Bulgarian Solar Industry in Spanish Déjà vu as Investors Sue Government Over

28 Sep, 2012 by Sneha Shah

The Bulgarian Government is set to face numerous lawsuits from investors in solar power plants as it imposes electricity grid fees on existing solar power plants to reduce their returns. This will reduce the returns for solar investors by 20-40% and bring down the electricity rates for Europe’s poorest citizens who saw rates go up by 12%. Note Bulgaria had given a very generous solar feed in tariff which has attracted solar developers and companies in droves setting up large solar power plants. The returns were enormous for these investors as solar panel prices have crashed leading to IRR of 30-40%. This has imposed a heavy monetary burden on the Bulgarian government and electricity companies as they are forced to pay for this boom. This story is similar to what was scripted in Czech and Spain a couple of years ago. The story goes like this:

a) Government starts a solar subsidy program by giving above market rates for solar electricity

b) Solar systems prices go down making the FIT very lucrative

c) Massive solar boom ensures with solar developers setting up huge capacities in short period of time (Czech saw 1 GW of solar installed making it the 4^th largest solar market)

d) Burden becomes huge in the government leading to increasing rates for customers

e) Government clamps down and imposes taxes and fees on existing solar power plants

f) Investors cry wolf and sue the government.

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Spanish Solar Changes faces Lawsuits

The Spanish Government faces multiple lawsuits over its Royal Decrees which cut the Feed in Tariff for Solar PV Installations Retroactively. These laws were passed in Dec 2010 as part of the comprehensive review of the Renewable Energy Subsidies by the Government. While Wind Energy and Solar Thermal Subsidies were changed earlier, the controversy over the Solar PV subsidies had forced the government to delay the change to the last minute. These changes were strongly opposed by the Solar PV Industry Association ASIF which has earlier called the measure as “industry killing”. These cuts over the next 3 years would be done through a “backdoor approach” in which the subsidies would be restricted for a only a few hours for the Solar PV plants.

Note this measure has generated a massive amount of heat with some pension fund investors threatening to abandon Spanish government debt. While lawsuit threats were also given, the Spanish Government (facing huge problem on the fiscal front as its bond yields increasing) change the FIT law adversely for Solar PV investors. This has led to huge problems for the investors and the banks financing these investors.

Czech pricks Solar Boom

Czech Republic has designed the worst Feed in Tariff Subsidy Scheme for Solar Energy in the World. The FIT which boosted the returns for green investors to about 40% or more per year has led to a massive boom in solar installations. This has made the Government sit up and decide to sharply cut the Green Subsidies being given to Solar Plants. While FIT will be cut by 50% next year for new solar installations, the Government also plans to rein in the super normal profits being enjoyed by investors in solar plants. The Government is planning a number of measures to increase the payback period of solar investment to 15 years as was planned earlier and which was reduced to 2-4 years now. The measures that are being planned are:

1) Tax on Solar Subsidies – The Czech Government which used to give a tax holiday to solar energy revenues will be withdrawn and a new tax rate will be introduced.

2) No more Free Carbon Credits – The administration will generate revenue through selling the carbon credits rather than giving it free to Renewable Energy Producers. This will remove another source of return for solar investors.

3) Rent for Power Plants on Agricultural Lands – The Government also plans to impose a Fee on Solar Power Plants that are built on Agricultural Lands.

Reuters

Dozens of Austrian, German, Japanese, Chinese, South Korean and U.S. companies have rushed to take advantage of sun and wind power potential in Bulgaria, which also offered lucrative incentives for green energy.

But growth in installations has outpaced forecasts, putting pressure on the ageing power grid and electricity prices in the EU’s poorest member state, which has been trying to cool down demand for green energy installations since last year.

The total installed capacity of photovoltaic parks in Bulgaria soared to more than 700 MW by the end of August, a huge gain from the 134 MW in operation at the end of 2011, industry officials said.

The surge of solar parks, however, has pushed consumer prices up 13 percent in 2012 as the government seeks to recoup the cost of the subsidies.

Bankrupt Greece Sees a Huge Increase in Solar Subsidy Expense in 2012 Driven by Blind Governance

14 Sep, 2012 by Sneha Shah

Europe,Solar Energy

Solar subsidies in general have always been a boom and a bust story with very few countries managing to get it right. In Europe, in particular the feed in tariffs given by the Government to promote solar have always resulted in massive booms. This has strained the Government exchequer forcing it to take drastic measure which leads to the fledging solar industry in that country going bust. Greece is following the same storyline as seen in countries like Spain and Czech. Greece has a very generous feed in tariff in excess of 30 eurocents/kwh. This gives a return in excess of 30% to solar investors. This has led to a massive increase with solar capacity in Greece almost doubling to 800 MW with almost half installed in 2012 alone. Greece is currently running at 1200 MW annualized capacity addition which is clearly unsustainable for a country as small as Greece.

Also Greece is known to have a massive government funding problem and probably cannot even afford to subsidize even 1 Mw of solar power let alone 391 MW installed in 2012. The high rates of electricity tariffs being paid by Greece is seen when compared to the German feed in tariff which are almost half at 20 eurocents/kwh.

PV-Tech

According to Hellenic Transmission System Operator SA (HTSO), Greece has installed an additional 75MW of PV in July which brings its total amount of installed PV capacity in the first six months of the year to 319MW. This was a slight drop compared to last month, when statistics showed that the country installed a total of 97MW in PV capacity.

This boom comes despite the country’s flagging economy. It has been partly fueled by the country’s FiT scheme which enables permitted projects to receive incentives. The launch of the FiT scheme is in line with the Greek government’s target of generating 2,200MWp of solar power by 2020.

Japanese Homebuilders want a piece of the Solar Boom in Japan

30 Aug, 2012 by Sneha Shah

Japan,Solar Energy

Solar Energy – Japan

The Japanese Government announced a very lucrative subsidy scheme for solar energy in Japan following the Fukushima disaster. Note Japan gets only 2% of its energy requirements from green energy compared to around 20% for Germany. Though Japanese solar panels used to be the world leaders till 2007, lack of government support and competition from solar panel producers in China has made them also rans. Though the Japanese solar panel producers are not being able to take advantage of the generous subsidy, Japanese home builders are not going to lose the opportunity. Big home builders like Sekisui House and West Holdings have made billion dollar investment plans to get into solar energy. Note Softbank has already announced plans to build 10 MW solar parks all over the country.

West Holdings has organized a consortium of 12 investors including solar cell and solar panel producers. The company is going to build 250 installations with around 500 MW of capacity. Note home builders have a natural advantage as they can easily install solar panels in newly built housing projects. They also have easy access to solar installers and financing.

Bloomberg

Sekisui House Ltd. (1928), the Japanese house builder, plans to move into electricity generation by installing solar panels, it said in July.

West Holdings Corp. (1407), a Japanese home renovation company, said it plans to invest $1.3 billion to develop solar power plants The 250 plants with a combined capacity of about 500 megawatts will be set up over five years by Japan Mega Solar Power Co., formed by West Holdings in June, Toshihisa Nagashima, senior managing director, said by phone today. Japan Mega Solar has attracted 12 investors including Orix Corp. (8591), a Japanese finance and leasing company, Shanghai-based JA Solar Holdings Co. (JASO), the biggest maker of photovoltaic cells, and LS Industrial Systems Co. of South Korea, he said.

Softbank and Mitsubishi solar investment in Japan

Mitsubishi has mostly looked to overseas market for growth like Wind Energy in the USA .Mitsubishi is a part of the consortium which is looking to set up huge solar power plants in Thailand as well.But now with Japan reaffirming it commitment to renewable energy and on track to kill nuclear energy,Mitsubishi is turning its focus towards the domestic market.Mitsubishi is planning to set up a number of solar power plants in the country to take advantage of the Japan solar Feed in Tariffs which will be introduced soon.Note the Fukushima disaster which led to elevated nuclear radiation levels has changed the energy policy of the country and its powerful businesses. Softbank CEO has already decided to set up a number of power plant in the country using solar energy, now Mitsubishi too is following. Softbank has decided to set up 10 large power plants of 100 million each in partnership with local prefectures for which it will give the 10% equity funding.

Solar Demand in Japan

However with the setting of a crazily high Feed in Tariff of 52c/KwH, solar demand is set to increase exponentially in Japan. Note Japan is already one of the biggest markets globally and has a large solar manufacturing industry. This is ideal grounds for a subsidy led solar boom like what happened in Spain in 2008 and Czech in 2010 with pernicious results. Japanese solar companies like Sharp, Solar Frontier, Mitsubishi will benefit the most. This is despite their much higher solar panel costs and prices compared to the global leaders like Trina. The reason is because of implicit barriers that Japan erects. Non-Japanese companies like First Solar, Sunpower have not been able to penetrate the Japanese market in a significant way because of these implicit hurdles. Note this is common to other markets and industries as well like LCD, computers, mobiles, rice etc.

Japanese Solar Inverter Companies in a sweet spot as Domestic Market set to Boom and JET Certification provides Barrier against Imports

25 Jul, 2012 by Sneha Shah

Japan,Solar Inverters

Japanese Solar Inverters

While Japanese solar panel companies are sweating due to cheap Asian solar panel imports, the solar inverter companies in Japan are facing the happy problem of supply shortages. The reason is that the Japan requires that PV inverters be certified by Japan Electrical Safety & Environment Technology Laboratories (JET). Most of the big global solar inverter companies lack this, which means that the local companies have a massive advantage. The Japanese solar market is set to boom due to very generous subsidies set by the Government which would imply returns of around 30%. While global solar panel majors are salivating at the prospect of the huge growth, solar inverter companies face a big barrier in the form of the JET certification.

Japanese Solar Demand to Boom

Japan after the Fukushima disaster had set out on a plan to increase the share of renewable energy in the electricity mix which is abysmally low. Japan has very low capacity in wind and solar energy compared to the more environmentally conscious developed countries like Germany. Japan which had led the solar market in the period till 2005 abruptly stopped its support. Though that time period had led to the birth of the Japanese solar industry (which is second to the Chinese even today), the industry had faltered as domestic demand went into decline. While large scale solar installations in Japan are almost absent, there remain large numbers of rooftop solar installations.

However with the setting of a crazily high Feed in Tariff of 52c/KwH, solar demand is set to increase exponentially in Japan. Note Japan is already one of the biggest markets globally and has a large solar manufacturing industry. This is ideal grounds for a subsidy led solar boom like what happened in Spain in 2008 and Czech in 2010 with pernicious results. Japanese solar companies like Sharp, Solar Frontier, Mitsubishi will benefit the most. This is despite their much higher solar panel costs and prices compared to the global leaders like Trina. The reason is because of implicit barriers that Japan erects. Non-Japanese companies like First Solar, Sunpower have not been able to penetrate the Japanese market in a significant way because of these implicit hurdles. Note this is common to other markets and industries as well like LCD, computers, mobiles, rice etc.

Read more with a tutorial on PV inverters

Photovoltaic Inverter or Solar Inverters as they are better known as, have become one of the fastest growing segment in power electronics. The ~$2.1 billion market in 2009 with 7 GW of installations has increased by more than 130% to around $5 billion in 2010, as the solar panel demand globally increased to around 17 GW. Note Solar Inverter Companies have done much better as competition is much lower and the annual price declines in solar inverters has been much lower at around 10% compared to the 50% decline in solar panel in the last 2-3 years. Photovoltaic inverters are not being manufactured by hundreds of suppliers around the world though the top 5 solar inverter manufacturers control almost 75-80% of the market. The reason is that solar inverters have a high technology barrier when it comes to making highly efficient and reliable solar inverters.

Till now Chinese manufacturers have not been able to significantly penetrate the solar inverter market because of this. In comparison Chinese solar module producers have captured more than 50% of the global solar market through cutthroat price and cost cutting leading Western solar panel producers like Solarworld to try and get dumping duties imposed on them. SMA Solar is the world’s biggest Photovoltaic Inverter manufacturer and is closely followed by US based Power One.

Types of Photovoltaic Inverters

Stand-alone Solar Inverters – They are used in systems without a connection to the power grid. Inverter draws Energy from Solar Energy. Many stand-alone inverters have attached batteries. These are mainly used in off grid application and in residential/commercial applications where there is no net metering available.
Grid Tied Solar Inverters – Many solar inverters are designed to be connected to a utility grid, and will not operate when they do not detect the presence of the grid. They contain special circuitry to precisely match the voltage and frequency of the grid. Grid-tie inverters are designed to shut down automatically upon loss of utility supply, for safety reasons. They do not provide backup power during utility outages. These are higher priced than standalone and require special laws to be used. They are always used in solar power plants connected to the grid.

Also Read on GWI:

Sharp PV Panels Review of Wholesale Sale Prices,Quality,Warranty of Solar Modules

Mitsubishi Solar Panels – Review of PV Modules Warranty,Price (Hawaii, UK, India, Japan)

Solar Demand in Japan to explode with IRR of 30%, as Government sets crazily high Tariff of 53c/KwH, implicit barriers may keep Chinese out

29 Jun, 2012 by Sneha Shah

Japan,Solar Energy

Sharp, Kyocera, Panasonic-Sanyo, Mitsubishi are the top solar panel producers in the world. Solar Energy in Japan has a long future dating back to 1994 when the government introduced capital subsidies to boost solar energy installations on rooftops. Till 2004, Japan was the largest solar market in the world after which it was overtaken by Germany. After 2004, the growth in the solar industry tapered off as the government reduced the subsidies for solar panels to almost zero. However the low cost Chinese solar module producers have pushed back most of the Japanese companies. The Japanese government grants generous solar subsidies and feed in tariff to boost the renewable energy production in the country which remains far off targets. This has led Japan to become the top non-European market after USA and the growth seems set to continue in the future as well. Japan has relatively low installations costs and is much nearer to grid parity. Also lack of wind energy makes solar energy more attractive as a renewable energy choice. While large scale solar installations in Japan are almost absent, there remain large numbers of rooftop solar installations.

Czech Solar Boom

Czech despite its small size has become the 3rd largest market for Solar Energy in Europe driven by high Feed in Tariffs. These guaranteed electricity rates have led to a Boom in the country due to IRRs in excess of 30%. The Parliament, overwhelmingly voted to overhaul the country’s Solar FITs. In the new plan submitted by the Czech Government to the EU, there are limits imposed on each type of renewables – biomass, solar, wind etc with emphasis given to Biomass Energy. Czech Republic has a EU set target of 13% Energy generated from Renewables. Wind and Solar Industry Groups have already started crying blue murder as the proposed FIT in 2011 for Solar will be cut by almost 50%. This made it uneconomical for a solar installer to put solar panels in the country.

The whole story of Czech Boom and future Bust is predictable and has already been played out in countries like Spain and Greece earlier. Like Spain, Czech electricity customers might see a 10-15% rise in electricity prices due to the high guaranteed payments to mushrooming solar installations. With the Czech Republic, implementing a Fiscal Austerity program involving pay cuts to public workers and other severe cuts in public expenditure, such huge payments to Renewable Energy seems an unnecessary luxury. Some more thought and preparation by the authorities would have avoided such a Failure.

Spain’s Solar Feed in Tariff Policy

Spain too had been in the media spotlight for its proposed retroactive solar subsidy cuts which were strongly opposed by the Solar Industry Association in Spain in 2008. These Feed in Tariff Cuts would come on guaranteed electricity payments to solar plants installed during the Solar boom in 2007 and 2008. Pension funds and other financial investors in these renewable energy projects had also strongly criticized the Spanish government as it would lead to 100% losses for equity investors. There were also suggestions that the government would be mired in legal tangles and have trouble in raising money for Green Energy in the Future. Spain had already come to agreements over the subsidy cuts with the Solar Thermal and Wind Energy companies. There had been speculation that the Solar PV cuts would be much more harsher than those dealt out to the Solar Thermal and Wind industries. However Sanity seems to have prevailed, with the Spanish government mode. New FIT cuts shifted the market almost completely towards small residential installations.

China Smartly Lower Solar Subsidy by 30% to Rmb 7 per Watt in 2012 to Lower Burden

6 Feb, 2012 by Sneha Shah

China,Solar Energy,Solar Panels

China which is home to the biggest solar industry in the world and most of the top solar panel manufacturers has decided to lower subsidy in 2012. Note China did not pass a Feed in Tariff Law for a long time as prices of solar energy remained high. But after a massive crash in solar prices and energy in 2011 it passed a FIT law in late 2011 to take advantage. This resulted in a big jump resulting in China becoming one of the top 5 markets in 2011 . Now China is set to become one of the top 3 markets in 2012 if not the biggest . This is due to the fact that other European solar panel markets are rapidly reducing subsidies and China needs to support its solar companies many of which are effectively insolvent like LDK.

Some big German companies like Solon and Solar Millennium have already announced bankruptcy.Note Chinese companies too would have shut down but the state owned Chinese banks are keeping them alive with loans at ridiculous interest rates.LDK which is buying Sunways is almost insolvent as well with its convertibles trading at less than 50c on the dollar in Singapore.It has more than $3 billion in debt compared to its market cap of around $600 million.It faces massive losses in the coming qtrs and can’t serve the interest payments much less expand.The strong support of the Chinese government for its green companies is keeping them alive.Chinese solar panels have become super cheap due to companies selling at below cost and massive scale.Note all the cheap solar panel brands in the world are Chinese with the exception of First Solar and some Asians.

LDK has managed to spend 22 million Euros despite burning hundred of millions of dollars in cash because it has got the Chinese government trillions backing it.So while Western companies burn and crash,the big crony Chinese companies can expand and acquire.

China has decided to lower its FIT by a big 30% cut to Rmb 7 /watt to lower the subsidy outgo. With the panel prices having fallen so much, it is still profitable to build solar systems at these prices without giving any outsized returns to solar project developers. Unlike many countries where FIT has led to massive unsustainable booms like Spain,Czech, China is proactively cutting any chances of a boom at the bud. Note most of the growth in the Chinese solar market will only help the Chinese solar companies because of their low costs, home advantage and implicit support of the utiltiies.

China’s solar market growth has hit the rocket phase in late 2011 with the announcement of the long awaited national Feed in Tariff . Many of the Chinese utilities have set up large solar farms utilizing the cheap solar panels produced by Chinese solar panel companies. Note Chinese solar companies are the dominant players in the world having almost killed the western solar industry in the last couple of years. With cheap costs and massive government support, China is almost ruling the solar industry globally . In the domestic Chinese market they have even a bigger advantage given the local home conditions and preference of domestic companies . Note China become home to the biggest wind turbine companies when China enacted the domestic content requirements in 2006. With the solar industry , the Chinese government does not need this law as its companies already possess massive advantages over the foreign competition.

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