EUROPE SUN SHADING

Hunting for the Next Hot Solar Market
Ucilia Wang, April 14, 2009 (Greentech Media)

SUMMARY
Travis Bradford, President of the Prometheus Institute, is one of the world’s foremost solar market watchers. His keynote at the Greentech Media Phoenix conference brought real news: Germany, the leading force in the world solar market for much of the last decade, is about to see slower growth. And the U.S., long the solar world’s most embarrassing underachiever, is about to take over market leadership.

Thanks to its innovative feed-in tariff (FiT), Germany’s solar energy installed capacity of 1.5 gigawatts far outreaches that of any other country. The German FiT was so successful it became the model on which Spain, France and Italy based equally rapid solar expansion.

Bradford said the incentive has brought Germany’s market to maturity and rapid expansion cannot be expected going forward. With the reduction of the guaranteed tariff, Bradford expects growth to steadily slow and capacity to hit a limit at 3-to-4 gigawatts.

About to shed underachiever status? (click for Global Green's full report, including Germany)

Spain’s use of the FiT drove a huge boom until the government cut the guaranteed tariff. Bradford said the panel manufacturers are now looking to Greece and France – where there are strong, new FiTs, and the U.S., where a tax credit incentive and Renewable Electricity Standards (RESs) will drive installation.

From the Bradford presentation. (click to enlarge)

Bradford said U.S. demand will create economies of scale in the solar panel manufacturing sector that will bring prices down. He cited a study by the U.S. National Renewable Energy Lab (NREL) that found 500 U.S. cities are expected to see solar energy-generated electricity achieve “price parity” by 2015, meaning its cost would be the same as electricity from conventional sources.

Solar panel prices have fallen worldwide at a rate of 5% yearly. Thin-film PV materials will continue to lead the drop in solar energy costs.

Crystalline silicon solar panels, the most common type of rooftop panels, cost $3.40 per watt in 2008 and are expected to drop to $2 per watt in 2010. Thin-film (averaged over all the competing formulas) will fall from $2.50 per watt in 2008 to $1.50-to-$2 per watt in 2010.

Prices for system components and installation have dropped even faster than panel prices.

The production of amorphous-silicon solar panels is relatively new and still faces cost challenges from a lack of adequate ready infrastructure.

The polysilicon shortage is no longer a problem for the solar energy industry.

From the Bradford presentation. (click to enlarge)

COMMENTARY
Several factors contribute to the shift of the solar market away from Germany. To begin with, changes in solar market technology – like increasing opportunities in thin-film PV and solar power plant technologies – require investors to think about a new set of choices, just as the availability of credit makes those choices more crucial. Germany's primacy in the market has been based on its rooftop panel industry. The newer concepts, emerging in the U.S. and elsewhere, offer investors a different and perhaps more promising opportunity.

Germany’s FiT was costing €300-to-€500 per household yearly. The electorate was getting restive and some political leaders wanted to cut the inflated rate paid by the FiT 30%. It was cut 10% and turmoil resulted in the panel manufacturing area of the industry. The threat of further cuts remains.

From the Bradford presentation. (click to enlarge)

As a result of the economic rescue package passed by the U.S. Congess in the fall of 2008, there is a 30% investment tax credit (ITC) on the full cost of solar energy systems. It is, for the first time, available to utilities as well as for residential and commercial buildings. The stimulus package passed by the Congress in February revised tax credits, grant programs and federal loan programs to further make buying a solar system attractive.

In addition, some 30 states now have RESs that require the state’s utilities to obtain a specific portion of their power from New Energy sources by a date certain. Many of those laws require a specific portion of the New Energy to come from solar energy. These provisions all significantly add to demand. The Obama administration and the Democratic leadership are expected to push through a national RES, requiring all U.S. utilities to obtain 10% of their power from New Energy sources by 2012 and 25% by 2025. This should further boost the U.S. market.

From the Bradford presentation. (click to enlarge)

Though many thin-film companies claim to have cut costs, only First Solar shows evidence of having done so.

The cost of amorphous-silicon solar panels is expected to drop and installed capacity grow, driving economies of scale.

The polysilicon shortage has been alleviated, in part by rising supply and in part by falling demand. Growth in the use of thin-film, which requires less or no silicon, has played a significant role in this important shift.

The drop in component and installation prices over the last 4-to-5 years is very much attributable to economies of scale that emerged with rising growth in large-scale PV ground systems.

The predicted parity. (click to enlarge)

QUOTES
- Travis Bradford, President of the Prometheus Institute: "[High costs to support the FiT] can't be left unchecked…"
- Bradford, Prometheus Institute: "[The U.S.] may be the greatest global hope for the PV industry…"