London, UK — At the end of last year, the global photovoltaic market hit a cumulative installed capacity of 40 GW, of which 16.6 GW was added during 2010. A year of unprecedented growth saw new capacity more than double from 7.2 GW in 2009. Worldwide, solar PV already produces some 50 TWh each year. By 2015, though, capacity could climb to range from 131 GW to 196 GW.
These figures come from the European Photovoltaic Industry Association (EPIA), which recently presented its Global Market Outlook for Photovoltaics until 2015. The trade group linked last year’s surge to soaring German and Italian markets. Germany continued to lead the PV market worldwide, with 7.4 GW installed over the year, while Italy added a substantial 2.3 GW.
Other countries with significant growth included the Czech Republic, which saw a 1.5 GW expansion in 2010, a rise unlikely to be sustained in 2011. Japan gained 990 MW, the United States 900 MW, and France 700 MW. Spain regained some ground by installing 370 MW after two years of strongly adverse conditions. Belgium connected more than 420 MW of PV.
Europe Leads the Way
In terms of global installed capacity, the EU leads with almost 30 GW installed as of 2010 — about 75% of global PV capacity, up from 70% in 2009. Japan (3.6 GW) and the USA (2.5 GW) are some way behind, while China has already entered the Top 10 of the world’s PV markets and should reach its first GW this year.
Across Europe, installations last year totalled 13.3 GW, outstripping 9.3 GW for wind to lead all renewable generation technologies in added capacity. In its expansion PV was second only to gas power plants, for which new capacity reached between 15.7 GW and 28 GW, depending on the source. EPIA, in fact, links global investment in gas — rather than nuclear and coal — with the growth in variable renewable generation sources such as PV and wind.
At its current pace of expansion, Europe could increase the percentage of its electricity generated from PV by one percentage point every two years, says EPIA. The continent’s annual increase in capacity has grown from less than 1 GW in 2003 to over 13 GW last year. Despite difficult financial and economic circumstances, 2010 was expected to show a major acceleration. But a 130% Compound Annual Growth Rate (CAGR) exceeded all expectations and almost matched the 145% from 2007 to 2008.
Global Growth Opportunities
While the EU has dominated the world market for years, and may continue to do so, the rest of the world clearly offers greater growth potential. PV can provide a sustainable solution to the energy needs of the ‘sunbelt’ countries around the equator. In this region PV can already compete with diesel generators for peak power generation without policy support
Driven by local and global energy demand, the fastest PV growth is expected to continue in China and India, followed by Southeast Asia, Latin America and the MENA countries. The PV potential of the sunbelt countries could range from 60 GW to 250 GW by 2020, and from 260 GW to 1100 GW in 2030, representing 27% to 58% of the forecast global installed PV capacity by then.
Currently, though, among countries outside Europe only Japan and the USA have more than 1 GW of installed PV capacity. China could reach that threshold quickly but medium-sized markets will need several years to reach the same level of development.
A global analysis reveals three leading zones that are developing PV in contrasting ways. The Asia-Pacific (APEC) region, reflecting its wealth and economic growth, is the second-placed region behind Europe. In addition to Japan and China, the APEC region covers: South Korea, where the market has slipped since 2008; Australia, with more than 300 MW installed in one year; Taiwan; and Thailand, where more than 2.5 GW may be installed in coming years. North America is the third region, with Canada developing steadily alongside the US to form a huge market with tremendous potential for growth.
Outside these three regions, the MENA (Middle East and North Africa) region represents an untapped opportunity for the medium term. PV also shows great potential in South America and Africa, where electricity demand is expected to rise fast.
Forecasts to 2015
While growth in the EU in coming years could be low, or even negative, non-EU countries should more than pick up the slack from 2011 and 2012 onwards, ensuring continuous global PV market growth until 2015 and beyond.
In 2011, though, a market stagnation or even a small dip is not impossible. The speed of political decisions over 2010 and the start of 2011 acts as a reminder that PV will be incentive driven until competitiveness is reached in all of a country’s market segments. Yet EPIA believes market developments could raise global installed capacity in 2015 to between 131 GW and 196 GW, with 100 GW hit as soon as 2013.
A rapid global rebalancing could also be imminent, with the EU accounting for less than 40% of the world market by 2015 in the EPIA’s ‘Moderate’ scenario and about 45% in its ‘Policy-Driven’ scenario. While 2010 showed no sign of such a change, the rest of the world, and especially Asia, could prove a fertile market, even if the EU is likely to stay ahead in installed capacity over the next decade.
Production, which was once balanced between the EU and the rest of the world, is already growing faster in Asia, and particularly China. Modules are still mainly shipped to the EU, reflecting the smaller size of Asia’s market, although about half of the value of a PV system is currently created further downstream and closer to the consumers.
Anticipated growth in markets outside the EU would tend to reduce the mismatch between supply and demand. A current overcapacity should also further reduce module prices over coming years and thereby trigger more demand.
The disparity in installations between the EU and the rest of the world should decrease over the next five years. On the supply side, a rise in the relative share of transport in the cost of PV modules as module prices decrease should address the imbalance and encourage production closer to the end market. A continuing slide in PV module prices will also further erode the share of modules in the overall value of a PV system.
Unquestionably, global PV production capacity in 2010 considerably outstripped demand. Even so, several manufacturers announced plans to accelerate their capacity expansion.
This apparent contradiction extends from module manufacturers further upstream in the PV value chain. EPIA estimates that global production capacity for silicon could reach 370,000 tonnes next year, up from about 350,000 tonnes in 2010. Huge expansions have taken place since the 2005 and 2008 shortages, and many only came on-line last year. Various small Chinese players are being forced to shut down production while the largest established companies are announcing capacity increases of as much as 40,000 to 60,000 tonnes by 2012.
For wafers, global production capacity totalled 30-35 GW in 2010, of which more than 55% was in China. Germany accounts for more than 10% of global capacity, followed by Japan, Taiwan, Norway and the US.
Crystalline-silicon (c-Si) cell and module capacity is now mainly based in Asia. EPIA estimated global c-Si cell production at 27-28 GW in 2010. Almost half this capacity was in China, while Taiwan produced more than 15%, the EU more than 10%, Japan slightly less than 10%, and the US less than 5%. Module production capacities for c-Si were estimated slightly higher at 30-32 GW.
Global production of thin-film modules reached 3.5 GW in 2010. This is likely to increase to more than 5 GW in 2011 and might reach 6-8.5 GW in 2012.
Scaled Down Incentives
Three main factors have driven PV’s spectacular recent growth. Firstly, renewable energy is no longer a curiosity; PV has proven itself to be a viable energy source in all regions of the world. Secondly, price falls have brought PV close to grid parity in several countries, encouraging new investors. Finally, policymakers in key countries have introduced FiTs and other incentives that have helped develop markets, cut prices and raise investors’ awareness.
Over the last decade, global installed capacity has multiplied by 27, from 1.5 GW in 2000 to 39.5 GW in 2010 – an annual growth rate of 40%. Furthermore, that growth has proved to be sustainable, allowing the industry to develop at a stable rate.
The EU, having overtaken Japan, is now the clear leader in both market and installed capacity, thanks largely to German initiatives, which have also fed global expansion. In the rest of the world, the leading countries continue to be those that started installing PV even before the EU.
The market is expanding every year. In sunbelt countries, falling prices are bringing PV closer to grid parity and helping spread awareness of its potential. But the financial crisis and competition from other energy sources put pressure on policymakers to streamline incentives.
‘The currently installed global PV capacity produces power equivalent to the entire electricity consumption of countries like Greece, Romania or Switzerland,’ said Ingmar Wilhelm, EPIA’s president.
‘The evolution of the PV market in recent years has been heavily linked to the confidence and vision of… policymakers in supporting the development of the technology. Adequate support policies that have been driving the markets so far, such as the feed-in tariffs, must continue and be ever [continuously] brought in tune with the declining cost curve of PV.’