Solar manufacturers have gained a little breathing room in their transition to new markets -- a welcome revelation as Europe cuts back on subsidies for solar.

Last week, Germany announced a 3%, three-month reduction in its previously announced cuts to feed-in tariffs for solar developments, beginning July 1. Roof-mounted solar prices will be cut 13%, instead of the planned 16%, while open-field and industrial installations will see smaller drops of 12% and 8%, respectively.

The importance of this has everything to do with investors' unease over the unknown transition to new customers beyond Europe. Solar manufacturers like First Solar (Nasdaq: FSLR), Trina Solar (NYSE: TSL), and Yingli Green Energy (NYSE: YGE) currently rely on a large percentage of sales from subsidized markets like Germany, Spain, and Italy, as shown below. The transition to new markets has lost many a solar investor a night's sleep, but Germany's reprieve provides little comfort for the time being.

2009 Sales




Total % of Sales

First Solar





Trina Solar





Yingli Green Energy





Source: SEC filings.

Germany's move comes as Italy plans a 30% cut in its feed-in tariffs for next year. That could force Italian developers to build as fast as possible in the second half of 2010, much like German developers did in the first half of the year.

The lower drop in feed-in tariffs gives manufacturers time to make a transition to markets such as the United States and Canada. These regions are slowly developing, and they have the possibility of being larger than Europe, based on combined electricity demand and land available for development.

Visibility is rarely more than about six months out for solar manufacturers, since subsidies fluctuate in nearly every market. Although Germany will become a smaller market, it's nice to see subsidies there eased, instead of falling off a cliff. I don't know if investors could handle that.

Further photovoltaic Foolishness: