FRANKFURT Europe's solar industry should prepare to defend its lucrative market in Germany without becoming protectionist as incentive cuts loom there, the head of the world's largest photovoltaic industry association said.
Feed-in tariffs --the prices utilities have to pay generators of renewable energy -- are reduced annually in Germany. However, the government said last month it would make additional one-off cuts in April and July, arguing the sector was still overly subsidized.
"Overall, protectionist measures should not be considered. It usually does not improve the situation. But when you are building an industry with money from electricity consumers, as is the case in Germany, you should at least think about some options," Winfried Hoffmann, president of the European Photovoltaic Industry Association (EPIA), told Reuters in an interview.
Hoffmann, who is also chief technology officer for Applied Materials' energy and environmental solutions and display business, said EPIA was against the cuts, echoing the opposition of many solar company executives in Germany.
"We do believe that an additional cut in feed-in tariffs, such as the one currently planned in Germany, is inappropriate as the industry has very ambitious targets anyway -- even without the additional cuts," he said. "Should such cuts be implemented, it would be a very tough environment for European component producers."
Hoffmann said options for the European solar sector -- where cuts in Germany, the world's biggest solar market, threaten to put some renewable companies out of business -- could include getting government requirements that favor European companies.
"One possibility would be to look at certain quotas. China is currently discussing plans that would require the majority of components for solar plants to come from domestic producers. Or look at Canada, where only those plants built by domestic players qualify for the full amount of incentives. We should at least discuss such options in Europe as well," he said.
The annual reduction in feed-in tariffs force producers of solar components to decrease their production costs to reach grid parity -- the point at which the price for solar power and that for traditional fossil fuel-based power cross.
Germany's plans for the one-off cuts have led to concerns in the sector that Chinese solar companies, favored by better financing conditions, would be able to cope better with the reductions at the expense of their European peers.
"In contrast to European solar companies, which are having much greater difficulties in securing credit lines and loans, their Chinese peers are getting very generous conditions from domestic banks," Hoffmann said.
The Brussels-based EPIA groups more than 200 member companies, including German players Q-Cells, Phoenix Solar and SolarWorld, Norway's Renewable Energy Corp and U.S.-based SunPower.
(Editing by Karen Foster)