The incompetence of government authorities and bureaucrats around the world continues to surprise me as renewable energy subsidies keep going haywire. The script followed is the same in all the bust countries but others fail to learn from them and keep making those mistakes. Spain was the first country to witness a massive renewable energy explosion due to generous feed in tariffs given for solar energy. This led to huge amounts of solar installations and a huge obligation on the Spanish treasury. The government stopped all solar energy subsidies and forced cuts in subsidies given to existing solar developers. This amounted to a reneging on existing contracts leading to losses for some and massive job losses.

Czech was another country to do the same thing installing a huge 2 GW of solar installations which is large for a country with a total installed electricity capacity of 15-20 GW. It was forced to issue taxes and levies to stop the spiraling of electricity prices for consumers who faced a 15-20% increase in price in one year. Australia too has faced a similar problem though not on a Spain and a Czech scale. Gujarat is trying to do a similar thing by reducing FITs to Rs 9/kWh from Rs 12.54/kWh.

Romania has become the latest country where RE investors face a big loss. The country installed too much wind energy through a generous incentive and now faces a problem funding it. The government has decided to postpone subsidy payments by 5 years to 2017, which means a big loss to the investors. CEZ, the Czech utility faces the biggest hit as it went overboard by building a 600 MW giant wind farm.

Note, RE investors should be careful in not getting carried away by big returns in politically unstable places. These countries do not have the financial strength nor the institutional strength to manage these complicated subsidies. This is a natural reaction and even the European Commission can’t do much. If there is no money, the country will not pauperize citizens to allow RE investors to make out-sized returns. Not in a democracy anyway.

Japan is currently seeing a huge boom through very high FITs. That is unsustainable and I can predict a bust in the country. This might not come in the near future as Japan is a big country and it also has a lot of money. But it cannot continue forever.

All posts published on GWI for the Week Ending 16th September, 2012:

The growth potential in offshore wind energy has attracted a large number of top global industrial conglomerates……… Offshore wind energy is facing a mounting number of problems……… Japanese companies like Toshiba, Hitachi are planning to build offshore wind turbines as the Japanese Government offers support………. Korean Shipbuilders are facing the twin problems

One of the most fascinating things about the stock markets is that there are as many views and opinions about the markets……… The “Bernanke Put” has been a huge factor in the bullishness and the risk on sentiment in the US markets…….. Massive risks to the global economy persist

The worst fears of the Chinese solar panel producers have come true with Europe starting the history’s biggest anti dumping case………. ProSun led by German solar panel maker Solarworld, complained against super cheap imports……….. If found to be true, Chinese solar panels could be levied with heavy duties

The Indian Wind Power Association (IWTA) representing 1350 companies has written a letter to India’s PM asking for reinstating subsidies for the wind energy industry……….. Wind Energy Industry Problems……… Fresh capacity increase, has declined by almost 60% to 522 MW according the MNRE………. Indian wind energy industry continues to benefit from the REC scheme

Hanwha Group is one of Korea’s top ten enterprises……… Hanwha Group is currently engaged in three core business areas ……… Hanwha Solar Panel Features, Types, Polycrystalline, Monocrystalline, BlackDiamond, Greenhouse, SolarIris…….. Costs & Affordability

The new nuclear power plants that are coming up in India are facing strong protests by local people ………. Note protests against companies encroaching on the environment and precious farm land are not only limited to nuclear energy………… The Government has blamed foreign NGOs for fomenting the violence in Kudankulam……….. making nuclear power plants uneconomical

Indian citizens are shocked by the actions of the judiciary and police in Maharashtra who have jailed a cartoonist……… federal government remains embroiled in corruption and scams totaling billions of dollars………. Asheem Trivedi remains locked up under the sedition law

The increasing costs of airplane fares……… cities which are strategically located in 4 different parts of the country are linked by national highways built by the NDA Government……….. High speed bullet trains are the ideal answer to the cost-speed balance need in transport between major urban cities……… China’s high speed train infrastructure is already starting to break even

A major price war has started between the stock exchanges in India with MCX sharply cutting the prices of transactions………. The Financial Technologies owned MCX-SX has also reduced the capital and net worth requirements of members……….. MCX was fighting a prolonged battle with the equity regulator SEBI to allow MCX to trade in equities

The shallow commodity markets in India are being blatantly manipulated by industry cartels and big brokers who through hoarding and circular trading……….. a large part of the price increase was due to price manipulation………. The Forward Markets Regulator (FMC) which is the industry regulator has remained behind the curve most of the time

Q-Cells is the biggest solar failure in Europe………. The company got battered in 2009 downturn………. Q-Cells tried to avoid bankruptcy………. Q-Cells operations are being bought for a mere $50 million by the Korean giant Hanwha Group

Exelon which is the owner of the biggest portfolio of nuclear power plants in the US has been kicked out………. Exelon has opposed the extension of the 30% wind tax credit given to the wind industry……….. Exelon is turning more pro-solar as it bought the 230 MW solar power plant

The massive global oversupply of solar panels has led to solar panel prices plummeting to new depths. This has already led to bankruptcies……… The carnage has not stopped as even small solar companies………. Silicon Industries has started shutting down……… New Jersey company Solar Power Industries too will be auctioning its equipments

Solar subsidies in general have always been a boom and a bust story………. In Europe, in particular the feed in tariffs given by the Government to promote solar………. Greece is following the same storyline as seen in countries like Spain and Czech………. Greece has a very generous feed in tariff

India suffers from a huge deficit in power generation……… The country’s Power sector is suffering from lack of fuel,………. Government proposal to export 500 MW of electricity to Pakistan has drawn howls of protests

The dominance of the Korean chaebols over the Indian air conditioning market has ended………. marketshare of Voltas has increased dramatically in 2012……… LG has been one of the biggest losers………. Samsung too has seen its marketshare go down




Entering the Japanese market is notoriously hard for foreign companies as they run into major implicit and explicit barriers. Like the Chinese, the Japanese have made it an art to keep out foreign companies in order to boost their local manufacturers. The solar panel market is no different from other markets like electronics, mobile phones etc. However the Feed in Tariffs fixed by the Government to boost solar energy has primed the Japanese market to experience a massive boom this year as IRR on solar investment will exceed 30%. The Japanese market is dominated by the big Japanese solar companies like Sharp, Kyocera, Mitsubishi and others. However a global glut of solar panels has led to crash in the prices and suppliers are looking at every market to survive.

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.

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.

How to Enter the Japanese Market

The best way to enter the Japanese market is to tie up with locally connected domestic companies, as breaking into the market for a foreign company on their own steam is almost impossible. Sunpower which is one of the biggest solar panel suppliers entered the Japanese market by tying up with Toshiba a couple of years ago, while Suntech bought a local Japanese installer. Now other Asian companies are taking a similar route. While Talesun which is a relatively new Chinese solar panel supplier has tied up with a construction material supplier, a small time thin film company from Taiwan has allied itself with a number of small developers to make an entry into the market.

Eastern Europe sees Massive Green Energy Boom

Renewable Energy is Easter Europe has boomed driven by government incentives and subsidies.Many of these countries like Estonia,Bulgaria and Czech are cutting or already have cut generous feed in tariffs paid to Green Energy Investors.While Czech has seen an unprecedented Solar Boom leading to a massive public backlash,Estonia and Bulgaria have seen huge wind energy projects.The Green Energy has boomed in the last 2 years mainly as governments in these countries try to meet the Renewable Energy Target of 20% by 2020 set by the European Union.These East  European countries have been hit hard by these EU directives as the costs have spiraled.Eastern Europe sees Unprecedented Green Energy Growth driven by EU Renewable Energy Growth leading to a Subsidy Backlash

Immature Institutions Leads to Huge Green Costs

The Governance Institutions in these countries are not well developed leading to huge growth in Green Energy Subsidies.Even developed countries like Spain ,Italy and Germany have suffered from rising Green Costs.These smaller relatively poor countries are even less prepared for these costs.Almost all countries have seen a 10-50x increase in Green Energy Installations and the concurrent costs .The Backlash by the Public has been quite severe as Czech expects an increase of 15-25% in 2011 Electricity Costs due to Green Subsides.Romania is the latest to join the bandwagon with a 40x increase in Wind Energy Capacity in 2010 with 600 MW to be installed.