The effect of new photovoltaic power station installations on economic activity

The current development of photovoltaic power stations, which is largely temporary in nature owing to the way state regulation is configured, is noticeably affecting foreign trade, investment and economic activity.

Imports of photovoltaic cells started to surge after their prices dropped sharply in 2009. The largest difference between imports and exports occurred in late 2009. Net imports amounted to CZK 14.8 billion for the whole year. Data on net imports for the first eight months of 2010 are also showing an upward tendency, with net imports amounting to CZK 13.7 billion (see Chart 1). This is in line with data from the Energy Regulatory Office (ERO) regarding installed capacity of solar power stations (see Chart 2). In 2009, most installations took place in December, and the data and published estimates for 2010 suggest that most installations will again be made in the second half of the year. The estimates for installed capacity at the end of 2010 range between 1,200 MW (Czech Photovoltaic Industry Association) and 1,600 MW (ERO upper estimate).

Chart 1 (Box) Imports and exports of photovoltaic panels
High demand for solar panels was reflected in very high import volumes in late 2009 and in the second half of 2010
(CZK billions)

Chart 2 (Box) Installed capacity of solar power stations
Installed capacity will continue to surge
(MW)

If we assume that most net imports of photovoltaic cells were used for new installations in 2009, we can quantify the import intensity of installing 1W, which was around CZK 37. Assuming that prices will decline by a further 15%, we estimate the effect of net nominal imports of photovoltaic cells on the trade balance at CZK 23–36 billion in 2010. We assume that most imports this year will take place in the second half of the year.

When quantifying the impacts on the domestic economy, the level of investment stemming from new installations must be estimated. If we increase the estimated average import price of photovoltaic cells to include sellers’ margins and VAT, we get a price very close to the published weighted average price of photovoltaic cells in the Czech Republic of about CZK 46 per W¹. However, photovoltaic cells account for only part of the overall installation costs. Assuming that the average cost of photovoltaic cells accounts for about 75% of the total investment, the average costs per 1W come to around CZK 63 for 2009 and CZK 53 for 2010. According to these calculations, solar power station installations increased the volume of nominal fixed investment by CZK 25 billion in 2009, and for 2010 we expect an effect of CZK 39–60 billion. The net effect on GDP is therefore estimated at 0.3% of nominal GDP in 2009 and 0.4–0.7% of nominal GDP in 2010.

Table 1 (Box)  Estimate of the effect of photovoltaic energy on economic activity            
Investment in solar panels significantly increased the volume of fixed investment in 2009 and 2010

1 http://www.renewableenergyworld.com/rea/news/article/2010/08/strong-pv-demand-in-2009-2010-and-2011