New challenges for the solar market

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News article

New challenges for the solar market

June 2013

solar pv
The European Commission (EC) announced that solar duties on Chinese manufactured solar products were to be imposed from 6 June 2013 of 11.8%. These duties were imposed despite 18 of the 27 EU member states voting against these punitive taxes (and 5 countries abstained from the vote).
 
This will affect the price of Chinese solar panels which dominate the European market. The Chinese have threatened to impose a similar trade tariff on EU wine sales which affect countries like France who wanted to have the tariff against China.
 
On 6 August 2013, the rate will return to the levels originally proposed by the EC with an average of 46.7% unless a compromise can be met between the EC and China. Even If a compromise can be agreed it will likely still push up the price of solar PV systems where the market price has very likely bottomed out. Whatever the outcome of negotiations the uncertainty does not help what has been a booming market and if prices go up and tariffs continue to fall now might be the best time to invest in the sector – if you can get the stock!
 
Although the Solar Trade Association (STA) warned recently that duties could bring the UK solar industry to a ‘grinding halt’ we consider solar PV still an excellent investment but there are concerns now about the European delivery lead-in times for equipment and issues over obtaining stock. Negotiations are required and a compromise found because if 46.7% is applied in August then the STA may be correct in their assessment. This could affect everything from domestic installations right up to solar parks which may become unviable, especially post 1 April when the ROC tariff digresses from 1.6 to 1.4 ROCs.
 
Harry Edwards of Fisher German believes solar PV is “still a good investment but there is no doubt this will dampen the market and many installers will struggle to secure the stock prior to potential increases in the cost of this stock. Solar park developers will also be deeply concerned given the added uncertainty and the cost of financing these long term projects. It is very frustrating given all the UK solar industry has been through to get to this point and just when the UK government seems to support the sector the EC come and undo the good work!”
 
It remains to be seen whether a solution can be found and what the outlook for the industry is but with feed in tariffs going down and module prices going up the market may again have to find a way to adapt. However, whilst there is no guarantee, it is highly unlikely that the FIT on larger projects (250kW to 5MW) will regress over the coming months because there is little activity at the moment in these tariff bands – it didn’t regress for the whole of 2012 and only did so in May 2013 because of the automatic annual regression.  Most large projects are funded under ROCs these days and so there are still good returns for such projects. 
 
Punitive tariffs will lead to higher prices and restrict the growth of the solar industry and the UK’s future energy security and so Harry Edwards hopes a solution is found, and found quickly. Harry commented: “It is amazing when you think that the EU has gone to huge expense to subsidise renewable energy and just when it is becoming competitive with fossil fuel based generation it gets taxed thereby taking us backwards! Why we want to spark a trade war with China I have no idea especially when the majority of the industry are employed installing, developing or within supply companies and not actually manufacturing panels.”
 
To date in the UK 1.7GWs of solar have been built, which is a 70% increase in the last 12 months. The government potential target for solar PV by 2020 is up to 22GWs out of a total  UK energy capacity of 90 GWs, so they are looking for solar to provide up to 25 per cent of the UK energy output. This will not be achieved with an anti-dumping tax, and a sensible solution must be found by the politicians.
 
for further information contact Harry Edwards on 01858 411204 email harry.edwards@fishergerman.co.uk
 
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