First – the photovoltaic industry is global and all regions participate in the good times and the hard times, though, not always at the same time and in the same way. For example, as demand side participants in Europe (installers, system integrators, et al) enjoyed serving the largest market for solar installations, the region's manufacturers steadily lost share. In the U.S., demand has soared (thanks in part to the grant in lieu of ITC, which expired at the end of 2011), while U.S. technology manufacturers are struggling, in some cases failing.
It is also impossible to ignore the tension among buyers and sellers in the U.S. PV market. Prices are at a low and unhealthy level (in Q4 2012, ASP (average selling price) to first buyer was $0.88/Wp, inventory ASP $0.55/Wp). The U.S. has always had a significant inventory lag. Heavy buying of modules at the end of 2011 (driven by the expiration of the grant), and the stranding of technology from Chinese manufacturers because of the trade dispute exacerbated the inventory lag in 2012. Many on the demand side, which is primarily made up of small to medium system integrators and installers, were required to place a bond on modules that had been acquired at very low prices. The situation has caused anger and anxiety on the supply and demand sides of the U.S. PV industry and strained relationships among people who share the common goals of trying to take market share from heavily subsidized conventional energy and working to mitigate climate change.
U.S. PV manufacturers held the leading share of global shipments until 1999. In 1995, 1996 and 1997 the U.S. share of global shipments was >40%. The U.S. share slipped to 38% in 1998, the last year the region held a leading share and trended down from there to 3% in 2011, and likely <2% of global shipments in 2012. Demand in the U.S. for PV systems (and other PV technology products), on the other hand, has been accelerating.
The primary reason for accelerating demand for PV products in the U.S. is utility participation. In most cases, utilities have been working to fulfill their RPS (renewable portfolio standard) requirements. Many utilities are nearing this requirement and some have said that they are slowing down. Problems include variability concerns, a real need for robust weather (cloud tracking) models, different peaks that may not match the PV peak, need for cost-effective and reliable storage, and finally, a method of encouraging solar other than the unfunded RPS mandates.
Figure 1 offers U.S. solar growth for shipments (from U.S. technology manufacturers) and demand (representing the acquisition of PV technology, not the installation of it), from 2001 through 2011. The compound annual growth rate for this period was 23% for shipments and 49% for demand.
Figure 1: U.S. PV Demand & Supply 2001 - 2011
It’s That Old Pioneering Spirit
The United States is a crazy quilt of different states, cultures, traditions, nationalities – all of these attributes and personalities and the like serve to create a regional persona that is unique and often unfathomable. From the American Indian through to the first settlers and the pioneers who made their way across the vast unknown heart of the country, the U.S. is filled with scrappy self-starters who hold the genuine belief that hard work will result in success. It is a country of ideas and startup companies, of entrepreneurs and strivers where independence is not a goal, it is held as an inalienable right. After all, the U.S. is the country of Benjamin Franklin, Abraham Lincoln, PT Barnum, WC Fields, John Wayne and Madonna – all difficult, original, inventive personalities. Essentially, it is the land of originals that, deep down, see failure as an opportunity for future success.
The photovoltaic industry in all its struggling, hard knocks, creativity, innovative glory has deep roots in the U.S. and shares this tendency towards reinvention. In the U.S., and globally, everyone loves a scrappy return from the ashes. The PV industry has a long history of struggling back against all odds while finding ways to innovate despite R&D budgets that are close to zero and low to negative margins.
The global PV industry had a few profitable FiT-driven years to prepare itself to return to business as usual – a low incentive environment where margins are mirages – and for the most part did not take advantage of the good times to put a bit aside for the lean, long winter of unprofitability. However, throughout its long history the industry has persevered – in fact, the lean, bad times have always led to innovation and technology advancement. The U.S. with its history of struggle is the perfect place for an industry built on struggle. Currently this is painful and often sad to watch, however, green shoots are already emerging, innovation is ongoing and the U.S. PV industry is still pioneering.
Lead image: Pioneering wagon via Shutterstock.
Paula Mints is helping to plan PennWell’s Solar Power-Gen, which takes place next February in San Diego. You can find out more about the show (and register to attend) here.