As the losses add up for leading PV industry manufacturers, and as manufacturing capacities are idled, it is important to remember that the current correction taking place the PV industry could not necessarily have been avoided. But the severity of the current climate may have been mitigated and the landing made softer if new entrants and participants had paid attention to, and learned from, PV industry history. Manufacturers in China, currently dominating industry demand at 46 percent, might have been more circumspect with capacity growth had they understood that incentives are temporary.
If officials took the time to study PV industry behavior — like an anthropologist studies civilizations — and then designed incentives, they might have developed more cautious programs with controls to stop overbuilding. Concerning the construction of incentives, dams provide a reasonable analogy: Incentives need to be designed and constructed like a good dam with solid floodgates and levees to control the flow of incentive money. In this regard, we must avoid situations where the market runs amok and doors are slammed shut before the resulting flood devastates everyone and everything around it.
It is important to remember and understand PV industry history because the good times will come again, and when they do, these lessons might help mitigate irrational optimism and curb overcapacity. Some things to keep in mind are:
- Incentives and subsidies for solar are designed to time out.
- Industry behavior has evolved in a start/stop incentive environment so the basic economic supply/demand principles do not necessarily apply and the resulting market behavior is not orderly.
- PV technologies (thin film and crystalline) all follow the twin paths of increasing efficiency and decreasing manufacturing cost. Changes are incremental, that is, there is likely no black swan technological change that will swoop in and change the fundamentals overnight. More than likely, the black swan technology has been in a university lab for years waiting to hatch, and has years to go before it does.
- Yes, the point is the system, but balance of systems technologies need an equal focus in terms of cost and efficiency improvement.
- Yes, again, the point is the system and installation practices should continue to become more efficient — while labor costs increase, time to install can decrease.
The top ten manufacturers for 2011 may have sold the most technology, but most, if not all, suffered losses. Examples are Suntech, $633-million loss, JA Solar, $67-million loss, Yingli, $510-million loss, Trina Solar, $38-million loss, and Canadian Solar, $91-million loss. These companies serve as examples of many other companies, some of which failed in 2011 and early 2012. In 2011, shipments of technology to the first buyer grew by 35 percent, from 17.4-GWp in 2010, to 23.6-GWp in 2011. In contrast, technology revenues increased by 4 percent in 2011, to $32.2-billion, from $31.1-billion in 2010. The low price for technology was the reason for flat revenues in 2011. Price pressure continues in 2012, which continues the margin pressure and leads manufacturers to idle current capacity and cancel building plans. Figure 1 presents PV technology revenues to the first buyer from 2001 through 2011, with revenue forecast to 2016.
Figure 1: PV Cell/Module Revenues, 2001 – 2016
Global capacity increased by a compound annual growth rate (CAGR) of 61 percent, with shipments increasing by a CAGR of 64 percent over the most recent five-year period, 2006-2011. Figure 2 displays a picture of industry shipment and capacity growth from 2001 through 2011, along with capacity utilization information and an estimate of capacity in 2012. The shipment data in Figure 2 is based on an accelerated estimate. Given current capacity reductions, it is expected that capacity will increase only slightly in 2012, unless, of course, a robust incentive appears that stimulates significant activity. Capacity utilization numbers appear near each year’s shipment bar in Figure 2.
Figure 2: PV Industry Manufacturing Capacity, Shipments and Utilization
It is currently in vogue to cast aspersions on the PV industry as too expensive along with suggesting that it has not fulfilled its promise. Critique of this type is a fad, and this too will pass. From 2004 through 2010 hype surrounding the industry was prevalent – and hype is just as dangerous as harsh criticism. Another history lesson and apt critique: the bigger you are, the harder you fall. PV, along with the other solar technologies, reliably and cleanly generates electricity with minimal running costs for at least 20 years after it is installed — but in reality, even longer. There are PV systems still in operation after 30 years. Solar needs to better manage expectations, but make no mistake — it is one of the technologies of the future. The day will come when no one remembers that there was an argument about this — that day is far off, but it will come.
Image: Martin D. Vonka via Shutterstock