Gartner analysts Al Velosa and Jim Hines list their key takeaway themes from Intersolar NA, including questions about supply and demand, financing, and technology developments.
July 28, 2010 – Several key themes emerged from Intersolar North America (July 12-14, San Francisco), but top among them were questions about the gap between demand and supply, according to Gartner analysts Al Velosa and Jim Hines, in a pair of research notes. They also point to persistent uncertainty about financing, and technology developments from cells to modules to balance-of-system (BOS).
Supply, demand “imbalance” worsening. Shortages persist across several areas in the PV supply chain, with project developers and financiers concerned in particular about modules and inverters, attributed to unexpected strong demand in Germany in 1H10, an “imbalance [that] is likely to begin to get resolved by year-end,” they write. Germany’s PV market is still strong, they say, citing “channel checks,” despite changing government incentives and euro valuation whipsaw. “However, for the 2011 time frame, we see increasing levels of uncertainty about demand across the market and thus across prices, especially as friction in the supply chain begins to ease off, leading to a flatter demand profile for 2011 relative to 2010.”
There is significant concern about the PV supply situation. PV module and cell vendors claim to be at max capacity, and financiers and project developers point to shipment delays and “product no-shows.” But are suppliers really at full capacity? There’s about 34GW of PV module supply (nameplate basis) in the industry, the analysts note, but that doesn’t mean all of it is at full 100% utilization — one has to account for ramp-up, test, utilization, yield, and materials allocation, the analysts say, which means more like 20-24GW of actual PV module manufacturing supply. Assuming “slightly more than 11GW” for PV installations in 2010, plus about 4GW of inventory in the supply chain (starting from modules in containers on ships from China to trucks in Europe and North America, and eventually in warehouses pending final delivery to project sites), adds up to ~15GW, not the 20GW+ above — meaning ~5GW is unaccounted for. And that doesn’t include capacity from electronics manufacturing service (EMS) firms who are dipping their toes into solar PV. (And it also doesn’t factor in an estimated 2.5GW inventory from 2009, which actually would make the perceived imbalance worse.)
2010 PV module supply and demand, on a GW basis. (Source: Gartner)
“This leads us — again — to an industry-wide disconnect between supply and demand,” one that may not be apparent due to both manufacturing and shipping snags, the analysts write, citing “anecdotes” of containers being left off boats, which bog down the supply chain and project schedules.
This perceived imbalance “should come to roost for all PV vendors” in 2011, the analysts write, as capacity increases from both traditional PV vendors as well as EMS and other firms. “The PV industry seems to already have forgotten that business cycles exist.” Look for PV module prices, which have been firming and in some cases increasing, to decrease by >15% in 2011 due to that excess capacity, as well as slower growth in European markets (which are reducing incentive programs). “We also expect buyers will favor premium suppliers, as project developers will have more choices for sources of PV modules,” the analysts write.
- Finance still a problem. “All players we spoke with were acutely aware of the need for working capital (for the construction period) as well as PV project finance,” the analysts write. In the US market in particular, there’s uncertainty whether the US treasury grant program will be renewed or allowed to expire at year’s end. Investors fear uncertainty, so concerns persist about financing projects in the US beyond 2010.
- Technology development marches on. All across the supply chain, from cells to modules to BOS, technology developments and investments march along. BOS firms in particular are working to improve technologies, to help lower costs associated with BOS (which can be up to half the total PV system’s cost). Microinverters, DC-DC converters, and alternative interconnection architectures are generating particular interest. PV cell and module makers continue to move the efficiency needle, e.g. with crystalline silicon (c-Si) vendors’ roadmaps targeting 19% and beyond. And work continues among the thin-film PV sector, both to push cell/module efficiency and manufacturing equipment.