In the UK, the coalition government was initially supportive of the feed-in tariff regime, but the large take-up of the solar element has caused a rethink. Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs) were queuing up to raise money for solar, and these entities would have invested in schemes that might be deemed too small for project finance.
A fast-track review of solar has been launched by the coalition government, with the changes to be implemented immediately. This is likely to mean that returns from solar projects of more than 1MW will be cut. Get the balance wrong and it could severely harm the industry.
One indication of government thinking is the UK Chancellor’s recent decision to exclude feed-in tariff projects from EIS and VCT investment - and thus from the tax-based incentives these schemes provide. Many experts in the sector feel that feed-in tariff projects may no longer be commercial without additional incentives.
Italy has also created uncertainty in its solar sector, which has hit AIM-quoted renewable energy company Acta. Even though Acta has a range of cleantech products, the PV solar sector has been the source of its early revenues. The company has not been able to book the sale of solar consents in its 2010 figures, which has wiped €3.4 million off the company’s expected 2010 revenues with little in the way of costs related to the sales. Since the recognised 2010 revenues were €7.9 million and the loss was €3.9 million, this reduction in revenues was significant. The good news is that the cash for the sales has been received.
The rate of expansion of the Italian PV solar sector has been rapid and the Italian government felt that a deceleration was needed. The installed base at the beginning of 2010 was 1.1GW: by the end of the year the installed base, plus applications for grid connections, totalled 7.2GW. The government’s target is 8GW by 2020.
Unfortunately, when the Italian government announced in March that the current tariff will end on 31 May and that new regulations would be announced later, banks immediately stopped providing finance to new start-up projects and activity ground to a halt. Although the plan is to reduce tariffs and try to cap the solar sector in order to stop any oversupply, the application of new regulations remains unclear and it is this lack of clarity which is the problem.
With an estimated 130,000 jobs being created by the solar industry in Italy, the sector is obviously extremely important for that country’s economy, and the government has promised to issue new guidelines shortly. It is Acta’s belief that the importance of the sector will ensure the new tariffs and regulations will not be significantly less attractive than previously.
Acta expects the market to stabilise during the second quarter of 2011, at which time it should be able to recognise the revenues from the sales of consents. However, there will still be a delay in installation revenues this year.
It is not only European companies that are suffering. China-based solar cells and modules supplier Jetion Solar Holdings, which is a big exporter to Europe, has also been hit. AIM-quoted Jetion has already said that its 2010 figures will substantially exceed expectations, but the profit will be slightly lower than in 2009 with a substantial decline in margins. Selling prices are under pressure as European countries reduce and review subsidy levels. Jetion expects trading conditions to deteriorate significantly, with margins and profit predicted to fall this year.
Jetion has decided to drop its AIM quotation since the company’s low share price makes it difficult to raise money in order to grow capacity. The main shareholder will make an offer of 83p a share in cash within 30 days of cancellation. AIM has already lost solar wafer manufacturer ReneSola, which decided to concentrate on its NYSE listing, so this latest departure is a disappointment.
Obviously European governments’ ambivalence about solar tariffs and regulations won’t help the solar sector to grow on AIM.
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