The outlook for the global solar PV industry does not look encouraging, at least, if recent happenings are set as benchmark. How will the global solar PV industry perform in 2013? How will the modules segment perform? How will solar cells segment perform in 2013?
Dr. Henning Wicht, director and principal analyst Photovoltaics, IHS iSuppli, said: “The industry will remain under pressure. We expect prices to decline further on all nodes. Margins will remain thin. Cell production outside of China, in particular Taiwan, can benefit from US anti-dumping tariffs on Chinese modules.
“However, Taiwanese cell producers will face difficulties, since European customer base will shrink. Module production will remain challenging. Prices are expected to decline further due to overcapacities and fierce competition.” Here is a graph of the module price decline.
There are a few other questions. Did the global solar PV industry touch 22 GW in 2012? What is the prediction for 2013? Also, how is Japan doing? Are we seeing pro REE politics there?
Dr. Wicht said that IHS iSuppli expects 31 GW of new installations in 2012. For 2013 IHS iSuppli forecasts 35 GW. “Installations in Europe
are declining, while installations in emerging markets and Asia are increasing. China, US and many of the new markets favor ground installations. Europe and Japan address more rooftops. Japan has been seeing a lot of activities in H2-2012. We expect this boom to continue into 2013.
“IHS expects that the Japanese government will adjust tariffs in 2013, since investment conditions are very generous. This is helpful to kick-start the market. However, the generous tariffs will become expensive for rate payers if maintained too long. Details on tariff adjustment are not yet defined.”
Finally, how will the industry focus on electricity storage and grid integration in 2013? And, what’s going to happen with Chinese suppliers in 2013?
Dr. Wicht replied: “Solar companies will see continuing and even increasing difficulties during 2013. Thin margins for all producers (including silicon) will maintain. Smaller players will stop production. Also 2nd and 3rd tier Chinese suppliers will partially stop production. Tier 1 Chinese players will face difficulties of financing if stock prices will not increase and companies will be excluded of Nasdaq (pending).
“Also, anti-dumping investigations in Europe can harm Chinese module business in 2013 since buyers will be careful to avoid any retroactive tariff from beginning of 2013. Strategy wise, 2013 will be a very difficult year. Electricity storage is an emerging topic, which is now addressed mainly by inverter suppliers. Grid integration of PV power is becoming a concern of EPCs and investors.”
Here is an outlook on the global solar PV industry for 2012, done with the assistance of Dr. Henning Wicht, senior director and principal analyst, IHS iSuppli. First, the outlook for the global solar PV industry for 2012. According to Dr. Wicht, the bottom up analysis results for the global solar PV industry is at 22 GW. However there is upside potential, e.g., in Italy and China, of a total of 6 GW.
On the same vein, what is the outlook for solar cell production in 2012? He said that based on the 22 GW market, 19.6 GW of cSi cells will be produced in 2012. If the market is growing faster (upside potential), then 24 GW is possible.
Let us now have a look at the current top 15 producers. The graphs here are for global crystalline module producers and global thin film module producers, as of Q2 2011. The data for 2012 will certainly look different.
Fig. 1 is about the crystalline module producers, as of Q2-11, with Suntech the leader at 9.8 percent share. Yingli with 6.8 percent and LDK with 6.4 percent are the next two. The others are: Trina Solar 6.2 percent, Canadian Solar 5.2 percent, Sharp 4.6 percent, Jinko 3.7 percent, Hanwha Solar 3.6 percent, Jabil Circuit 3.5 percent, SolarWorld 3.3 percent, REC 3.2 percent, Sunpower and Kyocera with 2.8 percent each, Sanyo Electric 2.5 percent, Bosch Solar 2.4 percent and all of the others at 33.3 percent.
Fig. 2 is about the global thin film module producers, as of Q2 2011, with First Solar as
the leader at 45.5 percent share. Solar Frontier with 10.5 percent and Sharp with 5.6 percent are the next two. The others are pretty small at the moment, with some of the major ones being Q-Cells with 3 percent, Bosch Solar 1.7 percent, etc. Others constitute 15.5 percent.
Improve cost structure, diversify downstream!
Two years ago, iSuppli had advised: ” improve the cost structure, improve the sales side, and diversify downstream.” How true does these hold for 2012?
Dr. Wicht said: “This advice remains very valid. Since 2009, nearly all Western players have developed downstream activities. They are using the power plant business to outbalance week demand and to enter into emerging markets.
“The challenge is now at the Chinese players: How do you maintain the high utilization of factories when sales is not visibility and there is no downstream business? PV installations in China are used as a “fast exit”, generating module sales and maintaining utilization (e.g., Yingli).” Read more…
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. Read more…
Part III in the series ‘Round-up 2009′ features the top posts in solar photovoltaics during the year gone by. Some friends and readers have spent hours searching for blog posts. Hope this list will help them to easily find the blog post they are looking for. Here you go!
Dramatic price forecast to reshape PV industry: iSuppli
Opportunities in India’s solar/PV landscape: SEMI India
More mature PV industry likely post solar downturn: iSuppli
How is PV industry reacting to oversupply conditions?
Dr. Robert Castellano on how to make solar a ‘hot’ sector again – 1
Dr. Robert Castellano on how to make solar a ‘hot’ sector again – 2
Consolidation likely in solar cell manufacturing to control oversupply, and, lessons for India!
Top-10 solar cell suppliers in 2009: iSuppli — This was also a top read article during 2009!
Solar PV industry scenario in India!
Rising opportunities in India’s solar PV space
Highest efficiency Si solar cells realised with n-Si — Prof. Weber, Fraunhofer ISE
Solar Semiconductor’s Hari Surapaneni on why solar is good for India!
India major destination for solar/PV investments!
Dynamics of the global PV industry
Prof. Eicke R. Weber, Fraunhofer Institute on future of PV
Solar PV and Utility 2.0: Making the grid smarter!
Union Cabinet approves National Solar Mission; 20 GW by 2022 (not 2020)! — The day and event everyone’s waited so very patiently for long in the Indian solar/PV industry!
Indian government unveils National Solar Mission Plan document!
What’s next in PV equipment?
Again, it is extremely difficult for me to list the Top 10. If you can decide, that’ll be great.
Best wishes to my dear friends, well-wishers and everyone for a happy and prosperous 2010!
It was a pleasure to finally meet up with Dr. Henning Wicht, Senior Director & Principal Analyst iSuppli, at the recently held Solarcon India 2009 event in Hyderabad, India.
He was also a speaker in the session: “Government policies shaping the growth of the industry.” Here are some of the highlights from his presentation.
According to Dr. Wicht, the global PV installation is likely to be around 8.3 GW in 2010. “However, it is too early to say whether this is good news. We will also see a 30 GW likely happening in 2013.” Italy, Spain, California (USA), France, Greece, Blugaria, Czech Republic, China and the USA are likely to witness aboive 60 percent CAGR during this period.
Touching on solar module production, he said that total PV modules is likely to grow from 14,52 GW in 2010 to 20,85 GW in 2013. During this period, production of crystalline modules will likely increase from 11 GW in 2010 to 13,97 GW in 2013, while production of thin film modules will likely increase from 3,53 GW to 6,87 GW in 2013.
The total crystalline cell production roadmap from is likely to expand from 11.679 GW in 2010 to 16.985 GW in 2013. The solar polysilicon production roadmap (2010-2013) is likely to expand from 22,79 GW in 2010 to 48,68 GW in 2013. According to Dr. Wicht, the dynamics of supply and demand determine the future price levels . Supply and demand for modules will likely balance in 2010. Also, polysilicon price will likely drop next year.
According to iSuppli‘s view at the end of Q3-2009 (source: PV Market tracker):
* German market picks up from July. In 2009 2,5 GW of PV system installations is possible in Germany (compared to 1,5 GW in 2008).
* Module oversupply peaked in middle of 2009.
* Installations in 2010 are estimated to grow by 60 percent reaching 8,343 GW.
* It will depend on Q4-2009 if supply and demand will be more outbalanced in 2010, or if the oversupply will continue next year.
It has now been indicated in Europe that “12 percent of EU 27 electricity shall be provided by PV”. About 462 TWh corresponds to 12 percent in 2020. Also, the insolation average: 1200 kWh/kWp installed. This would indicate 390 GW has to be installed in Europe by 2020. In 2008, only 10 GW are installed. The PV industry in Europe is likely to grow at a CAGR of 35 percent over the next 12 years.
Will the industry be able to install 100 GW in the year 2020 in Europe? According to the PV Systems Market Tracker, by 2013, annual installations of 17 GW in Europe looks likely, and 12 GW in the rest of the world.
Dr. Wicht compared three approaches for evaluating the PV market. He advised:
* 120 to 130 GW is forecasted by bottom up approach and by top down approach. assuming that PV will provide 1 to 2 percent of total energy consumption.
* 100 GW may seem very large compared with 4 to 5 GW in 2009 but is it feasible?
* PV is still in the early stage of adoption; large solar markets, eg., US, China and India have just started.
* By 2020, it is likely that PV would contribute 1 to 2 percent to the total energy consumption of the respective region.
* Markets can grow fast, when ground installation is possible (Spain).
Hence, the annual installations of 100 GW for Europe in 2020 looks realistic!
Dr. Wicht advised pursuing CO2 emission trading and grid management. A separate grid management is recommended from traditional energy suppliers. Also, there is a need to guarantee grid access for renewables (secure investment case).
Worldwide CO2 emission trading is the next way to grow PV. Recommendations include making energy by fossil resources more expensive to trigger demand in non-PV supporting regions. Also, there’s a need to generate budgets and funds for REE as well as stimulate self-consumption of REE energy.
Those interested in reading more on Solarcon 2009 can see my articles on the India Semiconductor Association’s web site.
Recently, iSuppli came out with a study on whether the current solar downturn will lead to a more mature photovoltaic industry! According to iSuppli, severe downturn in the global PV market in 2009 could actually have a more positive outcome for the global solar industry, yielding a more mature and orderly supply chain when growth returns.
Worldwide installations of PV systems will decline to 3.5 Gigawatts (GW) in 2009, down 32 percent from 5.2GW in 2008. With the average price per solar watt declining by 12 percent in 2009, global revenue generated by PV system installations will plunge by 40.2 percent to $18.2 billion, down from $30.5 billion in 2008.
“For years, the PV industry enjoyed vigorous double-digit annual growth in the 40 percent range, spurring a wild-west mentality among market participants,” said Dr. Henning Wicht, senior director and principal analyst for iSuppli.
“An ever-rising flood of market participants attempted to capitalize on this growth, all hoping to claim a 10 percent share of market revenue by throwing more production capacity into the market. This overproduction situation, along with a decline in demand, will lead to the sharp, unprecedented fall in PV industry revenue in 2009,” he added.
What about new entrants?
I quizzed Dr. Wicht how this downturn would lead to a more mature PV industry and what about the new entrants?
Dr. Wicht said: “We expect that the solar industry will invest more softly. The years 2007/2008 were special. Each of the hundreds of suppliers were ready to invest to reach 10 percent market share. This is not likely to repeat.” Interesting! “Also, the new entrants will invest more modestly and closely linked to fixed customer orders,” he added.
Role of FIs in solar
Are financial institutions paying that much importance to solar, especially in places such as India? This is an issue that was also raised and discussed at the recently held SEMI India solar/PV paper launch.
According to Dr. Wicht, the financial investors are definitely looking into solar, mainly in Europe and US. “PV in India is still at the very beginning. From my experience, there is not yet much attention of financial investors for PV in India,” he noted.
Off-grid or grid connected apps?
Turning the discussion to off-grid vs. grid connected applications, I sought Dr. Wicht’s advice on the route that should be followed. Again, this topic was discussed during the SEMI India meet early this month. Hence, the interest for India in this field is significant!
Dr. Wicht highlighted: “Installations for the off-grid remains a small portion in terms of the sold modules (MW), about 5 percent. The off-grid system selling might be a good way to start in places such as India. For cell and module production, on-grid is where the volumes are needed.” Hope the Indian solar photovoltaics industry takes note of this valuable advice — and it holds good for other regions as well.
I also asked him regarding a good low carbon growth strategy for developing countries. Dr. Wicht said that depending on the place, it could be a combination of wind, solar and biomass.
Compensating for Spanish whiplash!
According to iSuppli’s study, the single event most responsible for the PV market slowdown in 2009 was a sharp decline in expected PV installations in Spain. Also, beyond Spain, the PV market is being adversely impacted by the credit crunch.
Therefore, why won’t attractive investment conditions in other some countries compensate for the Spanish whiplash?
Dr. Wicht said: “The investigated countries start from a low level of installations and show long, administrative procedures, limits of feed-in tarifs and reduced capital access. They simply cannot compensate the 2.6GW of Spain in 2008.”
Finally, what is likely to happen after the shakeout or fall in the coming years? He added: “System demand will grow stronger from H2-2010, absorbing the inventory, which has been built up in 2009 and 2010. From 2011, demand for modules will rise. It might pick up quickly. Then, companies, which are able to supply on short notice/(flexibility) can gain market share.”
Let me see if I can convince Dr. Wicht to visit India and share his insights with the Indian solar/PV industry. Last, but not the least, thanks Jon!
The severe downturn in the global Photovoltaic (PV) market in 2009 actually could have a positive outcome for the worldwide solar industry, yielding a more mature and orderly supply chain when growth returns, according to iSuppli Corp.
Worldwide installations of PV systems will decline to 3.5 Gigawatts (GW) in 2009, down 32 percent from 5.2GW in 2008. With the average price per solar watt declining by 12 percent in 2009, global revenue generated by PV system installations will plunge by 40.2 percent to $18.2 billion, down from $30.5 billion in 2008.
The figures present iSuppli’s forecasts of global PV installations in terms of gigawatts and revenue.
“For years, the PV industry enjoyed vigorous double-digit annual growth in the 40 percent range, spurring a wild-west mentality among market participants,” said Dr. Henning Wicht, senior director and principal analyst for iSuppli. “An ever-rising flood of market participants attempted to capitalize on this growth, all hoping to claim a 10 percent share of market revenue by throwing more production capacity into the market. This overproduction situation, along with a decline in demand, will lead to the sharp, unprecedented fall in PV industry revenue in 2009.”
However, the 2009 PV downturn, like the PC shakeout of the mid 1980s, is likely to change the current market paradigm, cutting down on industry excesses and leading to a more mature market in 2010 and beyond.
“The number of new suppliers entering and competing in the PV supply chain will decelerate and the rate of new capacity additions will slow, bringing a better balance between supply and demand in the future,” Wicht said.
Blame it on Spain
The single event most responsible for the 2009 PV market slowdown was a sharp decline in expected PV installations in Spain. Spain accounted for 50 percent of worldwide installations in 2008. An artificial demand surge had been created in Spain as the time approached when the country’s feed-in-tariff rate was set to drop and a new cap of 500 Megawatts (MW) loomed for projects qualifying for the above-market tariff. This set a well-defined deadline for growth in the Spanish market in 2009 and 2010.
While the Spanish situation is spurring a surge in excess inventory and falling prices for solar cells and systems, this will not stimulate sufficient demand to compensate for the lost sales in 2009. Even new and upgraded incentives for solar installations from nations including the United States and Japan—and attractive investment conditions in France, Italy, the Czech Republic, Greece and other countries—cannot compensate for the Spanish whiplash in 2009.
The Spanish impact will continue into 2010, restraining global revenue growth to 29.2 percent for the year. Beyond Spain, the PV market is being adversely impacted by the credit crunch.
“Power production investors and commercial entities are at least partially dependent upon debt financing,” Wicht noted. “Starting in the first quarter of 2009, many large and medium solar-installation projects went on hold as they awaited a thaw in bank credit flows.”
After the fall
After 2010, the fundamental drivers of PV demand will reassert themselves, bringing a 57.8 percent increase in revenue in 2011 and similar growth rates in 2012 and 2013.
“PV remains attractive because it continues to demonstrate a favorable Return on Investment (RoI),” Wicht said. “Furthermore, government incentives in the form of above-market feed-in-tariffs and tax breaks will remain in place, making the RoI equations viable through 2012. Cost reductions will lead to attractive RoI and payback periods even without governmental help after 2012.”
Furthermore, lower system prices will open up new markets by lowering incentives and subvention costs. The lower the PV system prices are, the lower the incentives will have to be. Developing regions will be big the beneficiaries of these lower prices and thus will grow faster than the global average, Wicht said.
Source: iSuppli, USA
I was very fortunate to attend a webinar on solar PV a couple of days back, thanks to iSuppli, USA. The webinar looked at:
* Polysilicon — what is going on in the market?
* Cells and modules — where will the prices go?
He said: “We believe that solar is a fantastic market. It has been growing over the last four years by revenue. It will continue to grow! There are not many industries with a growth path like that! However, in last the 18 months, the supply has been disconnected from demand.”
This is exactly the point iSuppli addressed in its webinar. Dr. Wicht was accompanied by Stefan de Haan, senior analyst, photovoltaics, iSuppli.
iSuppli’s recent findings are:
* Severe supply chain imbalances exist at polysilicon/wafer and cell/module levels.
* Short term polysilicon and module prices will decrease significantly.
Polysilicon: What’s going on with supply and pricing?
If you looked at the global solar PV industry, many plants are under construction, and there are huge capacity expansion plans. There has been a dramatic decrease in production. In 2008, iSuppli estimated total production of solar PV at 60,000 metric tons. In 2009, about 100,000 metric tons will be produced!
What are the reasons for this supply situation? In 2005-06, the high margins of this industry attracted several newcomers. The cycle time to ramp up a polysilicon plant is 24-36 months, and including another 12 months to get finance, it takes about four years.
He said: “The decisions taken in year 2005-06 are coming to the market now. This is also why we see the big ramp in 2009-10. This is also the reason why the industry will have big difficulties to react on a short term notice. The polysilicon industry is a big super tanker, which has difficulties to maneuver on short term.”
Looking at the demand side of things, iSuppli showed a graph where the two curves — polysilicon supply and polysilicon demand meet, or rather cross, in early 2010. From that point on, the supply line passes the demand line. “That means, from that time onward, we definitely see prices for polysilicon decreasing,” he said.
What will happen in 2009?
The key point to note is that the ramping rates of polysilicon and solar cells are completely different! The ramping rate of polysilicon is much steeper, than on the cell side. Polysilicon is more than doubling, while the cell industry is growing at 34 percent.
According to Dr. Wicht, the gap between demand and supply is already shrinking fast in 2009, which will lead to a price decrease in 2009.
Coming to prices, the polysilicon market boasts two kinds of prices — long term and spot market. According to Dr. Wicht, the long term prices are already decreasing from around $100/kg in 2008, and it is expected to be around $80/kg in 2009.
On the other hand, the spot market price peaked in 2008 at around $400/kg. Now, it has already dropped. It will continue to drop, far beyond today’s long term contract price, which will then, from 2010 onward, make up another round of discussion. This is because companies might tend to get out of their long term contracts to secure their silicon on the spot!
Summarizing, he said that polysilicon production will increase heavily. Next, supply will pass demand from 2010 onward, and then the industry will enter the oversupply situation for the next three to four years. The polysilicon industry will also react. In fact, iSuppli anticipates a recent announcement from a solar PV company to expand production capacity would be the last for quite a while!
What about projects on the way? These projects have to come on to the market and many of those will! This is precisely the reason why the industry will see silicon passing solar cells in capacity over the next few years.
Stefan de Haan added that the output of the PV modules industry will grow. The total module prod will likely grow to 11GW this year and to 20GW in 2012. Thin film modules will continuously gain market share and it probably account for 1/3rd of the total market by 2012. Production of crystalline cells will run in parallel. It is likely to reach 9GW for 2009 and 18GW for 2012.
Commenting on the competitive landscape, he added that many new players would be entering production in 2009, especially in the thin film business. “However, the current leaders — QCells, Suntech and First Solar — will increase their edge over the competition in terms of absolute production volumes,” he said.
In general, it is a good thing that the industry is growing and that all of this capacity is coming online. However, this raises the question: can demand can keep up with the supply?
According to iSuppli, in 2009, the installation market will be flattening. In the sense, iSuppli projects that 4.2GW will be installed this year, or about 10 percent growth. However, this growth is much smaller in comparison to the previous years. Some of the reasons for slower growth in 2009 include changes in sustained feed-in tariffs and the global economic slowdown.
Hann added, “In H2-2010, module demand will probably return to the previous growth rates, of more than 20 percent per year.”
Combining demand and supply, there is a massive oversupply of modules that has already been building up since early 2008. Back in 2008, this did not impact on the module prices as there was short term heavy demand from countries like Germany and Spain, from project developers and installation companies, etc. So, this was not noticeable earlier. However, in 2009, the oversupply situation is quite serious!
As a consequence, many suppliers will not be able to react to this situation in the short term. They will still need to run their factories to try and generate some revenue and satisfy the industry. Many had bet on some strong demand coming from USA and also China.
This year, the module prices will decline. Consequently, the declining prices will also create some additional demand. However, for the next two years, this fundamental oversupply situation will not change.
How far will prices drop?
So, what are the message for 2009? First, crystalline module prices will drop to about $2.50 per watt, and second, cost is going to be the differentiating factor! This was a point emphasized strongly by the iSuppli analysts.
Further, how should companies manage this situation, where supply is disconnected by demand? According to Dr. Wicht, there is 11.1GW of module supply vs. 4.2GW of installations. “We do not see that the demand is elastic and that everything will be good after the end of 2009. The gap is too large between demand and supply, and will last till end of 2010.”
Installation capacity will surely become a bottleneck. There will be falling prices for silicon, as well as solar cells and modules. Also, the demand is not that elastic enough to absorb all modules produced.
Therefore, given this situation, what are the options for success, rather, what are the ideas to re-orient the solar PV business?
The first option could be to shut down 50 percent of production till price recovers. However, this is not a realistic option. Another could be to put expansion plans on hold. Yet another option for producers would be to become the best in class in production cost, an option, which is excellent, but difficult!
Probably, the best option would be for makers to integrate downstream. This includes new demand simulation in established markets as well as developing new markets.
Dr. Wicht said: “Anticipating bottlenecks are key for solar. The next bottlenecks are the bureaucracy and installation capacity. The production capacity would not be influential. Production cost and downstream integration are key.” He advised solar PV producers to monitor their PV market demand and supply situation regularly.
Friends and dear readers, this is my last blog post for 2008! Indeed, what a year this has been!!
Let me bid this year goodbye with a general outlook on the global solar photovoltaics industry for 2009.
iSuppli had recently put out a report on solar eclipse coming in 2009! I had blogged about the possible solar sunburn ahead, as well, earlier last week!
Another point that has interested me is: what happens to the top 20 global solar photovoltaic companies, based on iSuppli’s analysis! This blog post has perhaps been the most popular in recent times.
I was very lucky to re-associate with Dr. Henning Wicht, Senior Director, Principal Analyst, iSuppli Deutschland GmbH, in Munich, Germany, for this discussion, thanks to the efforts of Jon Cassell and Debra Jaramilla!
How bad is solar?
The first and the most obvious question: how bad is the global solar market right now and why?
According to iSuppli, bringing an end to eight consecutive years of growth, global revenue for photovoltaic (PV), panels is likely to plunge by nearly 20 percent in 2009, as a massive oversupply causes prices to drop!
Worldwide revenue from shipments of panels will decline to $12.9 billion in 2009, down 19.1 percent from $15.9 billion in 2008. A drop of this magnitude has not occurred in the last 10 years and likely has not happened in the entire history of the solar industry.
Dr. Henning Wicht says that the upstream part of the solar business (cell, module, etc.) will suffer from price decline due to strong oversupply. The downstream side will benefit (installation, end-user, investor, etc.) by lower system prices.
Therefore, what can the solar players do to get over this coming bad phase in 2009? Well, three things: improve the cost structure, improve the sales side, and diversify downstream… These points hold strong for all fully integrated and non-integrated solar panel suppliers as well. By the way, fully integrated solar panel suppliers are likely to suffer less severe losses than non-integrated competitors.
There must be some way around to to bring about some balance within the current imbalance in the demand and supply situation. While Dr. Wicht agrees this is a difficult one to answer this early, he adds that supply and demand are diverging heavily. “With the current trajectories even in 2012, 100 percent more modules are produced than installed,” he says. I promise to discuss this question again with the good Dr. in another six months time.
Word of wisdom
There are various support programs in place, and it is important to know whether they will continue to remain beneficial, both to support markets to become independent sustainable and to develop the regional industry.
Dr. Wicht believes the support programs are still required and beneficial. “If China, India, Mexico and other sunny regions would start to support solar installations, that could change the picture drastically,” he notes.
A note of warning for new entrants in the solar photovoltaic space! Be aware that this warning has been earlier highlighted in the global semiconductor outlook for 2009! In tune with what the various analysts have maintained earlier, iSuppli also forsees newcomers in the solar photovoltaic line having problems in getting the required credit for their projects.
What next for Europe, emerging regions?
According to iSuppli, the short-term boost in demand from Spain and Germany has kept the installation companies busy, and solar orders and module prices high. But this boom is over. So, what’s next for European players?
According to Dr. Wicht, Germany and Spain should continue their leading role as solar installation regions, even after the boom. France, Italy and Czech Republic are attractive, but still much smaller markets, he maintains.
iSuppli has also mentioned that the race to larger manufacturing scale comes to an end when the production is not sold anymore! In that case, what’s the case for the emerging nations, like China and India? Aren’t there buyers in such places?
Dr. Wicht says: “Demand in the traditional solar markets is not elastic enough to absorb all of the solar production. Potential new markets, for example, China and India, do not yet have installation capacities and administration to significantly change the global solar demand short term.”
iSuppli also feels that the newer Chinese and Taiwanese suppliers will be hit particularly hard during 2009. The reason being, many suppliers have expanded their production capacities heavily without securing equally the sales/downstream part.
Global top 20 rankings to change?
Now to the most interesting part! Most of you have read about the top 20 global solar photovoltaic suppliers. Following the iSuppli warning of a ‘solar eclipse’ in 2009, there is every likelihood that there will be changes in that table!
Dr. Wicht adds, “However, the top 10 companies are typically better placed than the competition regarding their cost structures, downstream integration and vertical integration.”
Obama’s solar plans!
Now on to yet other interesting point! The US President-elect, Barack Obama’s, New Energy for America plan could well have a significant impact on the US solar industry.
The plan’s provisions include:
• A federal renewable portfolio standard (RPS) that requires 10 percent of electricity consumed in the US to come from renewable sources by 2012.
• A $150 billion investment over 10 years in research, technology demonstration and commercial deployment of clean energy technology.
• Extension of production tax credits for five years to encourage renewable energy production.
• A cap-and-trade system of carbon credits to provide an incentive for businesses to reduce greenhouse gas emissions.
Dr. Wicht says: “We all know that Obama is in favor of renewable energy. However, he will not change a 160 percent oversupply of solar panels in 2009.”
Bumpy ride to grid parity?
On another note, and a pretty favorite one: Is it going to be a “bumpy road” to grid parity? How will the subsidies be kept going?
Dr. Wicht notes: “Subsidies will continue. It will always be a bumby road because the ramping cycles differ heavily among silicon, cells, modules and the installation capacity. Please remember that the installation business will now benefit from low module prices. It will recover some of the margins it has lost in the last years due to high module prices.”
Also, up to when will polysilicon constraints last? iSuppli had earlier indicated PV strategy changes. According to Dr. Wicht, the polysilicon prices are coming down already. “Our indication from October 2008 seems to be fairly good,” he says.
Lastly, will iSuppli be still sticking by solar, semicon investments being equal by 2010?
Dr. Wicht says: “Please let me cite again our interview in October: The investments for solar production raising up to several hundreds of Mio USD, up to 1 Bio $ per production site. That is coming close to a semiconductor fab. The total capex of semiconductor is still 10 times larger than PV. However, PV is rising much faster.”
That will be all for this year, folks!
Look forward to sharing much more captivating moments in semiconductors, electronics, solar photovoltaics, telecom, etc., in 2009!
Wishing all of you a very happy, prosperous and successful 2009. Be safe and look after yourself! See you next year!!