Please ensure Javascript is enabled for purposes of website accessibility

Germany Softens Blow to Solar

By Travis Hoium - Updated Apr 6, 2017 at 12:41PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A decrease in Germany's feed-in tariff cuts could help solar.

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

Germany

Italy

Spain

Total % of Sales

First Solar

65%

6%

3%

74%

Trina Solar

33.9%

19.6%

12.1%

65.6%

Yingli Green Energy

63.1%

6.1%

5.9%

75.1%

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:

Fool contributor Travis Hoium is a longtime solar investor. Of the companies mentioned in this article, he is long First Solar. First Solar is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

First Solar, Inc. Stock Quote
First Solar, Inc.
FSLR
$107.24 (5.24%) $5.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.