Solar Stocks Fall as Germany Slashes Subsidies

Joel Anderson  |

Well this is a novel idea: a government program that might have been TOO successful. That appears to be the case, though, as the German government announced plans to slash subsidies to solar companies much faster and sooner than expected. Germany, which found great success in boosting capacity and installations through its government subsidies, is now looking to roll back the financial help provided by the government on March 9.

Subsidy Cuts Bigger, Sooner than Expected


While a cut in subsidies was expected by most experts, the degree and timing of the cuts took many by surprise after they were announced in a press conference by German Environment Minister Norbert Roettgen today. Not only did he reveal that the cuts could approach 30 percent, nearly double what many analysts expected, but the proposed cuts were moved up to March 9 instead of the previously planned April 1 in order to prevent a last-minute boom in installations to take advantage of the old rates.

"With the new proposal, the royalty rates are halved compared to 2009. In view of the past two years of greatly increased volume, is the re-adjustment of funding," Roettgen said. "The  goal is that in a few years, the photovoltaic market will be ready and make do without subsidies."

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The shift in policy could be seen as primarily a reaction to the massive spike in installations that it created. Since 2004, when Germany began to offer the subsidies, Germany has seen a major boom in solar installations, with last year bringing 7,500 megawatts in new projects bringing Germany's totals to 25,000 megawatts. The reductions, which came from a joint effort by Roettgen and Economy Minister Philip Roesler, are geared towards phasing out subsidies over time and scaling back the expansion of the industry. Another consideration may be issues with the nation's peak capacity. One issue with solar is that it can be inconsistent, failing to provide energy during cloudy weather or night time and forcing Germany to turn to other sources.

Solar Stocks Take a Hit

The surprise cuts in subsidies meant that solar companies across the board saw shares plummet Thursday. Industry leader First Solar (FSLR), which relied on Germany for 46.8 percent of its core market installation capacity at the peak of the boom, lost almost 8.25 percent in earlier trading. First Solar is rapidly trying to shift into installation of larger solar plants and away from subsidized markets, a move it began late last year. Shares of Trina Solar Limited (TSL) were hit even harder, falling over 11.25 percent. Trina also took a hit on its earnings report, released before market open, which showed losses that were more than double the same quarter last year. Also losing ground were Suntech (STP), which was off over 8.25 percent, Yingli Green Energy (YGE), which lost nearly 11 percent, and LDK Solar (LDK), which dropped just over 2.75 percent.

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