Czech Solar Developers Accused

The Czech Republic has witnessed the biggest solar boom in the world relative to its economy. The country saw a huge increase in solar installations in 2010 and 2011 as the government gave a generous electricity feed in tariff for solar power generation. This led to almost 2-3 GW of solar installations being installed in a very short period of time as investors rushed to make windfall IRRs from this scheme. In one year, the strain on the electricity consumers in the country became unbearable as the costs of the green energy were passed on the rate payers.

The government and parliament then tried to mitigate the situation by passing a retroactive tax on solar installations and clamping down on new solar panel installations. The solar developers could not do much other than make a lot of noise. The unsustainable FITs had to be reduced in some manner to bring some kind of equilibrium. Other European countries like Spain and Romania too have brought in measures to delay payments of subsidies as these countries come under huge fiscal strain.

Now the Czech solar developers have been rocked by allegations of improperly reporting the amount of electricity generation. Note Italy is notorious for such frauds and even the infamous Sicilian Mafia has a number of solar farms in the country. These farms were registered for higher FITs despite being built later. These frauds are ultimately being paid by the poor consumers. I don’t know whether these allegations are right or wrong but the blame should go to authorities for devising a hare brained scheme and then not correcting it on time when the solar boom was on.

SBI opposes Gujarat’s cut in Solar Feed-in-Tariffs

The State Bank of India (SBI) which is India’s largest bank is worried about the effects of a retroactive cut in solar feed in tariffs by Gujarat. The bank has lent to almost 10% of the total solar capacity built in the state under a solar subsidy policy. The state now wants to cut the tariff by 30%, as it feels that the developers are making too much money. The state wants to decrease the burden of the high tariffs of nearly 1000 MW of plants built in the last 2-3 years. The solar electricity generated gets a normalized tariff of roughly 20c/KwH compared to the 8c/KwH for electricity from other sources. The states stable political regime and decent returns has made Gujarat the rock star of India’s solar energy industry. The state has more than 50% of the entire Indian solar energy capacity. The state’s target of 500 MW by 2014-15 has been far exceeded.

Lenders have a big issue as debt forms almost 70% of the capital of the solar plant and any problems in making profits will lead to big NPAs. Solar energy being a new industry has got problems in raising debt and the new cuts will make the bankers super cautious. This will raise the lending rates, making the solar energy cost much higher. Solar subsidies have always been a big problem area for countries around the world. Spain, Czech, Italy etc. have seen huge solar bubble which ended in spectacular busts. It remains to be seen how the Gujarat Energy regulator treats the petition by GUVNL to reduce the solar tariffs. If it accepts the request then it will set the cat amongst the pigeons.

Read on GWI Gujarat trailblazes solar energy growth in India with over 65% capacity. 

Why does the Indian state of Gujarat want to reduce Solar Feed-in-tariffs

The government is now feeling the blues as it installed much more capacity than it wanted and is paying a high price for the solar electricity. The state utility GUVNL now wants the tariff to be reduced by 30% as it feels that the solar developers are making huge profits at the expense of the customers. Note the solar panel prices crashed in the last few years, which made the cost estimates of the solar power plants come down sharply. The solar developers paid much less for the plants, that was estimated leading to big profits. The government’s argument is that since the thermal power developers are being paid higher tariffs as they are making losses, the solar developers should be paid lower tariffs because they are making huge profits.

India’s western state of Gujarat has been the poster boy of solar energy success in India installing almost 1 GW of solar capacity in a couple of years. The state gave a fixed tariff and a hassle free experience to solar energy developers that attracted more than $2 billion in solar investments. The top Indian industrial groups such as Welspun, Tatas and Adanis have built large solar power farms in the state to take advantage of the high feed in tariffs. The state’s solar energy success overshadowed the tardy progress of the much bigger federal solar subsidy scheme JNNSM and made the Gujarat government crow about its success. Read on GWI Gujarat trailblazes solar energy growth in India

Gujarat state feels the blues

The government is now feeling the blues as it installed much more capacity than it wanted and is paying a high price for the solar electricity. The state utility GUVNL now wants the tariff to be reduced by 30% as it feels that the solar developers are making huge profits at the expense of the customers. Note the solar panel prices crashed in the last few years, which made the cost estimates of the solar power plants come down sharply. The solar developers paid much less for the plants, that was estimated leading to big profits. The government’s argument is that since the thermal power developers are being paid higher tariffs as they are making losses, the solar developers should be paid lower tariffs because they are making huge profits.

There is precedence

This is not the first time that bureaucrats and policymakers have got the solar subsidy wrong. Huge profits have created massive booms across the world (Japan is currently experiencing one). While some countries such as Germany and Italy are absorbing the huge profits being made by solar energy developers, some countries such as Spain and Czech have retroactively reduced the tariffs through taxes and cesses. Like Gujarat, I expect the investors to make a huge hue and cry and go to the courts. But this won’t fly as public opinion and courts would like to pull back the profits

Solar developers can do little

Solar developers can do little if the electricity regulator pulls back the tariff. Indian courts will take a long time to decide and governments in India have too much power vis-à-vis the developers. Only crony capitalism and lobbying can help these guys now.

Also read List of Current and Future Solar Photovoltaic Energy and Solar Thermal Plants/Projects in India.



Solar News

1) Is Global Solar Trade Peace in the works

2) After Czech and Spain, Greece introduces retroactive taxes on solar plants

3) Sunpower to pair solar energy installations with storage options

4) World’s biggest solar wafer producers reports 30% drop in wafer and 40% drop in poly prices

5) Welspun Energy becomes India’s top solar installer with 300 MW solar capacity planned this year

6) First Solar is not worried about India’s anti dumping case as it knows the Indian government is slow and lethargic ( and corrupt as well)

7) Tamil Nadu makes solar energy mandatory without any guidelines in place

8) Marrying of oil and solar thermal energy in Oman

9) Yingli Green Energy to have 4-4.5% Gross Margins in Q113 inline with other Chinese companies

Solar Growth

Solar demand is expected to surge by 20% in 2013, after a flat 2012 as lower solar panel prices boosts solar adoption in under penetrated Solar Panelsparts of the world. Asia will overtake Europe as the biggest market for solar modules with countries like China and Japan become the biggest solar power countries. Europe will see a continued decline with major markets like Germany and Italy saturated with solar power. Spain and Czech have already sharply reduced/ stopped subsidies and except for UK there is no major growth in solar demand.

Read my earlier article 2012 Actual Solar Demand Growth does not turn out to be too great, 2013 should be much better.

Middle East and Africa will see the fastest growth of 250% as countries like South Africa and Saudi Arabia start building huge solar farms. Latin America led by countries like Chile and Brazil are also boosting solar demand. Brazil with its very high electricity rates does not require subsidies while Chile also benefits by installing large solar farms to power its mine in remote deserts.

IHS thinks that Chinese demand will not be 10 GW, as is being predicted by most analysts but will be more conservative at 6 GW. They also think that countries like Turkey and Poland will surprise with solar growth. This should boost the solar panel makers who have been continued to be plagued by plunging prices and massive overcapacity. The turnaround in solar stocks will only come if the Chinese government allows the bankrupt solar companies like Suntech to fail. If they keep running the zombie companies then the whole industry will see another year or two of losses and pain.

Read about Chinese Solar Panel Reviews.

PV Tech

Market research firm IHS has released a new forecast for the photovoltaics industry that is more bullish about global installations in 2013 than many others.Confirming its previous projection, IHS said that global PV installations in 2012 reached 31.4GW, a 14% increase over the previous year. In contrast, NPD Solarbuzz had recently confirmed it put global installations at 29GW for 2012.

However, IHS noted that grid-connected PV capacity was actually lower than the total installation figure which it said had reached 30GW in 2012. IHS said this was due to lengthy delays in connecting major PV projects in countries such as China and India.

 “While hopes in the past could have been pinned on Germany or Italy — which accounted for nearly two-thirds of European installations in 2012 — growth here looks impossible,” Sharma said. “Changes to Germany’s EEG and Italy’s Conto Energia are already in place, and a contraction in these two big markets is predicted in 2013. Moreover, looming antidumping measures against Chinese manufacturers are taking their toll on Europe, resulting in price increases and additional registration paperwork that will further temper solar demand this year.”

In emerging markets, coming off from small installation levels, growth rates of 250%, 50% and 65% are forecast for Middle-East & Africa, Americas, and Asia respectively.

The Solar Energy Industry saw only a 5% year on year demand growth in 2012, despite falling solar panel prices. The main reasons were that Germany and Italy kept dropping their subsidy levels in order to stop the skyrocketing growth in solar panels. Some of the boom markets like Czech, Spain etc. have also been saturated and have pretty much become no- material to world growth. The European market in fact declined to 60% of the global demand compared to 68% last year.

Government have become more wise on how to give subsidies for solar energy and prevent a massive boom. Also solar energy in the new markets like US and Japan are not seeing the exponential growth like the European countries did. The bureaucratic costs of solar energy installation is much higher which is preventing the consumers from enjoying the full benefits of the ultra low solar panel prices.

2013 will be a better year for the solar industry as China sees a big spurt as the government finds the price of solar panels low enough to allow bigger subsidies. Other markets like India, Brazil and South Africa are also starting to rev up their solar engines. US and Japan will also see decent to high growth in 2013. With many of the solar manufacturers bankrupt 2013 will be the first year of the up cycle for the solar industry.

Read Solar Panels in India – Complete Guide.

Solar Power in India

Solar Energy in India is one of the most exciting growth industries in the world right now. Solar Energy in India is poised to take off in a exponential manner because of a unique confluence of favorable Supply and Demand factors. Here is a list of factors that will make Solar Power one of the fastest growing energy sectors in the world

  • India has very high isolation (solar radiation in layman language) which makes solar energy much cheaper to produce solar power in India  compared to  countries like Germany, Denmark etc.
  • India has a huge electricity demand supply gap – Large parts of India regularly face blackouts for lack of electricity supply leading to huge monetary losses.
  • Lack of power grid availability – Solar Energy is ideally suited for providing power to those areas which don’t have power lines connecting it. Large parts of India don’t have electricity grid connectivity and it is cheaper to power them through solar energy rather than extending power lines.
  • Increasing expensive and unreliable electricity supply – The rates of electricity prices are going up rapidly each year due to a combination of factors like higher costs of fossil fuels, increasing capital expenditure by utilities and privatization of power.
  • Solar Energy approaching Grid Parity – The costs of Solar Energy has been decreasing rapidly over the last 2 years and has reached retail price grid parity in countries like Italy, Hawaii.
  • Strong Support from the Government –  The Indian government through the Jawaharlal Nehru National Solar Mission has provided strong support to the growth of this industry. The government has set a  target of 20 GW by 2022.

You can also read about the Advantages of Solar Power


The expectation that PV installations would reach 32GW in 2012 has been dampened by a new report from NPD Solarbuzz.

According to the market research firm, PV demand in 2012 reached 29GW, up only 5% from 27.7 GW in 2011. Notably, the growth figure is the lowest and the first time in a decade that year-over-year market growth was below 10%..“During most of 2012, and also at the start of 2013, many in the PV industry were hoping that final PV demand figures for 2012 would exceed the 30GW level,” explained Michael Barker, Senior Analyst at NPD Solarbuzz..“Estimates during 2012 often exceeded 35GW as PV companies looked for positive signs that the supply/demand imbalance was being corrected and profit levels would be restored quickly. Ultimately, PV demand during 2012 fell well short of the 30GW mark.”