German solar subsidy cut to spur price dip-iSuppli

SAN FRANCISCO (Reuters) - Germany's decision to cut solar subsidies would result in a significant fall in both the price of and demand for photovoltaic panels in the second quarter, research firm iSuppli said on Thursday.

Germany, the world's biggest solar market by installed capacity, has proposed a cut in solar feed-in tariffs -- prices utilities have to pay generators of renewable energy -- by 15 percent, putting pressure on industry players.

A final decision is planned within the next 10 days.

Only a 5 percent to 10 percent decrease had been expected, the report said.

"Germany's decision to cut its solar subsidies in the second quarter will make installations less attractive for the country's consumers," said Henning Wicht, principal analyst for iSuppli. "Because of this, German consumers will rush to make solar installations in the first quarter and then stop in the second quarter."

Feed-in tariffs are the sector's lifeline in Germany as long as grid-parity, the point at which renewables cost the same as fossil fuel-based power, has not been reached.

The firm said it expects the German market will overheat during the first three months of the year and then collapse during the next three months.

Solar installations in Germany will surge during the first quarter, starting at 200 megawatts in January and then rising to 300 megawatts in February and 500 megawatts in March, iSuppli predicted.

However, installations are likely to plunge to 50 megawatts in April and recover only to the 100 MW monthly level in May and June, the report said.

"As a result of the decline in installations, solar system prices in Germany could decline by 7.5 percent from April through the end of 2010, compared to less than the 5 percent normal rate of decline," Wicht said.

Germany accounted for 51 percent of global solar system installations in 2009, followed by Italy, which accounted for only 9 percent of global installations.

The news has had a big impact on U.S. listed shares of solar power companies, which fell between 1 and 5 percent after the announcement.

(Reporting by Poornima Gupta, editing by Gerald E. McCormick)