Solar Panel Demand Depressed By European Lending Crunch

By tightening credit lines for solar power developers, European banks are effectively reducing demand for photovoltaic panels in the world’s largest market for the technology.

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According to Renewable Energy Corp. CEO Ole Enger and Canadian Solar Inc. (NASDAQ:CSIQ) CFO Michael Potter, banks are paring short-term revolving credit lines for solar energy developers.

“Customers are having trouble getting both short-term and long-term financing,” said Enger. “With such low panel prices, we were expecting demand to be much higher by now. It’s about 10% less than expected, maybe even more.”

Last year, German, Italy, and Spain were the three biggest markets for solar energy, but the banks that loaned to finance those projects are now working to rebuild balance sheets and cope with an economic slump and concerns over the value of the sovereign debt they hold in their reserves, which has resulted in cuts to shorter-term financing. “we believe that’s impact the shorter-term demand,” said Potter, whose company is the third-largest manufacturer of crystalline solar modules, by capacity.

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European banks are trying to shrink their loan books, either by turning down loan applications, or by reducing the rolling loan facilities they have with solar developers. “You cannot get the first level of financing” needed to start a new solar project, said Potter.