German Photovoltaic Feed-in Tariff Frenzy – Part 2

The German Federal Cabinet is supposed to finalize their photovoltaic (PV) Feed-in Tariff (FiT) policy on March 3, 2010.
June 2010 is shaping up as a record month for German PV installations.
And what’s the deal with Hapoalim Securities?

EuPD_Research_ohneClaim_ScreenRGB Last week, EuPD Research issued a SPEEDLETTER titled “New Feed-in Tariffs: German PV promotion decreases significantly” after the German CSU (Christian Social Union)/Christian Democratic Union (CDU) and FDP (Free Democratic Party) coalition cabinet agreed on key points for the planned mid year revision of the PV FiT included in the Renewable Energy Act (EEG). Here are the new degression proposals since my last German Photovoltaic Feed-in Tariff Frenzy post:

  • July 1, 2010: Roof-mounted PV FiT reduced 16%
  • July 1, 2010: Ground-mounted PV FiT reduced 11% on disturbed land and 15% on other land. EuPD Research said: “In the future, large-scale systems on agricultural fields will receive no funding whatsoever.

EuPD Research said a transition period is being considered for legacy solar park projects permitted by January 1, 2010. Also, 2010 PV installations will modify the planned 2011 degression as follows: over 3.5 GW (GigaWatt) of PV installs will add 2.5% and over 4.5 GW will add 5%.

Per “Stabile Rahmenbedingungen für einen dynamischen Ausbau der Photovoltaik” (Germany only, Stable framework for the dynamic expansion of photovoltaics), an opinion from the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) echos the policy to conserve farmland and open space while encouraging the development of disturbed lands such as industrial facilities, military bases, or along roadways. In addition, the Direct use PV incentive premium will be more than doubled from 3.6 Euro cents per kWh (kiloWatt-hours) to more than 8 cents. All the above is subject to a final decision at a German Federal Cabinet meeting on March 3, 2010.

EuPD Research CEO Markus A.W. Hoehner said:

It is not advisable to calculate political incentives solely on the basis of a short-term price decline, but on the basis of long-term trends and forecasts. Actual system prices, which serve as a foundation for calculations by the federal government, reflect a distorted image.

The same point is made in a Fraunhofer ISE (Institute for Solar Energy Systems) study “Determination of the extend of a further reduction in the feed-in tariff for solar electricity in 2010” in German only (English abstract) prepared for the German Solar Industry Association (BSW-Solar) which recommends “a one-time additional reduction of 6% for PV systems up to 30 kWp and 10% for PV systems up to 100 kWp respectively would be appropriate.” [Ed. Note: kWp means kiloWatt-peak.]

Hapoalim Securities?
In “Update: German Plan Would Nix Subsidy For Solar On Farm Lands” by Eric Savitz for BARRON’S Tech Trader Daily, Hapoalim Securities Senior Alternative Energy Analyst Gordon L. Johnson II:

reports that about 50% of Germany’s ground-mounted solar market uses agricultural lands, and asserts that he sees “the government’s proposed termination of the agricultural ground-mounted FiT [feed-in-tariff] as [a] headwind to new projects in this segment.”

I had to read the above statement twice because it was delivered out of context. About 80% of German PV installations are rooftop leaving 20% ground mounted. If half of ground mounted PV installs are on farmland that is 10% and assuming a 3 GW annual market, 300 MW (MegaWatts) of PV installations are at risk with the policy change. In addition, numerous former military and industrial locations could be developed in eastern Germany and in other German states to leverage the disturbed land preference.

Mr. Johnson has been nothing but bearish on the PV industry since Fall 2008 after I met him at the 23rd EU PVSEC in Valencia, Spain. I don’t believe Mr. Johnson has ever recommended a significant solar PV stock as a BUY and maintains an industry Underperform rating. So why does Hapoalim and Mr. Johnson bother to cover and research the PV industry and engage the mainstream financial press with unending bearish comments about photovoltaics?

As a self described “super boutique” firm, Hapoalim Securities USAis a NYSE broker/dealer specializing in value added investment strategy services and products for institutional and high net worth private investors.

Great, so PV research and bearish media promotion can be used to advise existing clients to avoid solar investments and attract new clients. However, clients are impatient and will expect those investment strategies that generate strong returns pronto. Could the Hapoalim client strategies in the solar space instead revolve around short selling pure play solar stocks?

Wrong Call, Wrong Forecast
YGE110109to022610
Regardless of the investment strategy or motivation, what is Gordon Johnson’s recent track record as a Solar Analyst? With “Hapoalim Securities Downgrades Yingli Green Energy (YGE) to Sell” at StreetInsider.com, Yingli was downgraded to sell on November 9, 2009, opening at $12.35, and proceeded to rise almost 55% over the next two months to an intraday peak of $19.11 on January 11, 2010! Under the shadow of the German FiT uncertainty, Yingli only closed below $12.35 for the first time since the Hapoalim downgrade on February 10, 2010.

hapoalimsecurities112409slide5 In a November 24, 2009, conference call, Mr. Johnson reviewed his Global PV Demand model forecasting a bearish 4.945 GW of PV installations in 2009 as shown. The flawed demand model was at least one cause contributing to the errant Yingli downgrade. In a bit of irony, Navigant Consulting’s Paula Mints was a Special Guest on the conference call and reiterated her Bearish 2009 Photovoltaic Backcast. At the February 17, 2010, Solar Forum held in Pasadena, California USA, facilitated by Tor Allen of the Rahus Institute/California Solar Center, Ms. Mints acquiesced to 6.039 GW of 2009 PV demand in her “Worldwide Solar Market: Review and Futurecast” presentation.

Mr. Johnson ignored my request for his current PV demand forecast only saying it had changed since November.

Until Hapoalim and Mr. Johnson issue a BUY or outperform rating on a relevant solar stock, their solar PV research and media commentary can be treated like a smoke alarm, a noise that at first requires attention but evolves into a serial string of false alarms. I initiate coverage on Hapoalim solar PV research with a Short Sell rating.

If German PV installers are crazy busy in June before the FiT cuts, will anyone have time for more than a quick visit to Intersolar 2010?

4 comments

  1. Insider says:

    Ed, the forecasts depend very much on when they were made. In early 2009 I did not expect WW demand to rise above 5 GW.

  2. disdaniel says:

    @ Insider

    Hence the need for analysts to work more than one month per year!

    “In a November 24, 2009, conference call, Mr. Johnson reviewed his Global PV Demand model forecasting a bearish 4.945 GW of PV installations in 2009”

    One would hope that with only 6 weeks left in 2009 Mr. Johnson might have had a chance to update his forecast.

  3. pelle says:

    Good article. I think Demand will continue to be strong in germany after 1 july. Module prices have fallen more than the feed in tariff cuts so its still good business. More countries will introduce feed in tarrifs in 2010 and 2h in italy will be strong.

  4. Jacopo says:

    Thanks, very usueful article. Quick questions, do you know if solar panels installed on a greenhouse would be classified as building-mounted PV plants? are there any extra incentives for PV plants installed on top of greenhouses? thanks for your help

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