Solar

PV production must scale back to align with 2012 demand

Tier-1 Chinese solar photovoltaics producers have maintained their high production levels throughout the PV price decline in 2011, and this solar module overproduction will keep up the price suppression felt globally in PV markets, according to the Solarbuzz Quarterly report.

September 26, 2011 — Tier-1 Chinese solar photovoltaics producers have maintained their high production levels throughout the PV price decline in 2011, and this solar module overproduction will keep up the price suppression felt globally in PV markets, according to the Solarbuzz Quarterly report. Factory gate prices are now down 33% year-over-year (YOY).

Because not enough manufacturers have revised down H2 2011 production and shipment plans in the pricing slump, global shipments will exceed end-market demand by 4.4GW. The lower prices have not stimulated late-2011 demand as quickly as expected.

Figure. Global PV demand and solar cell/module inventories. Source: Solarbuzz Quarterly report, September 2011.

Crystalline silicon (c-Si) PV factory-gate prices will drop another 18% in Q4 (Q/Q), Solarbuzz predicts. Thin-film PV will also see a sizeable quarterly price decline. Gross margins for the major cell, wafer and polysilicon manufacturers, which took a 50%+ hit from Q1 to Q2, will be pressured with each reduction. Margins are “already at a breaking point,” said Craig Stevens, Solarbuzz president, who compares the supply/demand equation with the situation that started PV price declines 12 months ago. The likely result? “More company consolidations and liquidations next year.” IHS iSuppli is also predicting that cost/Watt of c-Si PV will fall below $1 (grid parity) early in 2012.

Q3 2011 global demand will increase just 1% quarter-to-quarter, 20% YOY, according to Solarbuzz’s preliminary analysis. The US and China are taking the lead in rate of solar PV installs. European markets have gone from 78% of global PV consumption in Q3 2010 to a predicted 58% in Q3 2011.

Downstream companies across Europe must choose whether or not to build inventories at the end of Q3 2011, said Stevens. He notes that companies over-estimating demand in the lead up to Germany’s 15% feed-in tariff (FIT) reduction in 2012 will face higher 2011 inventory write-downs.

Solar PV in 2012
The solar industry faces a “challenging year” in 2012: end-market demand will increase at less than half the rate of new cell manufacturing capacity, shows Solarbuzz Quarterly analysis. The resultant oversupply of PV modules will create about 22GW of inventory by the end of the year.

Solarbuzz has determined that an 11GW reduction in production would be needed to maintain the same level of inventory days as projected for the end of 2011.

The Solarbuzz Quarterly report provides analysis of industry production, shipments, inventory, market demand, and the total price picture. The report also includes corporate data for leading company quarterly cell production and company data through the PV chain, along with financial indicators. Solarbuzz, part of The NPD Group, is a globally recognized market research business focused on solar energy and photovoltaic industries. For more information, visit www.solarbuzz.com.

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