Falling prices and market shares, European solar cell makers moving to Asia?

Falling prices, lower demand and credit crunch are combining forces to hit Europe’s renewable energy market. Key players in the solar and wind markets are facing difficult choices in order to survive such harsh current market conditions. A situation that could force European solar cell and module makers to speed up their production shift to Asia, if they want to survive.

Prices on the European solar sector market have been falling for the combined action of oversupply of cells and modules – that has driven down average selling prices (ASPs) for solar systems – and a strong offensive by Asian companies who have tried – successfully – to steal market share by slashing costs.

China’s incentive program for solar firms, announced last week – including a 50 percent subsidy for investments on solar power projects – has added further to the already high level of stress. The situation could see a further reduction in production costs, already among the world’s lowest, at the expense of European makers who would be actually pushed out of the market. Current market share losses could push European makers to move their production centers to Asia.

According to a survey by German industry publication Photon, China accounted for about a third of the market for global cell production in 2008, while Europe’s share declined to 25.6 percent last year.

Chinese module makers now have a market share of about 50 percent in Germany from zero a year ago, according to a UBS report, though Germany is still expected to become the world’s biggest market by installation.

A lack of cash is also hurting the wind industry. The UK government is expected to announce £1billion (about $1.6 billion) of lending to wind farm developers to kick start 1 gigawatt of onshore wind schemes that have been stalled by the credit crunch.

The initiative comes as Greenpeace unveils new figures showing that local councils run by the Conservative party block more than three times as many wind farms as they approve.

Both issues are important because Vestas, the UK’s only major wind turbine maker, is threatening to close its manufacturing plant on the Isle of Wight this week in part blaming a lack of a strong domestic market.

The government’s cash infusion is part of the additional £4billion (about $6.6 billion) of European Investment Bank (EIB) lending to support UK energy projects announced in the spring budget. The government has been urged by environmentalists and thinktanks to use the state equity stakes in banks, gained when they had to be bailed out last autumn, to push them towards green projects, according to the UK newspaper.



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