SOLAR AFTER THE CRUNCH

Solar power seen overcoming credit crunch
Martin Roberts (w/ James Jukwey), March 2, 2009 (Reuters)

"Solar energy could power up to 100 million European homes by 2020, but only after a squeeze on bank lending is over…Spain was the world's hottest solar market last year, adding about 2,500-2,800 MW of power-producing capacity…outpacing an increase of 1,800 MW in conventional gas generators…But the sector's fortunes have reversed after Spain slashed its subsidies and a global financial crisis dried up project finance …

"Spain slashed subsidies last September and capped new PV plants entitled to receive them at just 500 MW a year, while more expensive debt had added to the slowdown…[F]inancing costs for solar had jumped to 270 basis points above Euribor from 150 a year ago."

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"Spanish company Abengoa Solar (ABG.MC) is locked in financing for 180 MW out of its planned 300 MW Solucar complex last August, but is still negotiating the remainder for the mainly solar-thermal project.

"The industry is pinning hopes on guaranteed, 20 or 25-year [Feed-in tariffs] for solar power in new markets -- including Italy, Greece and France -- which confer much security for newly risk-averse investors following the financial crisis…Second-tier opportunities were available in the Czech Republic and Bulgaria…Feed-in tariffs are guaranteed prices to help solar power gradually become competitive and now stand at around 300 euros per megawatt-hour in Europe, or well above wholesale market electricity prices of about 40 euros…They are motivated by government goals to cut greenhouse gas emissions and reduce dependence on imported oil and gas."

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"The falling costs of projects, as a result of a glut in inputs, may offset higher financing costs…[B]righter prospects longer term could see solar power rivalling fossil fuels in barely a decade… PV plants alone could generate 80,000 MW by 2020, based on conservative growth assumptions, compared to less than 5,000 MW now…[A]ll types of solar power could generate at least 100 GW in 2020…

"The EU aims to obtain 20 percent of its energy supplies from renewable sources by 2020, and within that, wants 10 percent of electricity consumption to come from solar."