France Cuts Solar Tariffs; Panic Averted

Andrew Kinross, director with Navigant Consulting(NCI), who studies the solar tariff regimes, said it seemed as if France has reacted responsibly, and that the solar market should expect more governments to look at cuts in feed-in tariffs.

"People have been making a lot of money in France, among the best returns in the world, so it's not terribly surprising. Governments need to do price discovery," Kinross said. "You put the tariff in and see the way the market reacts, and adjust it up or down based on that trial-and-error process," Kinross explained.

While Kinross said the 24% reduction in the French feed-in tariff is significant, he does not believe it will keep solar players from making profits in the market - and in fact, the French government has adjusted the feed-in tariff with that goal in mind.

"The French market has been very strong this year, there has been a feeding frenzy, and 42 euro cents still sounds as if the returns will be sufficient, particularly since average selling price of systems has declined significantly this year," Kinross said.

The big issue is that as a relatively new market, France lacks the level of infrastructure to make solar installation inexpensive, and so it needs feed-in tariffs to bring on the early adopters. The only question would be if the infrastructure has developed enough already for 42 euro cents, and the Navigant consultant said he thought it probably had.

"My bet is that 42 euro cents is still adequate, certainly in the southern locations, and downstream companies will still be making satisfactory returns from the French tariffs," Kinross said. He noted that if France was getting 3,000 applications a day at 55 euro cents, a feed-in tariff of 42 euro cents is probably still going to encourage interest.

Overall, the French market may grow to the level of the low hundreds of megawatts this year, according to Navigant projections, and will be somewhere between the bottom half of the global top ten in solar capacity.

-- Reported by Eric Rosenbaum in New York.

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