By Jon Mainwaring
Europe’s solar stocks had a poor month in September with several major solar companies seeing share price falls. Germany’s Q-Cells, once a leading European solar share, lost more than 20% of its value. Even more defensive German solar stocks such as Centrotherm Photovoltaics, a maker of manufacturing equipment for solar device producers, and SMA Solar Technologies, which makes power inverters (a key component in solar energy systems), also saw significant falls.
Outside of Germany, London-listed PV Crystalox lost more than 10% of its value, while Spain’s Solaria Energia y Medio Ambiente was down marginally.
Clearly concerns about increasing competition, both within Europe and from external competitors such as Chinese solar device manufacturers, have been spooking markets, and for good reason. Strategic consulting firm Roland Berger predicts that an accelerating price war in the photovoltaic (PV) industry will result in only half of Germany’s 50 major solar energy companies being around in five years’ time.
Meanwhile, despite being upbeat about global solar PV demand during the rest of 2010 following a strong first half, San Francisco-based research firm Solarbuzz predicts that the first quarter of 2011 will prove challenging. It believes that leading European markets, including Germany, will face large reductions in tariffs at the beginning of the year, so that, even with careful phasing of projects and price reductions, market demand is projected to be less than 50% of module production.
However, an unlikely saviour for German solar companies in the short term could prove to be the UK – which has not traditionally been seen as a major market for solar power. But according to Solarbuzz, the introduction of a feed-in tariff (FiT) programme to the UK in April this year has catapulted the country into the mainstream of global PV market activity.
According to the results of a recent report by Solarbuzz, UK PV Market 2010, the UK’s emergence “could not be better timed, when taking into account the uncertain prospects for the dominant German market next year”.
The research firm says that, with UK FiTs as high as 41.3p per kilowatt-hour paid over 25 years, the foundations are in place for “rampant PV market growth in 2011”. Already in 2010, the country has seen rapid growth in residential installations, with the south-east and south-west regions accounting for 45% of the English part of the market in megawatt terms. Additionally, an emerging pipeline of large scale commercial, agricultural and industrial projects are currently going through the application and permitting process, ready to make an impact on 2011 demand.
According to Solarbuzz, several well known national utility and retail brands have entered the UK market, joining a fast-growing downstream installer network that exceeds 500 companies. It believes that the leading wholesalers and installers, constituting a group of 18 firms, are well positioned to serve the burgeoning market in the country.
“The early entrance of big name brands is helping to lend public confidence to what is generally a poorly-understood renewable energy source in the UK,” says Alan Turner, vice president of Solarbuzz Europe. “These companies join a multitude of European and international companies scrambling to establish early positions in this fast growing embryonic market.”
Whether the UK solar market will prove big enough to save some of the German solar companies that Roland Berger expects to disappear during the next five years remains to be seen. But one thing is for sure: cleantech investors will have to be much more discerning about which European solar firms they back if they are to profit from the sector during the coming decade.
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