Analyst: German Solar Subsidies Not Sustainable

DIRK LAMMERS

SIOUX FALLS, S.D. (AP) — A Barclays Capital analyst said Tuesday that Germany's residential rooftop subsidies could be cut by 25 percent because of escalating costs.

Vishal Shah said it's likely the country will revise its generous subsidy program, especially given that German companies are cutting jobs as Chinese companies add capacity and jobs.

Shah said the value of the German solar subsidy cost burden will likely increase from 6 billion euros in 2006 to 11.3 billion euros in 2010, while the value of the German wind subsidy cost burden could decrease from 3 billion euros to 2 billion euros over the same period.

"Bottom line: German solar subsidy costs are escalating and the current trend is not sustainable," Shah wrote in a client note.

Shah said Barclays' analysis of California Solar Initiative data suggests that the industry would have to have significantly lower industry pricing to maintain the current growth rate in California.

"We maintain our near-term cautious stance on solar stocks as we believe despite the recent sell-off, expectations are high and potential for downside risk to shipments/margin guidance exists for several stocks," he wrote.