Market Situation and Forecasts
Since 2006, solar installations have grown year-on-year. This trend will continue to happen in 2013 and every year after that until at least 2017. Encouraging as that may seem, however, the picture is much more sobering when one looks at industry revenues
Industry revenues – measured as system prices multiplied by total gigawatts installed – peaked at 94 billion US dollars in 2011, but fell sharply to 77 billion US dollars in 2012. Revenue is projected to decline once again in 2013 to 75 billion US dollars, on the back of lower volume growth and continued system price declines, given that PV component prices continue downward.
The conflicting trend of growing volumes but falling revenues will, of course, challenge solar companies to continue to reduce their cost structures.
Globalization of the industry
But an equally imposing problem for companies will be the rapid globalization of the industry. Back in 2010, Europe accounted for more than 80% of solar demand, which then contracted to 53% in 2012. This will shrink further in 2013 to 39%, and Asia will then replace Europe as the world’s largest solar market. Historically, solar companies could focus on Germany and a few other European countries to support their business, but these same companies need to now quickly accelerate their entrance into emerging markets around the world.
Germany is predicted to be displaced by China in 2013 as the world’s largest solar market – a position that Germany has held for the last seven years, with the sole exception occurring in 2008. The United States is also forecast in 2013 to add more solar installations than Germany, which will drop down to third place, followed by Japan and Italy in fourth and fifth, respectively. This geographic shift presents a challenge in itself given that China is almost inaccessible to Western suppliers, with Japan proving equally challenging for non-domestic vendors, and the USA impacted by the recent anti-dumping trade case.
Perhaps more important than next year’s changing rankings of the biggest markets is the geographic fragmentation that we predict will accelerate in 2013. While nearly three quarters of total solar demand in 2012 came from the top 5 end markets, the total proportion will drop to 65% in 2013 as the market fragments. This is because of the increasing importance of “midsized” markets installing a few hundred megawatts per year.
The good news is that more stability will result for this boom-bust industry, because a single government’s incentive policy will have less impact on the overall global market. But along with this stability will come intense challenges for solar companies as they are forced to globalize business by setting up new sales and service networks, complying with local requirements and grid codes, and navigating past the “quick-hit” markets that are here one year and gone the next.
Despite the likelihood that 2013 will be another challenging year for solar companies, the longer-term picture looks somewhat more positive with installations – and more importantly, with industry revenues that are predicted to grow at a double-digit rate between 2014 and 2016. As a result, industry revenues will soar past the 2011 peak to 115 billion US dollars by 2016.
PV module prices to stabilize in 2013 as oversupply eases
A drastic decline in prices along the silicon supply chain has taken place since March 2011. As of November 2012, Chinese module prices have declined by more than 25% on average from their 2011 levels. The drop can be seen in the figure below, which shows Chinese c-Si module prices, differentiated according to the region in which the modules were sold. The time frame spans the period from February to December 2012; figures from November to December are forecasts and estimates from IHS Solar research.
Looking ahead: more stable prices predicted
Despite such gloomy developments during the course of 2012, more stable cell prices are predicted ahead. This means that c-Si module price reductions will also slow, even though the end market might still be expecting bigger price cuts.
All told, IHS predicts c-Si module prices will stabilize by the middle of next year. The anticipated stabilization of prices – from polysilicon to c-Si modules – will be due to a moderate cut in production among Tier-1 polysilicon suppliers.
Energy storage systems (ESS) for PV
The FiT for small PV systems has fallen below the retail price of electricity in the world’s largest PV market, Germany. New system owners in Germany will sell their electricity for less than they are buying it back for. A residential system owner now effectively has a financial incentive to use as much of their electricity as pos sible. Still, the investment into a storage system is not very attractive financially. That’s why the German government has announced a subsidy program for energy storage. The subsidy program got everyone’s attention; however, its scope is much more limited than that of the original EEG. It consists in subsidized (reduced interest) loans and a 30% cash grant for the purchase of the storage system. The program is limited to PV systems up to 30 kWp. The applying PV systems are restricted in feeding to the grid at a maximum 60% of the nominal output power of the PV systems. These measures shall help to integrate more PV systems into the existing grid by capping the power peaks at local level. The date of the introduction is yet to decide (as of March 2013), cf. www.kfw.de.
A strong influx of new products from inverter manufacturers is expected to tackle this market with an array of solutions. The solutions range from inverters with the capability to have batteries attached to full solutions with batteries integrated and intelligent energy management systems that switch between energy sources and charge/discharge batteries in order to achieve the most economical and efficient supply of electricity. IHS will provide a detailed forecast by May 2013, expecting a strong increase of PV energy storage systems in 2013 and the years to come.
This article is an excerpt of IHS Solar Whitepaper on 2013 Market Predictions, December 2012. The document can be downloaded at www.imsresearch.com/media_contact.php?sector=6.