REPORT INTRODUCTION

The European photovoltaic PV market, buoyant in 2007, is heading for a similar outcome this year. However, some turbulence lies ahead as European governments get to grips with rapidly escalating program costs. As a consequence, the pathway to downstream corporate profitability in this region will become significantly more challenging.

Faster annual feed-in tariff decline in Germany and revised incentive terms in Spain next year will be partially offset by fast growing "start-up" European markets and significant adjustments in factory gate module prices, all of which will form part of the new downstream commercial equation. With relatively few countries and market segments forming the core marketing opportunities, targeted customer segment marketing and sales channel strategy will return to top of the agenda.

Germany's review of its Renewable Energy Law, the EEG, has crystallized outcomes for PV feed-in tariffs that now set a clear policy framework in the short term. Political consensus has centered on feed-in tariff declines from 8-11% depending on system size and type, and the size of the market relative to government targets.

Summarizing the 2007 outcomes, the European market grew 87% to 2,157 MW in 2007, led by explosive growth in Spain (to 640 MW) and consistent development of the bedrock German market (reaching 1328 MW). In 2007, 40% of the German market consisted of systems below 10 kilowatt, while in Spain 91% of the plants connected to the grid were 1 MW or above that year. Listing of PV project details from the Solarbuzz database, gives outstanding visibility to this segment.

The Italian PV market grew by 350% to 90 MW in 2007. The largest customer group was the commercial segment, accounting for 46% of the market.

In France, the market grew by 257% to 50 MW in 2007, with over 60% of the year's newly installed power located in the French overseas territories.

55 itemized module supply contracts into European customers total 3.1 GW of orders help give character to the global nature of these markets.

Meanwhile, in a review of German downstream channel module flows, 2007 global solar module volumes, including those supplied by domestic manufacturers, totalled via wholesaler/integrators accounted for 881MW via the large wholesaler/integrators, a growth of 49% over 2006 volumes.

The largest downstream channel in Spain was direct to end user/investors which accounted for 290MW of modules.

The report concludes with a 5-year forecast, which includes an intensive analysis of project economics for residential, commercial and power plant systems in the key European PV markets.

This shows how investment returns will change with declining factory gate and system installed price movements. These results are integrated with the policy environment to shape how the European market segments will develop over the 2008-2012 period.

Utilizing the unparalleled access that Solarbuzz has within the PV industry, this insider report is targetted at established major PV companies in the downstream, new entrants to European country markets and investment analysts focused on country market and corporate developments.

Further details about: European Major PV Markets Report 2008