France Cuts Solar Tariffs; Panic Averted

(French solar tariff story updated for closing prices)

PARIS, France (TheStreet) -- France today announced that it is cutting its solar feed-in tariff for rooftop systems from 55 euro cents to 42 euro cents, a 24% reduction in its solar-incentive system. Solar companies and investors have been in panic mode about an upcoming feed-in tariff cut from Germany, the world's biggest solar market by far, but the French reduction is significant.

Is the French reduction a harbinger of worse to come from Germany? The German environmental minister has been quoted recently as saying an announcement about the feed-in tariff cut could be made within days.

There are some important distinctions to be made between France and Germany's solar markets. First and foremost, France is a blip compared to Germany on the solar power global grid. Germany represents between 50%-60% of the global solar market, while France, even breaking into the Top Ten in 2009, represents a mere fraction of Germany's solar dominance.

However, France is a growing solar market, and an important one, so the feed-in tariff reduction is reason for solar companies to pause and reflect on the significance of a 24% reduction. It probably won't keep solar companies from chasing business in France, though.

The big solar players like First Solar (FSLR), SunPower (SPWRA) and the Chinese solar gang led by Yingli Green Energy (YGE), Trina Solar (TSL) and Suntech Power Holdings (STP) are all anxious to exploit new feed-in tariff geographies ahead of the German tariff reduction.

Solar companies were down by as much as 6% early on Wednesday, but by day-end, the losses had moderated. Solarfun Power (SOLF) and Yingli were down more than 6% at mid-day, but closed on Tuesday down 4%. Trina Solar ended Wednesday down less than a percentage point after also being down close to 5% at mid-day.

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