Monday, June 20, 2011

FiT FiT FiT FiT Changes

The Germans decided to phase out their nukes in reaction to Fukushima. Can't say I blame them. The nuclear phase out coupled with the lethargic PV installation numbers so far this year have resulted in a decision to hold the FiT rates where they are rather than cutting them on the first of July. This means my previous projections won't apply.

Using my standard logic in regards to the connection between the FiT and system prices would lead me to believe that system prices are going to stay relatively flat at their current price give or take.

I see two big-picture things which could cause prices to go lower. The first one is interest rates creeping up. Higher interest rates mean system prices need to fall to maintain overall profitability. I think we've already seen interest rates climb up a smidge but I haven't rigorously verified this. The second thing that could happen would be a discontinuity in module prices. It seems everyday I read about all this inventory that's been building up in warehouses. This isn't 2009 though... We don't have all the expensive poly cushion built into module prices that we did back then. Margins are already tight so it's not as though manufacturers can come down in price that much.

Q2 average prices are 2422 Euro/kW according to the BSW. I had originally expected average prices to get all the way down to 2000 tp 2100 Euro/kW in the second half but I can't see this happening. I see prices staying mostly flat for the next six month and will be plesantly surpriced if they end the year under 2300 Euro/kW.

These system prices along with the expectation of a small bump in German retail electricity prices should lead to a strong finish to the year. The installers have been sitting on their asses and they've got to be ready to get back to work. I could see them averaging over a GW per month for the rest of the year. We've seen GW+ months before but we've never seen a long string of them. My wish-guess is that we see a string of GW+ months and end the year with 8 to 10 GW installed. This is a preposterously high guess given the state of things. What can I say? I'm high-pothesising.