Europe’s PV outlook in the post FiT era
Germany’s mighty PV industry still puts Europe at the head of solar markets worldwide. We look across Europe to see what is driving and impacting growth and private investment in the post-FiT era.
Britons shivering in their coldest August Bank Holiday did not enjoy the irony of living in what is currently Europe’s biggest solar market.
But the fact that the UK is set to install what researcher IHS predicts could be up to 3.2GW this year, despite a famously inclement climate, says two important things about European PV overall. On one hand, it is clearly not what it was. On the other, it is still all about government support.
In general, comments NPD Solarbuzz vice president Finlay Colville: “European demand is down about half of where it was a few years ago. This year it might be short of 10GW and next year it might be about the same level.
“It’s plateauing at 10GW compared to nearly 20GW a few years ago, when it was driven by Germany and Italy. The market would have declined a lot more last year and this year if it had not been for the UK.”
Benjamin Fontaine, senior communications advisor at the European Photovoltaic Industry Association (EPIA), concurs. “Several European markets that performed well in the past went down in 2013, a consequence of political decisions to reduce PV incentives,” he notes.
Indeed, last year was a period of turmoil for the continent that for the last decade has led the development of the PV sector worldwide.
Spain, the Czech Republic and Greece all reneged on government promises with retroactive measures that are “damaging the attractiveness of PV as a long-term investment and penalising the market in these countries,” according to Fontaine.
“The development of PV markets not only depends on the ability of PV to reduce electricity bills, but also to sell excess electricity on the markets,” he says.
“From this point of view, 2013 was a difficult year, with several countries backtracking from previous commitments, through measures aimed at discouraging prosumers or increasing grid costs for PV systems.”
In addition, installations in two of the leading markets in the European Union (EU), Germany and Italy, fell drastically with the phase-out of government-backed feed-in tariffs (FiTs).
“For the first time in years, the installations in Germany went down to 3.3GW due to regulatory changes pushing the market down,” Fontaine observes. “In Italy, 1.4GW of PV were connected to the grid in 2013, a sharp decrease compared to 2011 and 2012.
“Having reached a financial cap for FiTs, the Italian market is now experiencing the transition to the post-FiT era, with a substantial market level decrease.”
Retroactive tariff cuts
Furthermore, Italy’s Decree-Law DL 91/2014, which includes retrospective tariff cuts, additional charges to existing plants and a tax on self-consumed PV electricity, will heavily hamper the future growth of the Italian PV market, the EPIA believes.
These dampened prospects made it easier for the UK to overtake Italy and become Europe’s second-largest market last year after installing 1.5GW with support from its Renewable Obligation Certificate (ROC) scheme.
Romania, with 1.1GW, and Greece, with just over 1GW, rounded off the top five.
“The UK experienced a boom in utility-scale installations in Q1 2014 due to the changes to the ROC scheme and IHS estimates that over 1.3GW was installed in Q1 alone,” says IHS market analyst Lauren Cook.
“The subsequent announcement that the ROC scheme is likely to be no longer available for ground-mount systems from April 2015 has driven a second boom, and IHS predicts that this will cause a very strong Q4 2014 and Q1 2015.”
IHS forecasts that Germany and Italy will be the second and third-largest markets in Europe in 2014, although they will decline from 2013 by 35% and 50% respectively.
In addition, says Cook: “There are a number of smaller markets experiencing moderate growth in 2014 and onwards. These include Austria, Switzerland and the Netherlands, which have stable incentives and policies to support PV. IHS expects them to maintain their growth.”
Despite this, it is clear that Europe can no longer expect to stay at the head of global rankings for new PV installations. That honour passed to Asia last year and, Cook says, “IHS expects this trend to continue over the forecast period. PV installations in Asia are forecast to grow by 32% in 2014, reaching nearly 26GW. China and Japan are forecast to account for 86% of these installations.”
Going forward, European PV players will need to get used to fewer incentives and higher costs. Cook says: “The EU anti-dumping investigation into Chinese modules has caused some system prices in Europe to increase.”
In addition, says Fontaine: “As European Heads of State are discussing the European Commission proposals for a 2030 Climate and Energy framework, the importance of creating the right investment climate for private funds needs to be highlighted.
“Only an ambitious and legally-binding 2030 renewable energy target will deliver the necessary signals to drive private investments in renewable energies and in particular in photovoltaics.”