Grid Scale, Off-Grid, Solar

Shipping forecast: Top manufacturer output increases 41% in 2006

Issue 3 and Volume 10.

Since 2001, the PV industry has grown at an extraordinary 41% a year, and this was matched in 2006. However an expansion this rapid presents in own set of problems and threatens to strain the PV manufacturing supply chain. Despite this, signs are still good. By Paula Mints and Dan Tomlinson.

Despite a challenging year for raw material availability, and warnings about softening demand and inventory stockpiles, the PV industry grew by 41% in 2006. Since 2001, industry shipments have grown by a compound annual rate of 41% per year. Growth of this magnitude is extraordinary, and comes with a set of problems particular to hyper growth, threatening to strain the ability of the PV industry to supply, and maintain the products it delivers to customers.

For the last five years the shipments from leading manufacturers have grown at an exceptional rate sharp solar

In any industry, as volumes increase, so does the need for stricter quality control. As the need for stricter quality control increases the difficulty of providing this service also increases. Historically, the PV industry has experienced the following problems – now exacerbated by strong demand:

  • The cost and availability of raw material, including the time to bring new material on line
  • Despite the expansion of incentive programmes globally, the fact that demand that relies on subsidies is unstable
  • Difficulties implementing new subsidy programmes

Competing sources of electricity that are less expensive.

The cost of the technology to the end user

The fact that controlling the cost of manufacturing the wafer, cell and module is disconnected from the price of a system to the end user. The amount of time and money required to bring a PV technology from idea to pilot stage, to commercialization, and to high volume production. Unrealistic expectations of what the technology will deliver in both the developing and industrialized worlds – a disappointed customer is a customer lost.


As Table 2 indicates, the PV industry’s compound annual growth rate over the past 30 years (from 1976 to 2006) was an amazing 35%. The 1976 to 1981 five year period experienced extremely strong compound annual growth at 86%, albeit at a much smaller volume of sales. In these early years strong industry growth was driven by the off-grid applications.


A solarpark in Bavaria, one of a growing number of large ground-mounted PV installations powerlight

Perhaps because demand for PV products relates directly to the strength and availability of incentive programmes, industry professionals are not entirely comfortable with success. Many in the industry can remember its unprofitable years, and this is a good thing, for there are technology and business problems that still need to be solved. In the strong California market, glitches implementing the new production incentive for residential buyers are currently slowing growth, and in the commercial sector a balance between power purchase agreement and system ownership models is yet to be established. All the caveats aside, the PV industry has experienced – through hard work, commitment and tenacity of belief – extraordinary growth over time. With all of its 30-year-start-up problems, at the heart is a group of people in the business of selling a technology that generates clean electricity to people in the developing and industrialized world along with creating jobs for thousands.

Regional shipments

Shipments from the ROW region, which includes SunPower in the Philippines, Suntech in China, and Motech in Taiwan, grew by 130% in 2006 over 2005, from 153.2 MWp to 351.9 MWp. Shipments from the Europe region grew by 50%.


Over the last decade a number of new companies have entered the PV manufacturing field, some growing into dominant players in a relatively short space of time q-cells

Shipments from the US have been flat to slow since 2001, with the exception of strong growth of 54% in 2004 over 2003. Currently, there are many thin film and crystalline technology start ups in the United States. Most of these companies are in early stages, and their future productivity cannot be assessed. Many US-based companies after initial commercialization are choosing to expand capacity in other areas of the world, either closer to the market or to lower cost materials and manufacturing. If the United States commits to building its market and supporting its manufacturing sector this may change. However, it is unlikely that the US will move out of fourth position in the near or long term.

Shipments for the European region, which buys over 50% of PV industry output, grew at a strong 50% in 2006, with a compound annual growth rate of 48% from 2001-2006. With announced capacity increases, growth for this region should continue to be strong for the long term. Though Japan’s shipment growth has been slower than that of Europe and the ROW regions in 2005 and 2006, the region retains its shipment leadership and had a 44% compound annual growth rate from 2001-2006. Led by Sharp Solar, other manufacturers in the Japan region (Mitsubishi Electric, Sanyo, Kyocera, Kaneka and Mitsubishi Heavy) continue to demonstrate a commitment – as does the government of Japan – to solar electricity. Though the region faces aggressive competition from Europe and the ROW for leadership, it should continue to maintain a slim lead.

 
Figure 1. Regional shipment shares 2005-2006

Figure 1 presents regional shares for 2005 and 2006. Though the Europe region has gained share, the most apparent change is for the ROW region, with an 11% share in 2005 and an 18% share in 2006. In 2004, the ROW region had a 9% share, and has gained nine percentage points in three years. As a point of contrast, in 1997, the ROW had a 16% share, Europe an 18% share, Japan a 25% share and the US a 41% share of that year’s shipments. In 1997, shipment volume was 114.1 MWp.

Technology

In 2005, thin film technologies were 6% of total shipments. Thin films increased their share of total to 7% in 2006, and are on track to increase by another percentage point, to 8% in 2007. Figure 2 (page 98) offers a view of poly, mono, ribbon and thin film technology’s specific contribution to total shipments from 1980-2006.


Figure 2. Technology contribution to total shipments 1980-2006

Of the thin film technologies on the market, cadmium indium diselenide (CIS), copper indium gallium selenide (CIGS), cadmium telluride (CdTe), and amorphous silicon (a-Si), only CdTe and a-Si currently have share. CdTe, primarily due to growth on the part of First Solar, has increased share significantly since 1999. During the 1999-2006 timeframe, shipments for the other thin film (again primarily CdTe) category increased by a compound annual growth rate of 80% per year. In 2004, 2005 and 2006, shipments for other thin films (OTF) increased by 147% per year, over the previous year’s shipment activity. Figure 3 (page 98) highlights the increasing contribution of OTF technologies to thin film shipment growth. Polycrystalline technology surpassed monocrystalline technology in 2001, taking the dominant share of the market. In 2006, however, polycrystalline technology’s market share decreased by six percentage points, while monocrystalline technology’s market share increased by four percentage points. Currently there is strong interest in higher efficiency monocrystalline products.


Figure 3. Other thin-film contribution to thin-film shipments 1999-2006

 

Capacity

During the 15-year period from 1991 through 2006, total industry capacity increased by a compound annual rate of 28%, with Japan and Europe increasing capacity respectively by a compound annual rate of 31%, the ROW region by 27% and the United States by 19%.

During the five year period from 2001 through 2006, total industry capacity increased by a CAGR of 45%, with the ROW region seeing the strongest compound annual increase of 63%, Europe with the second strongest increase of 56%, Japan increasing at 44%, and the United States increasing capacity by 17%.


Figure 4. Regional capacity shares 2005, 2006

PV industry capacity has increased by over 30% every year from 2001-2006. In 2005, total capacity increased by 58% in answer to the previous year’s strong shipment growth. In 2001, industry capacity increased by 54%, responding to 44% shipment growth in 2000, over 1999. In 1998, during the early stages of the German programme, and strong demand growth in Japan, industry capacity increased by 44%. Given the 2001-2006 compound annual capacity growth rate of 45%, if the industry continues increasing at its average, by 2010 total PV industry capacity will be on the order of 14.2 GW. Given the reality of competing energy technologies, the expense of the technology to the end user, and the vagaries of demand in the PV industry, it is easy to assume capacity utilization of less than 60% should capacity continue increasing at this rate. Figure 4 (page 100) provides information about regional capacity shares for 2005 and 2006. Note that Japan’s capacity share decreased by 10%, while the ROW region’s capacity share increased by 9%.

Top manufacturers in 2006

The top ten manufacturers in 2006, comprising 74% of total shipments were:

 

The top ten manufacturers have changed only slightly from year to year. Sharp Solar has been ranked number one since 2001. Though Sharp is expected to retain the number one position in 2007, Q-Cells and Suntech are aggressively adding capacity, and are likely to threaten Sharp’s position as early as 2008. Aggressive competition between these three companies (and others) will likely soften module prices sooner than expected, perhaps as early as mid-2007 – despite the continuing high price of raw material and commitment to long term contracts for this material. Currently the average selling price of power modules is $3.80/Wp, with modules sold in large quantity at an average of $3.25/Wp.

 
Figure 5. Manufacturers shipping 3% of total 2005, 2006

All the top five manufacturers are holding inventory at this time, that is, these manufacturers did not ship all that they produced in 2006. Holding inventory, even in a year of strong demand, is normal. Of the five top manufacturers, capacity utilization for Sharp, Q-Cells, Kyocera and Sanyo was the strongest, at over 70%. Figure 5 presents manufacturers shipping at least 3% of total in 2005 and 2006. In 2005, nine manufacturers shipped at least 3% of total, for 81% of shipments. In 2006, thirteen manufacturers shipped at least 3% of total for 88% of shipments. The increase in manufacturers shipping at least 3% of total indicates that industry manufacturing strength is growing and competition is increasing.

PowerLight’s PowerTracker technology implemented in global large field installations

Announcements of ever larger PV power plants continue, with PowerLight Corporation, a Berkeley-based subsidiary of SunPower Corporation, completing an agreement with Municipal Mortgage & Equity (MMA), a Baltimore, Maryland capital service provider, for the construction of a 14 MWp solar system at Nellis Air Force Base in Nevada. When constructed, this will be the largest commercial system in the world (for a few months), will use module product from SunPower among other technologies, and will employ PowerLight’s patented PowerTracker technology to increase system output. Also this week, PowerLight took part in the dedication of an 11 MWp PV power plant in Serpa, Portugal. The Serpa project uses modules from SunPower, Sharp Solar, Suntech and Sanyo. This $75 million system is owned and operated by GE Energy Financial Services. Catavento, a Portuguese renewable energy company, developed and provided management services for the Serpa project. In November, 2006, PowerLight, working with the Elecnor Group, parent of Atersa, broke ground on an >20 MWp power plant in Trujillo, Cáceres, Spain. The installation in Spain will use modules from Suntech, among other manufacturers and employs the PowerTracker technology. The projects at Nellis and in Portugal and Spain will all use PowerLight’s PowerTracker technology, totaling around 45 MWp of large field installations using this tracking technology. Feedback from PowerTracker users indicates that the technology enhances system efficiency in terms of overall kWh delivered. This tracking technology is one of the global market leaders in the large field category of the commercial market application.

In March 2007, PowerLight also announced it would move its headquarters to Richmond California. PowerLight was short on space at the current 27,000 square foot Berkley (2508 m2), California location. PowerLight has leased 175,000 square feet (16,258 m2)at the new site, an old Ford Motor automotive facility.

Commentary

On January 10, 2007, SunPower Corporation, San Jose, California, a manufacturer of high efficiency crystalline technology announced completing the acquisition of system integrator PowerLight Corporation, Berkeley, California. SunPower paid a total of $332.5 million for PowerLight, including retention bonuses for key PowerLight employees.

SunPower will provide 25% to 35% of PowerLight’s module requirements in 2007. The acquisition marks the end of an era in the photovoltaic industry. PowerLight Corporation was the first company in the PV selling channel to establish itself as a branded business. In this regard, PowerLight should be considered an industry pioneer, and as such has led the way for many system integration companies in the commercial sector.

Paula Mints and Dan Tomlinson work with Navigant Consulting
e-mail: [email protected]

This report was originally published by Navigant Consulting and has been reproduced with the permission of the author.