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-----Original Message-----
From: Rebecca Van [mailto:rvan@tnag.net]
Sent: Sunday, October 25, 2009 3:51 PM
To: Monty
Subject: Germany and California: Changes leave the devil in the details -
Photovoltaics World
Germany and California: Changes leave the devil in the details by Paula
Mints, Navigant ConsultingThe new German governing coalition is promising
(or threatening) a steeper cut to the country's EEG tariff along with a
possible cap, and soon -- perhaps before this article is even published.
Meanwhile, California finally passed a bill that will allow solar system
owners (residential and small commercial) to either be paid for their net
excess or roll it into the next year, instead of losing it. A bill
authorizing a FiT for California also passed for systems =3MWp. The details
about changes in Germany's FiT and California's new programs are not
completely worked out -- and the devil may well be in those pesky
details.One thing is for certain -- should the German FiT be reduced
significantly (guesses abound from 15% to 30%), the market would reduce with
it, perhaps significantly. Should the government implement a cap on the
program, the market could conceivably shrink even further. Meanwhile,
nuclear power in Germany has been given a boost. A significant change in the
German incentive for solar is troubling because Germany is currently the
only market ready to accept >1MWp of product a year; other markets,
including the US, are still in a nascent stage of market development and
need more time. As the figure at right indicates, a significant change in
the market in Germany would lead to an extremely soft market in 2010.
Global demand share in 2009 (total: 4555.0MWp).Germany: Et Tu, FiT?After the
recent parliamentary elections in Germany installed a conservative
government, the PV community expected a change was coming. The recession had
pushed the German population to the point of change, much as in the US.
However, while a desire for change pushed US voters to the left, German
voters chose a different direction.The German government appears to be
acting quickly to change the EEG. While optimistic PV observers expect
significant changes, they also presume these changes would not take place
until 2011, giving the PV industry one more year of heavy selling along with
the chance to build up new markets, such as the US. Pessimistic PV observers
fear that changes will happen much sooner. Now, some degree of optimism
remains; even if it is soon, the change cannot possibly be too dire -- and
how could a significant change take place with such a large German PV
industry, not to mention the EU 20/20/20 target?Optimism and pessimism
aside, there is currently a genuine and significant pushback from German
voters whose utility bills pay for the EEG, along with a degree of anger
that it has created not just a strong German manufacturing industry but also
thriving industries in other countries. Chancellor Merkel has made it clear
that the EEG, long viewed as a 20-year annuity for system owners, is
expensive to support and will be rethought. Meanwhile the entire industry
awaits the expected outcome and at this point, a 15% digression in January
2010 without an accompanying cap would be a relief to many.Again, there are
currently no markets for solar that are developed to the degree that Germany
could be replaced -- much as Spain's market could not be replaced. Japan,
even with its announced FiT, will not be a gigawatt market in 2010 and
likely not in 2011. The market in China remains a wait-and-see proposition.
The US has strong potential and a lot of pesky details to be worked out
before its potential is fully realized.Right now other governments (and not
only in Europe) are watching to see how Germany changes its FiT, and what
reasons it gives for the changes. Italy, Greece, France, and even the US may
well consider making changes to their national programs if Germany -- the
global leader and parent of the FiT model, is too negative in its
response.The US -- we know where, but when?The new net excess and feed-in
tariff bills passed in California are significantly less fuzzy in detail
than the uncertainty in Germany. In California, complexity is the issue.
California is not the only US state with a solar market, nor is it the only
state with incentives and an announced FiT. However, California remains the
boldest US state with regards to breaking the barriers that could really
drive a thriving and globally competitive market for solar in the US
California's legislature and governor are poised to make more changes in
early 2010, hopefully before pre-election anxieties induce legislative
hesitation to act. The state's current Democrat-heavy government and its
independent governor know that they need to take action now, just in case
the next governor is an ultra-conservative Republican. For one thing, in
order for California's new bills (FiT and ownership of net excess
electricity) to have a long-term impact, the state's 2.5% net metering cap
needs to be raised.A cause for celebration is California's elimination of
the net excess penalty -- that is, for systems <1MWp, the net excess must
either be purchased by the utility or rolled over to the following period.
Soon there will be no more 'use it or lose it' in California, which should
stimulate strong interest in rooftop residential and small to medium
commercial solar. Interconnections will also be processed faster -- the bill
calls for 30 days from receipt of a completed application. The price the
utility must pay for the electricity has not been set, but aside from the
market price referent (MPR, ~13¢/kWh) that utilities have set for
renewables, it must reflect the value of the RE generation, and, the value
of the pollution that has been offset. The legislation favors distributed
generation, and should encourage development of new business models for the
residential and small commercial market.More good news: California will have
a feed in tariff for systems <3MWp. The price utilities must pay for
electricity for a 10-, 15-, or 20-year period (to be defined) is the
California PUC's MPR, including "all current and anticipated environmental
compliance costs." The bill authorizes the PUC to adjust the payment to
reflect time of electricity delivery. California's FiT will be available to
system owners or operators within a utility's territory on a first come
first served basis until the utility meets its share of the 750MWp or the
utility's above-market-cost limitation has been met or exceeded. For
California's FiT there will be studies and likely quite a bit of traffic to
and from the PUC by the strong utility lobby not to mention PV industry
interest groups and lobbies. In the timeframe before this particular bill is
enacted, much nebulous language needs to be worked out.Despite the good news
from California's legislature and governor, the changes in Germany could
lead to more than one down year for the solar industry. The best-case
scenario would have Germany announcing changes for 2011, giving markets in
Japan, the US and other countries in Europe time (though not much) to
develop. In the worst case, swift and drastic changes in Germany's FiT will
leave an unprepared industry with even more overcapacity and no time to
react. (No matter the dire effect of losing Spain as a primary market, the
industry was given plenty of warning.) The lesson for the industry is to
aggressively develop new markets while protecting current ones -- and
unfortunately, there is no getting around the pesky details in either
case.Paula Mints is principal analyst, PV Services Program, and associate
director in the energy practice at Navigant Consulting. E-mail:
pmints@navigantconsulting.com. Photovoltaics World Article
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