PV Sector Market Forecast

Ultimately proven to be a year of booming demand for the photovoltaic industry, 2010 also demonstrated the usual incentive anxiety, module price pressures and expectations for continued strong growth, or a sudden crashing decline, or, business as usual. It is not unusual for such a divergence of outlooks for the PV industry.

After all, incentive anxiety drives expectations and industry behaviour to a significant degree. Incentives drive grid-connected sales in the PV industry, and, since incentive programmes are always at risk of lowered tariff (or other) levels; programme caps being instituted; rules being changed; sudden cancellation and now retroactive changes of some sort or another – incentive anxiety drives the industry. This anxiety is well earned, and there is nothing new about it.

 

Thin-film is facing challenges in the face of cheap crystalline silicon and lower support incentives (Source: First Solar)

During the latter half of 2010 mounting rumours of drastic changes to incentive programmes led to a frenzy of activity resulting in a very good year indeed for PV – with a 104% growth over 2009 in shipments to the first point of sale. The PV industry has seen growth of more than 100% before, but from significantly lower levels. When this level of growth comes at multi-gigawatt levels, it is truly something to celebrate. Figure 1 presents PV industry growth from 1995 through to 2010 – and shows an industry that has struggled and continues to do so, but which is succeeding against all odds.

The announcements about changes to feed-in tariff (FiT) programmes in European countries came true. France’s FiT is stalled and likely to return with significant changes (a rumoured 500 MWp cap). Despite continued activity, the FiT in Italy is teetering. The German government is unlikely to embrace the high level of activity in 2010 along with casting a dour eye on strong activity in 2011 and among other unfortunate changes to programmes, the retroactive tax in the Czech Republic and a limit to the number of hours that electricity can be fed to the grid in Spain are likely to give investors some cold chills.

Figure 1: Global PV Industry Growth, 1995 through 2010

Despite these unfortunate developments, 2011 is likely to be a 20 GWp year (to the first point of sale). Firstly, crystalline from manufacturers in China and Taiwan is still quite cheap. Secondly, First Solar has low manufacturing costs and installation efficiencies that should help it weather bleak times – and its technology is bankable. Finally, the industry is still in over capacity and it will go somewhere – even if it is into inventory.

Et tu crystalline?

In 2008, crystalline technologies had an 86% share of shipments. In 2009, however, its share of the market decreased by three percentage points to 83%, despite aggressive pricing by manufacturers in China and Taiwan that made it, simply, cheaper to outsource manufacturing than to manufacture in house. Inexpensive c-Si made for a harsh competitive landscape for thin-film technologies.

Higher efficiency goes to lower system installation costs (at least currently, and until advances are made in this regard). Thin-film technologies must have a lower price point to overcome the area penalty – meaning, you need more to do the same. In 2010, with shipments of more than 16 GWp, thin-film had a 13% share of the market.

Note that in 2010, CdTe (Cadmium Telluride) gained two percentage points, while poly and mono crystalline decreased by one percentage point, respectively. It must also be recognised that the gain or loss of a percentage point, or two, in market share is far from trivial in a highly competitive industry such as the solar sector.

However, like it or not, the aggressive pricing for share of 2009 and 2010 has affected the fortunes of all manufacturers.

Figure 2: Snapshot of PV industry activity at the beginning of 2011

The downward trend in average pricing was noted by governments and assumed to represent a similar downward trend in costs. On average, manufacturing costs have declined by a compound average of 5% over time, however, cost and pricing in PV (traditionally a low margin industry) have, historically, not had a close relationship. In 2011, average selling prices (ASPs) continue to decrease, driven down by decreasing incentive levels and continued aggressive pricing from China/Taiwan – for more on Taiwan see the feature in this issue of Renewable Energy World.

The road ahead for thin-films in 2011 is highly competitive.

Continued low pricing from crystalline technologies, shrinking incentives and new markets such as China, India and the US that are struggling to emerge, along with a continued wait for the anticipated boom in Building Integrated PV (BIPV) – where thin films have some advantages – will make for anxious strategy sessions.

A few years ago, when polysilicon supplies were tight and prices up, many prematurely forecast that crystalline was, essentially, on its way out, and that by 2010 thin-films would have at least a 35% share of the market.

Obviously this forecast did not come to pass.

A Look Ahead

Before looking forward, a glance over the shoulder at technology contribution over time, history tends to repeat itself.

Table 1: Technology Forecast to 2014

In the 1980s, amorphous silicon had an advantage in consumer indoor applications such as calculators and watches. Of course, this was from a much smaller level of demand (kW to low-MW range).

Given that nothing in terms of demand for photovoltaic technologies can be taken for granted, the industry may be in for some struggles in the near future. Figure 2 shows where the PV industry stands at the beginning of 2011.

As the industry moves from generous feed-in tariff incentives to markets that rely on renewable certificate trading (commodity trading under any name is still commodity trading), tender processes to set electricity rates, and decreasing tariff levels towards a future of no FiTs and few rebates, margins will suffer and the solar landscape will become more Darwinian. Larger companies will continue to eat smaller companies while manufacturers and installers with higher manufacturing costs will experience significant margin constraints.

For thin-films, this presents an argument for a focus on new product development that focuses on thin-film strengths, such as flexible substrates and better performance in low light conditions.

A focus on product development might finally lead to advances in building integrated PV sub-applications – an obvious area where thin-film technologies have an advantage.

Unfortunately, it will be some time some time before thin-films have a 30% share of the market, but 20% going forward is not out of the question. Table 1 offers a technology forecast to 2014 based on conservative and accelerated forecasts.

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