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New Crop of Reports Indicate Solar Outlook Is Brightening

Several new reports in the past few days are raising the bar for the solar energy sector over the next couple of years. Some key themes: Demand in Asia is rising, Europe is stabilizing, and manufacturers are starting to ramp up production again.

Scanning the new crop of reports from IHS, NPD Solarbuzz, and Navigant, here are a few key themes that emerge:

Demand Is Shifting to Asia. Global solar PV demand reached 9 GW in 3Q13, up 6 percent from the prior quarter and nearly 20 percent from a year ago, according to Solarbuzz. China's share of that 3Q demand exceeded 25 percent, compared to 10 percent just two years ago. Meanwhile, the National Energy Administration reportedly has increased its 2014 targets for solar PV capacity to 12 GW instead of 10 GW, while the State Council has said solar capacity should stay at the 10-GW/year pace through 2015, reaching 35 GW cumulatively installed by the end of 2015.

"There is a big shift in the solar PV market from Europe to Asia Pacific," said Dexter Gauntlett, senior research analyst and author of Navigant's report, which pegs solar PV capacity more than doubling from 2013-2029, from just under 36 GW to more than 73 GW. He especially points to new markets for distributed PV as prices fall; China, for example, will see more than 100 GW of solar PV deployed by the end of this decade. "We have increased our estimates for Japan, given the lucrative feed-in tariff scheme, but it is unclear for how long that scheme will be sustainable," he added.

Europe is Stabilizing. Europe dominated PV demand from 2006-2011 with nearly 80 percent of demand, but growth has fallen off consistently over the past two years, and rather precipitously in several countries. Continuing that trend, solar PV demand in Europe declined 11 percent between July-September from the previous three months, and for the year Solarbuzz sees an annual 37 percent dropoff, a four-year low and half the region's peak in demand in 2011.

Nevertheless, Europe remains overall a vast pool of end demand for solar deployment, nearly a third of global demand at 10-11 GW in 2014, with some markets offering especially attractive near-term growth. Germany, the U.K., Italy, and France will account for the vast majority of that, but there's potential in smaller markets such as Romania and Austria. NPD Solarbuzz sees overall European demand at around 2.5 GW per quarter for the next several quarters and growing slightly in the latter half of 2014. "The boom/bust phase at the major country level [e.g., Germany and Italy] is largely in the past," explained Solarbuzz vice president Finlay Colville. "We see much of Europe as stable in 2014," offered Sam Wilkinson, research manager at IHS, similarly pegging around 5 percent growth in MW installations.

Yes, there's a difference between "no more plummeting" and a "growth recovery" -- but stabilization of demand is good news. More predictable demand forecasting means lower risk and easier planning for investors and developers, Colville said: "It is very much a market that can be addressed, with more confidence now." Added Wilkinson: "Europe will remain a key region for business [and] so it will not be ignored."

Quarterly European solar PV demand. Credit: NPD Solarbuzz

Manufacturing Is Ramping Up. Stabilizing demand means an improved outlook for solar PV manufacturers, who have suffered a punishing couple of years and eagerly watch as the gulf between oversupplies and demand finally is narrowing -- something IHS sees officially happening in the next few months. "Things are looking brighter throughout the solar industry as PV demand climbs and spreads to new regions," states Jon Campos, lead PV capital spending analyst at IHS.

As a result those manufacturers are opening their wallets again: global capital spending is predicted to surge 42 percent to $3.3 billion in 2014, and another 32 percent to $4.3 billion in 2015. "The vast majority" of that growth spike will be internal production as part of a long-term strategy, as opposed to contracting out to Tier 2-3 suppliers which he says has been more of a short-term stopgap.

Global forecast of solar industry capital spending in U.S. $M. Credit: IHS

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