European solar photovoltaic (PV) demand for 2014 is forecast to reach 10 gigawatts (GW) according to new figures published in the NPD Solarbuzz European PV Markets Quarterly report, a 7% drop year-over-year and the third consecutive year that European solar PV demand has dropped since reaching its peak in 2011.
NPD Solarbuzz’s somewhat idealistic headline suggests that the European solar PV demand is ‘stablising’ at 10 GW, but fails to give any indication of it remaining stable over the next year. In fact, as noted by Susanne von Aichberger, an analyst at the firm, “for Europe to reach 10 gigawatts of demand in 2014, the United Kingdom would need to meet expectations of doubling in size.” Considering the recent policy uncertainty that has kicked up over the past few weeks in the UK, it’s a little hard to imagine the European solar PV demand ‘stablising’ anytime soon, let alone managing to halt the slide.
Europe reached a peak PV demand of 19.2 GW in 2011, during which time Europe’s contribution to global PV demand had reached 70%. Now, however, Europe makes up only 22% of global PV demand, with the region’s previously-major markets — Germany, Italy, and Greece — only accounting for 37% of the European market.
“The decline in PV demand from Europe in 2014 is due mainly to the effects of major funding reductions in Germany, Italy, Greece, and Romania” said Susanne von Aichberger, adding that “planned reductions in the UK’s incentive rates in April 2014 boosted final Q1 figures” for the region.
Adding insult to injury, for the European market, the UK reached 43% of European demand for the first quarter of 2014 — it’s highest quarterly share so far. Good news? Only maybe, given that 215 ground-mounted UK PV farms are now being re-evaluated, according to findings earlier this month in the NPD Solarbuzz UK Deal Tracker. The same incentive cuts that pushed the UK first-quarter share to its highest peak yet are the cuts that are forcing the re-evaluation of mid-scale solar farms — above 5 MW and below approximately-30 MW.
According to the proposal put forth by the U.K.’s Department of Energy and Climate Change (DECC), Renewables Obligation Certificates (ROCs) would be restricted to solar PV farms below 5 MW in size, beginning in April 2015. ROCs place “an obligation on UK electricity suppliers to source an increasing proportion of the electricity they supply from renewable sources” (OFGEM) and are one of the main supports for renewable electricity projects in the UK.
“If the proposed changes by the DECC go ahead, it will force investors and developers of large-scale solar farms in the UK to shift to the Contracts for Difference scheme, two years earlier than expected,” said Finlay Colville, vice president at NPD Solarbuzz.
Such a change to the UK market — a market identified as one of the few reasons the European market as a whole will reach 10 GW — could very well have immediate and lasting impact on the industry as a whole. If the government is not willing to commit to the same level of support that they have provided over the industry’s burgeoning growth phase, then investors are more likely to similarly withdraw their own support.
With big-name PV markets in Europe shifting away from direct support — Germany, Italy, and France are all moving away from feed-in tariff schemes, while the UK is proposing moving away from their own existing support mechanisms — other countries are expected to grow.
“2014 PV demand is expected to grow in France, the Netherlands, Austria, Portugal, and Switzerland, and Turkey is forecast to become a significant PV market this year,” noted von Aichberger. “Belgium, Denmark, Romania, and Ukraine are forecast to experience annual declines.”
“Within Europe’s established PV countries, policy makers in Italy have taken the most radical steps to transition away from FITs. The Conto Energia funding scheme was discontinued in July 2013, with the final projects completed in May 2014,” added von Aichberger, “In the future, demand will be driven by installations based on net-metering, power purchase agreements (PPAs), direct marketing, and tax benefits.”
NPD Solarbuzz still believe, however, that the PV market in Europe has a place to grow;
The new driver for PV growth in Europe is coming directly from the energy markets in each country, where PV is now competing with other forms of traditional and renewable energies. This increased competition is creating new PV opportunities, but requires overcoming regulatory and funding challenges.
The European solar PV market, which started out as one of the leading and trendsetting markets thanks primarily to Germany’s aggressive attitude towards the technology, is slowing. There is the chance that 10 GW will remain a relatively stable figure for the future, but with policy uncertainty throughout the region, it’s a bet I wouldn’t take right yet. The remainder of 2014 will set the tone for the next few years, best wait and see.