Top Pic Solar Markets

 

PV Solar Growth

Solar Growth

As can be seen from the graph at the left (updated in July, 2013) the solar industry has seen a remarkable rebound from the 2009 recession. The bars represent the actual annual installed amount of PV solar systems by manufacturers expressed in giga-watts (1 GW = 1 billion watts). For reference purposes, one nuclear reactor produces about 1.3 GW of electricity per year. Data up to and including 2011 is from Solarbuzz, the data for 2012 is from the European Photovoltaic Industry Association (EPIA), and the forecast for 2013 is by the author.

The five year growth rate from 2007 to 2012 was approximately 55% per year! The growth rate from 2009 to 2010 was a whopping 172%. The growth rate for 2011 was a more modest 40%, but still very good for an entire industry.. The reason for the growth rate of only 1.6% in 2012 was due to major reductions of incentives in several European countries, namely Italy and Germany.

While the overall five year growth rates are very impressive, the 28 or so giga-watts installed in 2011 and 2012 was just a fraction of one percent of the total amount of electricity that was being generated by all sources worldwide. The 2013 growth rate is estimated to be about 26% due mainly to increases in China, Japan and the US. After 2013, the long term growth estimates generally range from 15% to 25%.

There was about 100 GW of PV solar installed in the world at the end of 2012. It is roughly divided into thirds as to that which comes from residential rooftops, from commercial buildings like hotels or malls, and from utility plants connected to the grid. The utility market has just recently been taking off. This is the market segment that has been the most influential in the growth rates over the last few years. Where solar makes a big difference is during the time of day when electricity is needed most, those hot summer afternoons when air conditioners are running almost constantly. This is when solar can add significant contributions to the grid at less cost than other sources. When you also throw in the pressure to go "green", you can see why the long term future for this industry is very good.  Top

PV Solar Installations By Country

 Country 2011 2012 2013
 Germany 7.5 7.6 5.8
 Italy 6.7 3.3 3.0
 China 2.8 3.5 6.0
 United States 1.9 3.3 4.5
 Japan 1.3 2.0 5.0
 France 1.8 1.2 1.4
 Australia 0.8 0.8 0.9
 India 0.6 1.0 2.0
 ROTW 4.3 5.4 6.9
 Total Market 27.7 28.1 35.5

The solar installation chart at the left shows that Germany has historically been the leader in solar power. Germany has a goal to discontinue all nuclear power by the year 2022 and replace it with renewable resources. However, as the price of solar power has decreased and Germany is on target to meet its goals, they have reduced their solar incentives prompting their installations to peak in 2012. The same thing occurred in Italy in 2011. In 2013 China, who has over 50% of the world's manufacturing capacity, has begun to focus on its own internal needs for clean power and is forecast to be number one in installations in 2013. In the last several years, both Japan and the United States have also come on strong with significant installations.

Germany's nuclear reduction goal prompted a government policy called feed-in-tariffs (FITs). A feed-in-tariff is a policy designed to encourage the adoption of renewable energy of all kinds to accelerate the reduction of the cost of renewables down to grid parity or less. FITs typically include three provisions: 1) guaranteed grid access, 2) a long term fixed purchase price contract (generally 20 years) for the electricity produced, and 3) declining contract prices for new installations that are based on the cost of renewable energy generation with a downward trend towards grid parity. They include besides PV solar, other technologies such as concentrated solar power (CSP), wind, and geothermal.

In almost all of Africa, Pakistan, Hawaii, Italy and large portions of Japan, the price of electricity is already in excess of what the cost of electricity is from solar. Therefore in these locations there is a ready market for today's solar electricity without any subsidies. As the price of solar electricity continues to come down every year, more and more locations will benefit from making the switch to solar when new capacity is added.

Other countries with major PV feed-in-tariff programs besides Germany are Italy, Japan and China. These countries will help take up the growth slack from Germany who has achieved their initial goals and will be reducing incentives. A negative to the German type of FIT is that it encourages customers to install as large a solar system as possible, sometimes larger than the amount of electricity the customer consumes. With a guaranteed selling price for 20 years, a customer can make a nice return on their investment for a pretty long time, thus encouraging as large a system as possible on a roof top.

As can be seen above, the US has been previously behind in installations. In 2006 the US implemented the Renewable Energy Investment Tax Credit (ITC) which allows solar installations to apply 30% of the cost of design and installation as a federal tax credit with no maximum credit limit. The ITC expires in 2016 (a 10 year program). In addition, there are 14 US States and the District of Columbia that regulate retail electricity markets in which customers may choose "alternative" power suppliers. Some states, such as California and Arizona, have implemented their own aggressive incentive programs to encourage alternative power. A "net-metering" type of arrangement has been implemented by California and Arizona whereby the amount of solar electricity "sold back" to the utility at purchase prices can not exceed the customer's annual electricity usage at purchase costs. In addition, California and Arizona, have several extremely large utility type solar installations in progress which should catapult the US into a major international player.   Top

Recent Overcapacity Issues

Between 2007 and 2011 the solar industry grew at approximately 70% per year. In particular, from the major recession year of 2009 and the recovery year of 2010 the industry grew at an incredible 172%! Production was hard pressed to keep up with demand. As a result, those companies that were able to dramatically increase capacity gained market share. No one wanted to be left out because of lack of capacity, so every company added capacity as fast as they could thinking the industry growth would continue for the foreseeable future. In 2010 industry analysts warned that too much capacity was being brought on stream. But, the market was growing at double the analyst's forecasted growth rates, so the added capacity was easily absorbed. Producers felt they were smarter than the analysts.

In early 2011 capacity additions finally began to exceed demand. Prices of crystalline silicon solar cells began to tumble as companies, especially second and third tier companies, fought to reduce inventories that were piling up. In spite of the fact that the industry continued to grow at a 40% clip, there was so much inventory by the middle of the year that all prices - modules, cells, wafers, and polysilicon - tumbled almost uncontrollably. For example, wafer prices dropped about 70%, solar cells dropped about 60%, and modules dropped about 50%. GTM Research estimates that 31 GW of crystalline solar cells were produced. Approximately 25 GW of silicone were sold (plus 2 GW of thin film), leaving 6 GW of excess inventory which was 24% of the amount sold. Because of this glut, many smaller producers simply suspended manufacturing operations and one major company, Q-Cells of Germany, filed for bankruptcy. In the longer run the analysts were right.

Hardest hit were the polysilicon suppliers. Prices dropped from about $80/kg at the beginning of 2011 to $20 to $25 at the end, about a 70% drop. This happened because back in 2007 and 2008 there was a world wide polysilicon shortage and polysilicon prices increased to about $400/kg. Suppliers made a lot of money and added tons of capacity so that there was a huge polysilicon capacity overhang, estimated to be 40 GW worth. The main reason crystalline silicon "cell" prices dropped so much in 2011 was because the raw material, polysilicon, which makes up a very significant part of the total cost, dropped so tremendously. While there was and is too much solar cell and module capacity, it was no where near as bad as polysilicon. Most analysts believe solar cell and module capacity will be reasonably in line by the end of 2013, but the polysilicon glut may take several years to work off. As a result of falling prices while unit shipments increased, almost all the companies in the solar industry were unprofitable in 2011 and 2012.

In March of 2013 the number two solar "cell" producer Wuxi Suntech, a subsidiary of Suntech Power in China, declared bankruptcy but continues in business while they try to work out their financials. Wuxi Suntech holds virtually all of the factories and other physical assets of Suntech Power. The outcome of the bankruptcy filing is expected to be a takeover of the Wuxi operations by Wuxi Guolian Development Group, a financial conglomerate controlled by the city government of Wuxi. Suntech Power announced the appointment of a new president, Weiping Zhou, a longtime Wuxi Guolian executive. David W. King, chief executive of Suntech Power, said the company would “continue to work closely with all of our stakeholders and take the necessary steps to put Suntech back on track for growth.” A complexity is that Suntech Power is incorporated in the Cayman Islands. The bankruptcy laws there do not normally allow reorganization. Companies tend to be liquidated instead. However, the convertible bonds issued by Suntech Power specified that any dispute involving the bonds would have to be resolved under New York State law.

Those Chinese companies who have stock traded on American exchanges, and have to follow American accounting rules, have mainly lost money because of inventory write downs and other asset impairment write downs. Most of these are non cash items on balance sheets. Actual cash flows were not as negative as profits. Some companies even continued to have a positive cash flow. The negative profit impacts are expected to continue through 2013. However, prices of some components like polysilicon, wafers and solar cells have been edging up since the beginning of 2013.  Top

Market Share Forecast By Region

Thin Film Market Share

Germany has over whelmingly dominated the worldwide solar markets the last few years. However, Germany has made the decision to "gradually" reduce their feed-in-tariffs (FITs) over the next few years until the market price equals "grid parity". See the chart to the left. This is causing a "redistribution", but not a reduction in the total annual newly installed PV solar market. Italy also is reducing their FIT, but the rest of the EMEA (Europe, Middle East & Africa) is taking up the slack.

China, Japan, India and the US are seeing dramatic growth. China produces more than half the world's supply of solar modules, so it intends to install a lot of solar locally. Japan has been hard hit by their nuclear disaster. Japan, like Germany, intends to phase out nuclear and replace it with renewable sources. As India becomes more modernized, it appears to be easier to install a lot of local solar rather than build fossil fuel plants with a lot of transmission lines. Solar prices in India are already close to grid parity. Overall, 2012 was a poor year due to the re-distribution mentioned above. Most analysts expect 2013 will be a recovery year. After 2013, the long term growth estimates are expected to normalize and range from 15% to 25%.   Top

Market Share By Technology

Thin Film Market Share

As can be easily seen from the chart to the left, crystalline silicon dominates the solar market by a large margin. Thin film's share for all thin film technologies was only 11% in 2011 down from 18% in 2009 according to GTM Research. Crystalline Silicon's share has been rapidly increasing the last few years as Chinese manufacturers have come on strong. Thin film's market share is forecast to decline further to 7% by 2017 according to Solarbuzz.

The leader by far in thin film technology is First Solar whose cadmium telluride module manufacturing costs are somewhat less than those of most crystalline cell manufacturers. Crystalline wafers are about 200 microns (a micron = one millionth of a meter) thick. In contrast, thin-film panels are made by vacuum depositing several layers of semi-conductor materials only a few microns thick. Silicon in its pure form (99.9999% pure for solar applications) is very expensive and makes up about 20% to 25% of the cost of crystalline panels vs. the semiconductor cost of about 2% in thin film panels.

However, thin film panels are not as efficient as crystalline panels and therefore more thin film panels are required to generate the same amount of electricity. A thin film installation can take up to 35 percent more space (and land) to achieve the same total power output as a premium crystalline installation. Thin film is strongest in the utility scale market because the cost of panels outweighs the cost of land in this market. Sharp and a few other manufacturers are trying to make "thin film silicon" a success in the utility market.  

Chinese suppliers using crystalline silicon have significantly reduced their costs and prices thus gaining market share. They operate on very thin margins and depend on large volumes to get their unit costs down. Of the ten top module producers in 2012, six were Chinese using crystalline silicon. The dramatic drop in silicon module prices in 2011 and 2012 has almost closed the cost gap between silicon and cadmium telluride. However, many silicon suppliers were in financial trouble and struggling to stay in business at the end of 2012.  Top

US PV Market Growth

Thin Film Market Share

Shown at the left are the recent annual solar installations in the US. Note that at the end of 2012 installations totaled 3,3213 MW, a 79% increase over 1,855 in 2011. In 2013 the US market is expected to be about 4,500 MW, a 35% increase. The previous 5 year average annual growth rate from 2006 to 2011 was 78%. So for the last six years the US has been growing between 75% and 80% per year (not bad).

The market size of the U.S. solar industry in dollars grew from $8.6 billion in 2011 to $11.5 billion in 2012. The three largest state solar markets (by installations) in 2012 were California, with 1,033 MW, Arizona, with 710 MW, and New Jersey with 415 MW.

US solar installations have grown dramatically the last few years as utilities have come on strong. Up until recently, utility installations have been weak compared to Germany, Italy or China due to the lack of support from the Federal Government in the early 2000s . The planning and licensing for a very large utility installation takes a minimum of two to three years. So the ITC federal tax incentive program passd in 2006 took a while to have an effect. However, in recent years state governments have added their support and results have begun to show starting in 2010 and continuing since then.

US PV Forecast By Market Segment

US PV By Segment

By the chart at the left, one can see that the utility sector demand is taking off in the US. In the future, the utility sector will be the key sector of US solar growth.  The major barrier to utility growth has been financing. A 100 MW to 250 MW installation costs $1 billion to $2 billion dollars. Only the very largest banks and the US Government can afford to lend that kind of money. The recent recession saw many banks reduce their lending policies and very few utility scale deals were done.

The Obama administration agreed to guarantee up to 75% of the cost of some of the proposed large new solar installations. This helped several large deals get off the ground. However, in order to satisfy the requirement that the loan would in fact be paid off, government due diligence significantly delayed quite a few projects. In addition, the 30% cash Treasury Grant Program (TGP) for renewable equipment was scheduled to expire at the end of 2010. This was renewed until the end of 2011 for the start of projects, but was not extended further. TGP grants supported 23,000 projects across the US and helped add more than 13,000 megawatts of wind and solar capacity to the grid. While this was not a long term funding program (ala Germany), it definitely helped to keep solar power growing through 2012.   Top

 

US CSP Market Growth

US CSP Forecast

Shown on the left is the forecast for CSP (Concentrated Solar Power). In 2010 the demand for CSP was insignificant. However, there are several very large projects underway, especially in California and one in Arizona, that are very significant systems. CSP is almost exclusively a utility sector technology as it requires a conventional steam turbine to convert heat stored in liquid salt into electrical energy. See the Parabolic Trough Solar Systems section. The exception is Stirling type engines that do their own conversion. See the Dish Stirling Systems section.

While trough systems do use some water (not excessive), they have two major advantages. First, they can be part of a hybrid system that shares the steam turbine system with an auxiliary gas fired front end turbine that can be used on cloudy days and at night. Secondly, they can store sunlight energy in the form of molten salt up to an additional 6 to 8 hours which covers the peak demand period during the summer when people arrive home from work and turn on their air conditioners for a few hours. Depending on a utility's portfolio of electricity generators, these advantages can be very important. California has one 1,500 MW system and two 2,000 MW systems coming on stream in 2013, 2014 and 2015.

 

Top