Renewables Anecdotes and Implications
1) By the end of 2010, Germany’s installed wind and solar capacity could reach 40 gigawatts. Peak demand averages about 90 GW on a warm summer day. On a warm, sunny, breezy day, Germany may satisfy 40-50% of its peak demand with renewable electricity, possibly pushing low cost base loads (nuclear? coal?) out of the pool. This may turn out to be a very difficult and expensive management task for the country’s utility industry, and could force an end or limit to the most liberal renewables subsidy program in the world.
2) The combination of weak currency and the risk of subsidy cuts has pummeled solar and wind-related equities, and presents risk that the Chinese solar producers, selling out of a relatively strong currency into a weak one, will all report losses for the current quarter. I note that First Solar, with a year and a half of North America-based backlog, and 72% hedged at $1.27/Euro, could absorb a complete shutdown of the European solar market (which is unlikely, although severe subsidy modification is likely).
3) While most recent comments from leading wind turbine manufacturers points to flat/lower wind power installations in 2010, solar installations may grow 50%. The primary difference is the more generous solar subsidies, particularly in Germany where, despite roughly 25% lower subsidy levels, the IRRs of most projects remain in the low double digits.