Australia’s most populous state last week became the latest important market to announce sharp cut-backs in incentives for solar power, in the face of falling hardware costs and strong interest from developers. The fact that the move affected some installations already in place came as a particular jolt to a sector already facing uncertainty over future policy in many countries.

The New South Wales government announced a cut in the incentive previously guaranteed to small solar projects, to AUD 0.40 per KWh from July, a third lower than what they currently receive under the Solar Bonus Scheme. It also folded up the scheme launched in 2009, citing a “policy failure”. Attracting 160,000 participants, the bonus scheme cost the state as much as AUD 1.9bn (USD 2bn at today’s exchange rate).

The Australian government also decided to cut funding for the Solar Flagships programme by AUD 220m over the next two years, according to Treasurer Wayne Swan’s budget papers released on 10 May. The 2009 initiative aimed at setting up four large-scale, grid-connected power stations in the country. The government also plans to end the National Solar Schools Program in June 2013, two years earlier than planned.

Australia joins Spain and the Czech Republic in making retroactive cuts to previously promised subsidies for the PV sector in the face of a development rush. The feed-in-tariffs look generous as prices of solar wafers and cells soften. The Solar Value Chain Index and the Module Price Index of Bloomberg New Energy Finance show that prices across the PV value chain continued to slide during the month of May with both monocrystalline and multicrystalline silicon cell prices moving much closer to USD 1 per watt.

Spain suspended subsidy payments to another 157 PV installations last week for failing to prove that they had begun producing power by the 30 September 2008 deadline, taking the total number of operators penalised to 808. The tariff per unit paid for plants set up within the deadline was 47.5 euro cents per kWh. Some operators have accepted a lower tariff of 32.6 euro cents per kWh. The country may trim its goal of meeting 22.7% of national energy needs from renewable sources by 2020, according to some recent news reports.

In Germany, Chancellor Angela Merkel said that solar subsidies may be too high. “We do have to think about whether we can keep this up,” she said. Netherlands is also planning to scale back offshore wind incentives. Italy has passed a law that will progressively lower subsidies.

While Europe touches the brake on incentives for renewable power, many emerging economies are just beginning to step on the accelerator. Jordan invited bidders for 1.8GW of clean energy projects, of which about 1.2GW would be wind energy plants and 600MW would be solar plants. Morocco is rolling out 1GW of wind energy capacity. It shortlisted bidders last week to build and operate a 150MW plant – the first project in its programme. Enel Green Power, EDF Energies, Mitsui and AES are among those in the race. South Africa is starting its renewable energy build-out. China’s Longyuan Power announced an investment of USD 1.5bn to build 1GW of wind farms in the eastern Anhui province.

The potential of energy needs that can be met by renewables is very high. According to a study by the United Nations Intergovernmental Panel on Climate Change, renewable energy could meet 77% of demand by 2050, though this would require investment of USD 5.1 trillion in the current decade and USD 7.2 trillion in the decade to 2030. The USD 5.1 trillion for this decade would be, per year, just over double the figure of USD 243bn achieved in 2010 according to Bloomberg New Energy Finance.

On the fund-raising side, Warren Buffett-backed Chinese carmaker BYD received approval to sell shares in China. The company is already listed in Hong Kong, and has a market capitalisation of the equivalent of USD 8bn. Meanwhile, Korean polysilicon maker OCI said it plans to raise USD 700m selling global depository receipts to overseas investors.