SUN IN THE MARKETPLACE

The New Solar Market; Implications of the Shift to a Demand-Driven Market: Key Differentiators to Watch in 2010 and Beyond
Dave Cavanaugh and Clint Wheelock, 2Q 2010 (Pike Research)

"Solar Market Demand is Recovering after a Difficult 2009…Starting in late 2008, the solar market shifted from supply constricted to demand-driven within a few quarters as a result of four main factors…[1] Strong growth in crystalline silicon (c-Si) cells and module production…with rapidly increasing availability of polysilicon at plunging prices…[2] Constrained availability of credit and financial uncertainties…[3] Spain’s dramatic demand decline of 2.2 gigawatts (GW) as overly generous feed-in tariffs (FITs) were capped in October 2008…[4] The growth of thin film (TF) supply and market share, primarily from First Solar…[I]n mid-2010, we believe that the new, dramatically lower-cost solar market looks to be set for just short of 43% year-over-year growth in demand to about 10.1 GW…[G]rid parity for solar produced power in most of the world’s energy markets has likely moved up a year to the 2013 timeframe…Pike Research expects solar market demand to exceed 19 GW by 2013, a 25% compound annual growth rate (CAGR) from 2010…

"Module Oversupply is Likely…[T]he number of cell and module manufacturers in the new solar market remains unsustainably large. Consequently, gross oversupply is likely…[T]otal available module capacity by the end of 2010 could reasonably add up to more than 30 GW – an astounding number…Pike Research has diligently analyzed the competitive strength of this large number of cell (for c-Si modules) and module manufacturers (both c-Si and TF)…[There are]… [17] Tier 1 companies: Strong…[80] Tier 2 companies: …formerly strong solar market competitors, emerging companies with innovative value propositions…more likely…to survive in a consolidating market…[~10] Tier 3 companies: Basically…[they will] struggle in varying degrees to survive…"

click to enlarge

"Low Cost per Watt is Now the Primary Differentiator…While $/W must be considered in combination with module efficiency, it has become the main competitive differentiator…[It] is achieved in a variety of ways, including…[1] manufacturing in low-cost (especially labor cost) countries…[2] Low-cost materials…[3] Low-cost processing resulting from engineering breakthroughs and process controls…[4] Advantages of scale…

Module Efficiency and Cost Define Winning Companies…[H]igher-efficiency modules are winning a larger share of large commercial and utility-scale projects…[L]arger projects will probably consume the bulk of modules in growing markets (e.g., China and the United States), thereby increasing the competitive strength of higher-fficiency modules…While the residential and building integrated photovoltaics (BIPV) markets will likely continue to favor pure cost, trustworthy brands, and architectural compatibility (i.e., invisibility) over efficiency, Pike Research expects module efficiency to continue as a key company differentiator…"

click to enlarge

"Moving Down the Supply Chain is Growing in Importance…[C]ustomers increasingly prefer one-stop shopping…[and] prefer companies that deliver project development, engineering, permitting services, BOS supplies, financing, and other services…Already, First Solar and SunPower have led the way…China’s Suntech and Yingli have also developed similar packages…Pike Research looks for most Tier 1 and Tier 2 companies to provide these products and services (increasingly through partnerships)…

"Other Market Differentiators to Watch in 2010 and Beyond…[1] Market presence (e.g., brand recognition and sales and marketing) in high growth markets…[2] Ability to internally finance a large portion of capacity and technology growth…[3] Module (but not cell) manufacturing near or in high-growth markets…"