BERLIN - Germany will add a record of up to 3 gigawatt (GW) of photovoltaic capacity this year due to unexpectedly strong demand in the final months of 2009, the head of Germany's BSW solar industry association said on Monday.

Carsten Koernig told Reuters the late surge would take the forecast past last month's increase to 2.5 GW from 2 GW.

We're all surprised by how strongly demand is picking up now, the BSW managing director said, adding the fourth quarter was especially robust due to pent-up demand from the easing of the financial crisis and fear of looming changes in German laws.

Lower prices have also attracted investors, he said.

It looks like we'll end up with 2.5 to 3 GW for 2009, he added. It's still too early to say if it will be closer to 3 or 2.5. It'll be well over 2.5. But it won't be over 3 GW simply because there isn't enough capacity. We're already at the limit.

Germany, the world's leader in photovoltaic which turns sunlight into electricity, had 5.3 GW installed at the end of 2008, including a previous record 1.6 GW added in 2008.

That was about a third of the world's total of 15 GW. Three GW installed this year would produce as much power as three large coal-burning plants or three nuclear power plants.

Spain installed a record 2.5 GW last year. But demand dropped sharply in Spain due to a cap on state support that also caused prices worldwide to fall due to overcapacity.

The slumping prices have hurt some companies. Two of the two biggest -- Q-Cells and Conergy -- both posted third quarter losses but aim to return to profit in 2010.

FALLING PRICES LIFTS DEMAND

Koernig said many companies in Germany have reached capacity limits and that demand for equipment such as inverters has far outstripped supply. He said he expected the strong demand to continue into 2010.

German group SMA Solar Technology, which makes inverters, last week raised its 2009 guidance for the second time.

Koernig said falling prices for PV systems that had exceeded the decline in state-mandated feed-in tariffs was a key reason for the strong growth in 2009 after the economic crisis slowed the sector's growth in the first half.

He said fears that Chancellor Angela Merkel's newly elected government might accelerate the scheduled cuts to feed-in tariffs contributed to the end of the year rush, even though it now appears unlikely there will be major changes in the law.

Our member companies report lower prices are attracting investors, Koernig said. There's also some who have long thought about investing in it but are pulling those plans forward now due to fears the laws would be changed.

Koernig said Germany's feed-in tariffs would decline, as already scheduled, by about 10 percent in 2010.

We're now confident the government does not want to endanger the sector and any adjustments to the law will be minor, Koernig said. The government sent us an important signal that they're still counting on renewable energy.

(Additional reporting by Christoph Steitz in Frankfurt and Gerard Wynn in London; Editing by David Cowell)

Germany Renewable energy Energy Solar