Photovoltaic Power Generation Market in Europe Is Favored, Yield Fluctuations Become A Challenge

Bloomberg New Energy Finance reported that, with the background of inflation and soaring electricity prices, Europeans hope to improve their electricity self-sufficiency to control household electricity costs. Therefore, photovoltaic power generation systems are favored, attracting a large amount of capital to pour into the photovoltaic market. However, it is not easy for photovoltaic companies to continue to attract capital, especially for start-ups whose yields fluctuate greatly.

According to data from industry consulting company Avent Abacus, in the first five months of this year, European photovoltaic start-ups raised US$6 billion in financing, an increase of 398% over the same period last year, and reached 83% of the total financing in 2022.

Although the overall development trend of European PV financing is consistent with the global trend, Avent Abacus believes that the confidence of the European capital market in PV is still insufficient. At present, photovoltaic power only accounts for 7.6% of the total power generation in Europe, which is still less than wind power.

According to the analysis of Avent Abacus, the increase in demand for photovoltaic power generation in the power consumption market is the main reason for the influx of capital. The European energy crisis has led to a sharp rise in electricity prices. The installation of photovoltaic power generation systems can reduce household energy costs, which has attracted a wave of investment in the capital market.

However, many industry research companies believe that the influx of capital into photovoltaics is not a spontaneous behavior under the active development of the market economy, but a forced choice after the emergence of special social backgrounds and problems.

Although electricity prices in Europe are currently at a high level, future energy prices cannot be stable for a long time, and photovoltaic companies face the risk of large fluctuations in yield.

The development effect and project quality of photovoltaic start-ups will directly affect the willingness of capital to invest. Only companies with obvious development results and high quality can be favored by capital. A stable rate of return is the main criterion for investors to decide whether to invest. Attracting new investments will be difficult for companies with volatile yields.

In addition, photovoltaic power generation companies are also faced with the challenge of large fluctuations in electricity prices. Recently, negative electricity prices have appeared in the electricity trading markets of many European countries, which has resulted in photovoltaic power generation companies being unable to obtain subsidies from the CFD mechanism during negative electricity price periods, and many photovoltaic power stations have chosen to suspend power generation. In the future, electricity price fluctuations will become the norm, and photovoltaic companies need to solve the problem of yield fluctuations in order to maintain competitiveness.

At present, the strategic investment of traditional energy companies and the incubation investment of venture capital companies are the main financing channels for European photovoltaic companies. Although listing and other means can also be used for financing, due to the small scale of European photovoltaic companies and the low stock market valuations, financing channels are still relatively simple, and most photovoltaic companies are also facing the fate of being acquired.

Nevertheless, European photovoltaic companies still have development opportunities. Photovoltaics are the key to future energy supply, and the fundamentals of industrial development are sound. Only by continuously promoting technology and business model innovation can European photovoltaic companies attract large-scale financing and maintain competitiveness.