Solar installations: How long will boom last?

October 28, 2011

Henning Wicht.

Henning Wicht.

Dr. Henning Wicht, senior director and principal analyst, PV, IHS iSuppli Corp., presented a paper at PV Taiwan 2011. Let’s take a look at how long is the boom in solar installations likely to last!

According to Dr. Wicht, the solar market is forecasted to reach 21.9 GW in 2011. In 2011, global installations will record again and reach 21.9 GW. Germany and Italy will remain the leading markets. The USA and China are growing strongly. Worldwide PV installation forecast, updated May 20, 2011 is currently at around 25 percent. It will then likely dip to -10 percent in 2012, before finally moving up to 32-33 percent in 2015. The upside potential of 6.5 GW in 2012 may result in 27 GW of installations.

Installations in 2012 are forecasted at 20.5 GW (-11 percent). However, historically the photovoltaic market never declined. Even in 2009, the most challenging year, the market grew by 33 percent. Can it repeat again?

In that case, what’s the situation in the world right now?

He replied: “In China, the support of domestic supplier industry will be the driver, while there will be expansion of solar subsidy programs. The forecast for 2012 is 2.4GW and the upside potential for 2012 is 1 GW. Germany will see pro REE politics. There will be re-opening of the ground installation market segment; and lifting of installation target to 5 GW, the upper edge of the target corridor. The 2012 forecast is 5 GW and the upside potential for 2012 is 1 GW. Italy will also see pro REE politics. There will likely be a target corridor of 2-3 GW. The 2012 forecast is 2.5 GW and the upside potential is 2 GW.”

Also, Japan will see pro REE politics. There will be an expansion of solar subsidy programs. The 2012 forecast is 1.6 GW and the upside potential is 1 GW. The rest of the world (RoW) will see an enhanced support of REE at the expense of nuclear energy. There will also be implementation of incentives and funding for solar. The 2012 forecast is 9 GW and the upside potential is 1.5 GW. In total, the realistic upside potential (50 percent) is estimated at 24 GW for 2012, and the total upside potential is estimated at 27 GW.

“Now, if we re-look at the global PV installation forecast, it is likely to be 21.9 GW in 2011, 24.17 GW in 2012, 28.23 GW in 2013, 32.3 GW in 2014 and 43.05 GW in 2015. In 2011, the installations in Europe will reach 63 percent, but will decrease to 33 percent in 2015.”

Let’s have a look at the emerging  solar/PV market situation at the moment. According to Wicht, the solar emerging markets in 2014 include: Americas at 1,300 MW, Europe/Middle East at 2,150 MW, Africa at 950 MW, Asia 3,440 MW and Australia 775 MW.

So, where are prices going for modules, cells, wafers and poly? He said: “First, module prices will not stop falling. At the end of Q3 2011, modules are offered at 0.8€/W (factory gate). The residential systems are priced at 2.0€/W in Germany.”

The year end 2011 forecast, as of July 2011 shows the silicon (spot) price at $50-55/kg, wafer at $0.54/Wp (multi), cell at $0.80/Wp (for tier 2 players) and module at EUR 0.85/Wp (multi, top 10 players). The year end 2011 forecast, as of Sept. 2011 will show silicon (spot) price at $48-55/kg, wafer at $0.43~0.48/Wp (multi), cell at $0.72/Wp (for tier 2 players) and module: at EUR 0.80/Wp (top 10 players). Currently, the most profitable segments of the value chain lies at the tail ends in polysilicon and in the balance of system/inverter.

And, where does all of this place the cost roadmap? Dr. Henning Wicht said: “The total costs are set to drop below $1/W this year as many top tier companies guide $0.70/W non-silicon costs by the end of Q4 2011. By Q2 2012, this will drop further to $0.66/W, which combined with $45/kg polysilicon and a 5.5g/W assumption, brings us to $0.91/W total cost. As we move into 2014, new process technologies will penetrate the market, such as kerf recycling, reducing the grams per watt.”

As for prices, the market is set to become lean in 2012 as players compete in a flat market, and gross margins will reflect this competition. This trend will continue, but gradually lighten through 2013, as second tier players drop out and in 2014 with newer markets taking hold.

As for the products we will get to see, he added: “The trends have so far been continuous pressure on production cost and decreasing margins. Mainstream products will dominate. Crystalline silicon is setting the pace of cost/price decline. Low margins and cashflow impacts R&D. Radical innovation, e.g., MWT, backcontacts might be delayed since R&D spending will slow down (margins).”

Also, exotic products will face difficulties. Productivity and scale increase will not be as fast as mainstream. Spectrawatt, Evergreen and Solyndra are already going out of business. Niches like BIPV will grow slowly.

Solar/PV in future
Finally, what can we expect from solar/PV in the future? He said: “First, there will likely be grid parity in Germany by 2012. The assumptions of LCOE Germany 2011 include insolation at 900kWh/kW, interest rates at 5 percent, equity at 30 percent, and operations and maintenance at 1 percent per annum. The system price will likely be 2.4 €/Wp. The LCOE in 1H 2011 would be 0.26 €/kWh. The grid price will likely be 0.24 €/kWh (< 3,000kWh per year), as the electricity prices are increasing: 3 percent every year.

“Still on Germany, there is grid parity, but there is an absence of a PV boom. What is wrong? The microeconomic view is that the investment case is not working without additional incentives (FIT). Incentives for end-consumer of about 20-30 percent will be required. Also, the switching costs are not included.

“Further, grid parity does not include all costs, such as grid supply and management as well as storage. The question before families is: do we buy a new car or shall we invest in a solar system? A long-term solar investment often does not match households’ preferences.

“There is also a macroeconomic view. Now, grid parity should mean solar boom. However, traditional energy suppliers are losing revenue through decentral production. Grid management needs to develop for decentral production. Storage techniques have to be developed as well. For Conservative politicians, there are little incentives for them to change the system. They need to focus on centralised systems (gas, offshore wind) supporting the traditional energy system. The official quota is calculating at 2-5 percent of solar electricity in 2020.”

So, how long does the solar boom look like lasting? Dr. Wicht replied: “The MW growth is dropping in 2012 and 2013 before new dynamics will pick up. We expect two drivers to appear: One, emerging markets will take larger volumes. And two, we expect by 2014 that utilities in industrial countries will incorporate solar as a mainstream power generation technique. Today, the utilities are mainly fighting to limit solar because it eats into their business.”

For that matter, how does the Indian solar/PV appear? He added: “The Indian market is of high interest. Our PV installation forecast as of today is as follows: 2011: 0.5 GW; 2012: 0.9 GW; 2013: 1.4 GW; 2014: 2.1 GW; and 2015: 3.2 GW.”

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