Unpredictable cuts to Europe's feed-in tariff schemes for solar energy threaten the recession-hit renewable sector with disaster, the head of the solar industry’s business association has told EurActiv.
An economic slowdown worsened by strong global competition – particularly from China – has increased reluctance among banks to lend to solar energy firms.
That in turn could spell calamity if investor uncertainty over the future pricing of solar electricity was factored in, said Reinhold Buttgereit, secretary-general of the European Photovoltaic Industry Association.
“We need a stable support scheme, not one you can only trust for 4-8 weeks,” he said, adding that a low but stable tariff would settle frayed investor nerves.
“In Germany over the last few weeks we’ve seen discussion about immediately stopping support schemes or reducing them by almost 50%,” he said. “This would be a real disaster for the industry.”
Last year saw a record-breaking expansion of solar power centred on Germany and Italy. But as equipment prices fell, swingeing cuts to feed-in tariffs – de-facto government subsidies – were announced across the continent.
In Berlin, tariff reductions of up to 30% were brought forward to 1 April. A few days later, the German company Q-Cells became the fourth solar power firm to file for bankruptcy in as many months.
Buttgereit said that he expected the current recession to last for another year or more.
Solar thermal energy firms which use the sun’s power to generate heat are facing a “special form of the general crisis” that is afflicting the photovoltaic (PV) sector, said Xavier Noyon, secretary-general of the European Solar Thermal Industry Federation.
“We rely very much on the dynamics of the building construction and renovation sector, which has collapsed in countries like Spain that have solar obligation for new builds,” he told EurActiv.
“It has affected us dramatically.”
If an obligation on public authorities to renovate 3% of Europe’s buildings were removed from the current draft of the EU’s Energy Efficiency Directive, it would be “a real drawback,” Noyon added.
One potential growth area for solar thermal may be in China where Noyon said “there is more solar thermal capacity installed than PV worldwide”.
Beijing’s solar conquest
But how to deal with Beijing’s rapid conquest of the global solar energy market is an issue that divides Europe’s renewables industry leaders, some of whom have pushed for strong “anti-dumping” measures against allegedly over-subsidised PV panels.
Much of Europe’s excess capacity in solar panels is believed to have been caused by the overspill of a renewables boom that China says is needed for it to meet its climate obligations.
Following a US decision to back import tariffs against solar panels last month, momentum for an EU trade complaint is reported to be building. Buttgereit took a balanced position.
“To be frank, without global competition and cheap Chinese PV modules, we wouldn’t be as close to grid parity as we are today,” he said, referring to the tipping point where renewables become competitive with fossil fuels.
The real problem was “the lack of a European industrial policy”, he said, as China was poised to become the world’s most important renewable energy market within two years.
However, if Europe’s debate became focused on German taxpayers financing jobs in China, “this discussion will also be dangerous for China itself,” he added, “because it will risk the public acceptance of PV in Europe.”
The International Energy Agency has predicted that solar could provide “a third of the global final energy demand after 2060”.
But despite its huge promise, solar currently provides less than 1% of energy sold globally, mainly due to its intermittent nature and low intensity. The main reason for this has been difficulties exploiting the resource on a large scale and at a competitive price.
Solar electricity will become attractive when it falls below so-called "grid parity," the point at which renewable energy becomes cost-competitive with conventional sources like fossil fuels. Europe is nearing this point.
Favourable regulatory regimes and rapid technological evolution in the industry helped the sector to get onto its feet quickly. But many in the industry now fear that the sudden removal of tariffs, often retroactively as seen in Spain, is damaging future growth prospects, particularly in Europe.
- 2020: EU deadline for member states to provide 20% of their energy from renewable sources.
- European CommissionSolar Electricity - Photovoltaics & Concentrated Solar Power