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Solar Outlook 2011: The German Question

Stocks in this article: TSL YGE JASO

NEW YORK ( TheStreet) -- The amount of noise coming out of Germany about proposed additional solar feed-in tariff cuts is an annual rite of passage -- and period of unrest -- for solar investors. Yet there's been a major change of tone this year in the battle of the future level of installations in the solar sector's leading market.

It's a well known fact that, as was the case last year, Germany is again considering additional feed-in tariff cuts in 2011. Also on the table is a potential hard cap on solar installations, though some solar experts, including Jefferies analyst Jesse Pichel, have stated categorically that a cap in Germany in 2011 won't occur.

Recent developments point to a hard cap being unlikely to occur but not because talk of a cap has turned out to be a "boy who cried wolf" scenario as it has in the past. Rather solar interests are already making big concessions about FIT cuts in 2011, and that's an indication the industry may really be afraid the political powers have the muscle to lower the boom of a hard cap if pressed on the issue.

Reuters reported last week that two key political parties that have always supported solar, the Greens and the Social Democrats (SPD), were willing to support solar FIT cuts next year. These are the parties that originally enacted the legislation to support the birth of the solar industry and the FIT in Germany.

Maybe even more telling, the German solar industry lobby, the BSW, has gone further, saying that it is willing to not just swallow a mid-year FIT cut in 2011, but move up a portion of FIT reductions scheduled for 2012 to 2011.

Carsten Koenig, the head of the BSW, told a German magazine recently that a mid-year FIT reduction of 13% in 2011 could actually be as high as 21%. Koenig's comment to a German periodical called Focus was reprinted this week by Bloomberg.

As Wells Fargo analyst Sam Dubinsky wrote in a note this week to solar investors, "Political support in Germany looks to be waning."

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