenge to the EPCs, because they have invested in the pipeline [and] in developing the project," says Wicht. "This is about 50 percent of last years market, and for these systems, the business case doesnt work anymore."
He adds, "If they sell the electricity on the stock exchange for only 0.05 or 0.08 [per Watt] then its very hard to make a reasonable return. If they can sell the electricity to a manufacturing park, or a commercial park then both parties can benefit. The commercial park can benefit from a power purchase agreement, maybe in the range of 0.10 or 0.11."
Return on investment
He goes on to say that based on the new tariffs, the return on investment (ROI) for larger-scale projects has been jeopardized. He explains, "For larger systems, if we assume a ROI rate of 10 percent on the equity capital where we assume 20 percent of the total investment is equity then we see [system] prices dropping down to 1,400, 1,250 and even 1,000 for ground installations per kilowatt (kW) installed." Costs are currently said to be between 1,600 to 1,800.
He does believe, however, that the business case for residential projects is still feasible. "We calculated system prices of 1,850 per kW for a rooftop system, which has a self-consumption of about one third and these prices are feasible."
A ray of hope
While politicians from Germanys CDU party have said that the cuts are not enough "I am pleased that the federal government has finally submitted the proposals The idea is to limit the current unchecked expansion and the associated massive cost burdens for citizens and businesses. The end of the road hasnt been reached," comments Joachim Pfeiffer Wicht believes there is still time for changes to be implemented.
"It is a draft and this has to pass through the parliament, and this is possible, but it also has to pass the Upper House, and in the Upper House, the party of the ministries doesnt have the majority, so it still can be changed." He says that there is a "20 percent chance" changes will be made, in order to improve the FIT plan. Specifically, he believes that the tariff levels and the clause where the ministries are asking to make tariff changes independently, will be altered.
As aforementioned, the German industry was out in force yesterday to protest against the changes. Placards bearing such slogans as "Feed in instead of fob off" (Einspeisen statt Abspeisen) and "Future investments pay off, not political mistakes" (Zukunftsinvestitionen zahlen sich aus, politische Fehlentscheidungen nicht) were waved as demonstrations took place across the country.
Around 200 First Solar employees, for example, took to the streets in Frankfurt (Oder), while in Wörrstadt nearly 1,000 juwi employees gathered. Demonstrations also took place in Nürnberg, Erfurt, Niestetal, Gelsenkirchen, Kassel, Freiberg, Wismar, Kirchheim und Bad Staffelstein with such companies as SolarWorld, SMA, IBC Solar, Sunways, AS Solar, Frankensolar, Centrosolar, Abakus Solar, Bosch Solar, Masdar PV, Parabel Solar, Asola and Solarpraxis taking part.
Overall, the reaction to the draft scheme has been negative, even within political circles. The SPD and Greens, for instance, oppose the plans, saying that they are an advertisement for the phase out of solar subsidies. Furthermore, SPD energy politician, Ulrich Kelber scathingly stated, "The governments plans to attack solar bears Röslers ideological handwriting."
Meanwhile, Michael Preißel, managing director of Mp-Tec says the changes come at a time when German companies are under extreme pressure from their Asian counterparts. "The timing couldnt be worse. From a business perspective, it is virtually impossible to respond to such a serious change in law, which already will take effect in two weeks."
Sunergys Gunther Strömer adds that without a home market, photovoltaic module production in Germany will become virtually impossible. "German wholesalers, system integrators and craftsmen would be removed from the business at the same time. This will result in a large number of bankruptcies and, thus, a broad loss of manpower," he stated.
First Solar goes on to say, "Large, ground-mounted PV systems already receive the least support and its nonsense to cut support for these systems more than for small systems, which are disproportionately expensive and therefore a higher burden on German electricity rate-payers."
S.A.G. Solarstrom is particularly vehement in its criticism, stating, "In 2011, the solar industry demonstrated a high level of innovative capability and cost degression. Grid parity at household electricity prices was achieved in 2012, and it is anticipated that grid parity at the industrial electricity price of around 15 euro cents will be reached in 2014. However, with the planned cutbacks, the Federal German government is completely choking the German market, which is viewed as a highly regarded global role model for renewable power generation. It is thus jeopardizing the agreed upon energy turnaround and jobs in Germany. It is not comprehensible how the advantages of a localized, grid-stabilizing technology can be so rashly ignored and instead, central models from major energy providers are favorized."
Karl Kuhlmann S.A.G CEO adds, "The share of costs of photovoltaics in the Renewable Energy Act (EEG) levy of consumers continues to decline, but is used again and again by the energy corporations as a welcome justification for some quite significant increases in electricity prices. This is complete nonsense. The Renewable Energy Act levy has increased from 3.53 euro cents in 2011, to 3.59 euro cents in 2012, yet the suppliers in Germany increased the electricity prices by 3.4 percent on average at the start of 2012, many even higher. The high portion of renewable energy even had a considerable cost-cutting impact on the electricity exchanges. Photovoltaics is being made a scapegoat by the energy corporations in order to expand their own profit margin without any risks."
He continues, "The protests are absolutely nothing to do with continuing to subsidize photovoltaics on a permanent basis. The industry is already in the middle of a transitional phase towards a competitive market. It is correct to arrange subsidies on a declining basis. However, this must be carried out in a controlled manner for the companies."
On a similar thread, new business start-up, DZ-4 comments, "We are concerned about what the dramatic cuts and future design of the EEG mean for all the good players in the industry The past examples in other European markets have shown, what unexpected and drastic support scheme changes have led to: banks and investors stay away, loss of jobs, loss of tax income from companies, etc. We were hoping for a more a more reasonable approach by policy makers to have a smoother transition from the EEG supported market to a non-supported market Todays situation is severe but we are still convinced: the future of solar PV is still bright."
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: firstname.lastname@example.org.