December 15, 2009 | 0 Comments
While both the overall economy and the construction market are important to the prospects for building-integrated photovoltaics (BIPV), the construction market is a stronger influence. Economic growth in the absence of construction growth can boost growth in photovoltaics installations, but new construction is where the largest growth will occur, particularly for building-integrated photovoltaics (BIPV), writes Paul Markowitz from NanoMarkets.
It is no surprise that the economy and especially the construction market have a tremendous impact on the building integrated photovoltaics (BIPV) market. There are other sectors of the PV market -- portable, ground-mounted, etc. -- but BIPV alone is completely dependent on buildings for installation and use. BIPV products are also, for now, significantly higher in cost than conventional PV materials. This is certainly true in retrofit markets where conventional building materials like roofing are either retained in place or removed for installation of the BIPV products, but BIPV is also still more costly on new construction, even when considering the savings on the conventional building materials that are not needed. NanoMarkets believes that healthy growth in the construction market will be required for the BIPV market to reach its full potential, although we also believe that such healthy growth is a long way off.
In many cases, BIPV is a luxury; basic PV installations can be performed at significantly lower cost than BIPV ones, and the visual and architectural benefits of BIPV do not contribute any more than a basic installation in terms of maintaining building integrity and providing power. Just as consumption of other luxuries declines in recessionary times, BIPV will not be as strong in the market during a recession as it would be in better times. The overall state of the economy is even more important to BIPV markets than to broader PV markets because of the premium cost of the BIPV materials.
While both the overall economy and the construction market are important to the prospects for BIPV, NanoMarkets believes that it is the construction market that is a stronger influence. Economic growth in the absence of construction growth can boost PV growth somewhat, but new construction is where the largest growth in PV -- and especially BIPV -- will occur.
Impact of the current economic crisis
The overall PV market was extremely hot a year ago, boosted by rising energy prices, uncertainty over the supply of fossil fuels from volatile parts of the world, and concern about the environmental impact of burning those fuels. As a result of these concerns, governments in various parts of the world devised policy incentives to further encourage adoption of renewable energy including PV power. The real-estate market, though slowing as a result of increasing loan defaults, was nowhere near as bad as it is today.
Several factors have conspired since then to dramatically cool down the PV market. The crash of financial markets triggered a worsening of the recession that had already been building, and further dampened the real estate and construction markets. The recession in turn led to reduced energy demand and a rapid drop in energy prices, as well as a focus by governments and other decision makers on economic issues at the expense of environmental ones.
With new construction down sharply there have been few opportunities for the installation of PV systems where they are most cost-effective -- during construction -- and with the banking sector extremely cautious about lending, it has become difficult to fund them, whether new installations or retrofits. Investment decisions have become very focused on short-term returns, and with energy prices low, the return on PV power has become too low to justify many installations. On top of that, a lack of venture capital and other investment funds has curtailed development of new PV products and technologies.
The impact of this environment has been apparent in the PV industry. Crystalline silicon PV cells are in something of an oversupply situation, and despite availability of silicon, manufacturers have all but abandoned expansions in capacity for the time being. In thin-film PV, some a-Si PV manufacturers have found themselves with expensive equipment sets but no market, and have chosen to outsource or abandon manufacturing; some highly anticipated CIGS PV startups have also failed to enter volume production as planned. Even the successful and still-profitable firms like First Solar are facing pricing pressure as PV supply exceeds demand.
What all this means for the BIPV industry is largely the same as what it means for the overall PV industry. Increased sensitivity of PV adopters to costs in the short term makes the added expense of BIPV systems a harder sell. What's more, BIPV products are a fairly new development and there may be some uncertainty regarding their durability and long-term performance, also making potential adopters reluctant to use BIPV.
As far as reliance on the construction market is concerned, BIPV is in most cases even more dependent on it than conventional PV. For one thing, conventional PV is suited to installations in places other than buildings -- solar farms and utility poles, for example -- while BIPV is clearly, and by definition, designed for installation on buildings. In addition, conventional PV on buildings is typically mounted on racks that may have only moderate cost and installation differences between new construction and retrofits, while BIPV is almost always much less costly on new construction than as a retrofit.
Finding BIPV markets in this economy
The situation just described sounds pretty bleak for the BIPV market. BIPV is even more dependent on new construction than is conventional PV, yet there is only minimal new construction. However, in markets that are already well-developed for conventional PV products, the differentiation of BIPV products may yield advantages in times of low demand. BIPV is inherently an innovative industry, and even though the volume of new construction is down sharply, BIPV can make a play for those new builds that still move forward. The larger selection of products in a demand-limited market can allow building designers and architects a greater degree of choice in the PV products that are used. BIPV products offer better aesthetics and architectural integration than conventional PV products, and for the projects that do get built in this environment, these appealing attributes are likely to be an important factor in product selections. In other words, in a developed PV market with a wide selection of products, BIPV products can stand out as more desirable than conventional PV products.
In this way, BIPV materials may help to lift the PV market in general to higher levels of growth. As a new industry, there are still many opportunities for innovation in BIPV products, and some of those innovations may stimulate new interest in PV systems.
Another path to boosting BIPV is to go after less conventional markets. In ordinary circumstances, a particular PV market would be "ripe" for BIPV only after it has become fairly well-developed for conventional PV products. But in these times, with construction down worldwide, the (otherwise) most likely BIPV hotbeds of Japan, Germany, and California, not to mention the rest of Europe and the US, are likely to yield a disappointing rate of BIPV growth.
In this environment, some markets that wouldn't otherwise be thought to be "ready" for BIPV may be good candidates to adopt it early. In a market like India, where population is tremendous, population growth is high, and where the economy has been historically volatile with periods of rapid growth, a reasonable resumption of construction growth is certainly possible ahead of the rest of the world. While India does not yet have anywhere near the PV penetration of the current largest PV markets, it has announced aggressive PV energy targets and this market may be a good one for early adoption of BIPV. Besides India, some other emerging countries share some of these characteristics; China even has a much more developed PV market and is already showing strong interest in BIPV.
Paul Markowitz received his Ph.D in chemistry from Washington University in St. Louis, MO, and is a senior analyst at NanoMarkets LC, PO Box 3840, Glen Allen, VA, 23058.