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UTILITY WEEK | 2nd - 8Th MaY 2014 | 21 Finance & Investment T he strong growth of the solar industry in China, combined with a stagnation of demand in Ger- many and Italy, led to significant oversupply in the market. As a result, the prices for solar technology more than halved in less than two years, leading to financial distress for many players in the industry. European players were hit especially hard because they were faced with significantly higher manufacturing costs compared with Asian competitors, but customers were willing to pay only a small premium for products made in Europe. Therefore, many larger, glob- ally leading players such as Siemens, Bosch and Schott decided to leave the industry, while others were in serious financial distress or even became insolvent, such as Centrotherm, Q-Cells, Solon or Conergy. On the other hand, players such as Hanwha, ACWA, Kawa and even SolarWorld, regarded this environment as an opportunity and took over troubled businesses to strengthen their own operations and expand their European presence. Key rationales for these transactions were primarily the excellent technological know-how, the long-standing expertise in the industry, wide-rang- ing and established distribution networks and the glob- ally known brands of the companies being acquired. Following years of declining prices and an overall consolidation of the market, the solar industry is now showing signs of recovery. Prices for solar technology have levelled out and leading players are already look- ing at expanding again. This development is backed by a pick-up in global demand, coming from markets such as China, Japan and the US. In Europe, the main beneficiaries of this recovery will be the leading equipment manufacturers, given a rising need for technology upgrades and capacity expansions in parts of the value chain, as well as those players that were able to successfully streamline their operations during the downturn and can now provide premium products at competitive prices on a global scale. Daniel Wong, head of power & utilities, infrastructure and real estate, Macquarie Capital Europe "After years of declining prices and market consolidation, the solar industry is now showing signs of recovery." Investor view Daniel Wong Analysis Public faces bill for Orkney link Taxpayers may pay part of the cost of connection for marine energy projects, says Megan Darby. M arine energy research projects near the Orkney islands may need public funding to get a grid connection, according to a government report published on Monday. There is a "looming underwriting funding gap" for a proposed 180MW cable to Orkney, the report warned. The link is needed to support a growing number of wave and tidal projects, but the technology is not yet advanced enough commercially to pay for the related infrastructure. It "may be justified" to fund some research and devel- opment grid capacity, the report said. Funds would most likely come through a body such as the European Marine Energy Centre, which hosts ten developers in the area. Orkney is one of three planned Scottish island trans- mission connections caught in a deadlock. The others are a 450MW cable to the Western Isles and a 600MW link to the Shetland Isles. Ofgem will only approve investment in the cables if there is commitment from island renewa- bles developers to use them. Meanwhile, renewables developers are reluctant to make investment decisions amid uncertainty over when the grid connection will be available. It can take upwards of four years to get an undersea cable approved and built. There is also the issue of cost: island windfarms will face higher grid access charges than their mainland counterparts, and the Department of Energy and Climate Change (Decc) has proposed a higher "strike price" of £115/MWh for power generated by island windfarms. The report, commissioned from consultancy Xero by the UK and Scottish governments, said this higher strike price was not enough. It said: "The Scottish islands strike price needs to factor in lengthy grid connection lead times and provide longer-term visibility on levels of support." Energy secretary Ed Davey said: "We have already made more progress in the past year than for many years, aer the UK government announced last December addi- tional support for onshore wind projects, with a special higher Scottish Islands strike price… I'm determined to tackle remaining issues despite the complexity involved." Scottish energy minister Fergus Ewing highlighted the "significant challenges" in getting grid connections completed in time. He said: "There is wide acknowledge- ment across both the Scottish and UK governments that the Scottish islands hold huge renewable energy poten- tial, which could make a substantial contribution to both governments' 2020 renewable energy targets and longer- term climate change ambitions." Decc is expected to publish an update on the renew- ables subsidy budget, including support for Scottish island projects, in the next few weeks. Customers were willing to pay only a small premium for products made in Europe