Kate Mackenzie The backlash against solar subsidies?

It’s been a somewhat disappointing year for the solar industry, at least in Europe, with cuts to subsidies in Germany sparking fears of a Spain-style slump in European demand.

The announcement in late January that Germany would cut its subsidies hit some solar manufacturers hard – and they still haven’t recovered (as the Solarworld chart on the right demonstrates).

Is the news for the solar PV industry about to get better in Europe?

Perhaps not.

First the good news: on the Germany front, Reuters reports that a small reprieve looks likely in the form of a three-month delay to the 15 per cent cut in feed-in tariffs for power from open-field solar sites. But these only account for a fifth of installations, while 16 per cent cuts for the much bigger rooftop installations will go ahead on July 1 as planned.

Germany last year installed about 3,000MW of solar capacity; twice what the government had envisaged. This year’s target is higher at 3,500MW — but the government is introducing a trigger to reduce incentives further if the target is exceeded.

Matthew Yates and Steve Milunovich at Bank of America-Merrill Lynch don’t think that will be enough, however. They predict a backlash against subsidies:

With power prices around €50/MWh in Europe currently, solar is costing consumers around €60bn more than they otherwise would have paid for electricity. We calculate a German household is now paying €130 in annual solar subsidies and rising rapidly. We fear an increasing backlash against overly generous subsidies and reiterate Underperforms on SolarWorld, REC and Q-cells.

They also believe an announcement on subsidy cuts in Italy will come soon, and France may bring forward its planned cuts from 2012. The Czech Republic, which has fears its grid can’t handle the country’s growing renewables capacity, is also thought likely by BA ML to cut subsidies soon.

The analysts however believe these cuts are probably warranted – after all, they argue, solar PV is probably the most expensive form of renewable energy right now:

Meanwhile the UK plans to introduce new microgeneration subsidies of up to 41.3p per kwh for ‘micro-generation’ solar panels. Jeremy Leggett of Solar Century (a sometime FT ES contributor) told the FT last month this could create 100,000 new jobs in the UK’s solar industry by 2020. But Leggett and environmental uber-commentator George Monbiot have got into a big argument over on the Guardian about whether solar PV subsidies are a good idea.

Further reading:

Cabinet agrees new solar feed-in tariffs; key elements (German Energy Blog)