German utilities looking to invest in Photovoltaic Power Plants as solar modular prices drop to attractive levels

Analyst Commentary, Matthew Bovencamp: Two of Germany’s largest utility companies, EON AG and RWE AG plan to invest in photovoltaic plants as prices on solar modules continue to become more attractive. Germany is looking to replace energy generation as nuclear plants are being shut down in reaction to last year’s Fukushima disaster. RWE is planning to invest about $6.6 billion in renewables. Most of the $6.6 billion will be invested in offshore wind farms due to the low hours of sunshine and plans of reduced solar subsidies in Germany. However, RWE is looking at investing outside Germany in places such as North Africa, Middle East, and other European countries with more attractive geographic locations for solar plants. EON, Germany’s largest utility company, is also planning to increase their current solar capacity. Currently, EON has 51 megawatt photovoltaic capacity located in Italy and France. EON plans to add 70 megawatt of photovoltaic capacity each year to bring the total to over 600 megawatts in the coming years. 

Bloomberg New Energy Finance estimates solar panel costs have decreased about 80% in the past five years and 2011 solar installations rose about 50% to a record 28 gigawatts. As countries continue to search for alternate sources of energy and costs for renewable energy continues to decline, we see the renewable energy sector continuing to gain momentum. Fossil fuel prices will continue to fluctuate due to political unrests and supply limitations, while alternative energy such as solar power offers energy which is renewable, through an almost unlimited supply of inputs. We believe there is significant potential in solar and other renewable energy production for players that have sufficient resources to use the latest technology inputs. 

Source: Bloomberg (Apr 11), EON AG

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