SUN IN THE WORLD

Global Market Outlook for Photovoltaics Until 2014
May 2010 (European Photovoltaic Industry Association)

THE POINT
Though the European photovoltaic (PV) solar market continued to expand in 2009, a lot of questions have emerged about 2010.

Germany, with the insolation (sun per square meter) of Juneau, Alaska, still leads the world in installed PV capacity but – in a carefully calculated move to prevent a bubble – it is cutting its subsidy. When Spain did that (in 2009) after a ruinous bubble had already formed, solar installations dropped almost to nothing (from 2,605 megawatts in 2008 to 69 megawatts in 2009) and the ramifications were felt in the solar industry around the world. Will the German effort succeed? And what impact will it have on the world market?

More importantly, what impact will the Greek financial crisis – now ominously threatening to spread to Portugal, Spain, Ireland and other weak EU economies – have on the world-leading European market for PV? The secret to success in Europe so far has been a subsidy called the Feed-in Tariff (FiT), an above-retail price paid to solar (and other New Energy) system owners for every unit of electricity (kilowatt-hour) they feed to the grid. This subsidy is paid by utilities but the cost is distributed among all ratepayers and often underwritten by governments. Can such subsidies endure if the crisis in Greece widens?

Japan, once the world’s PV pacesetter, renewed its commitment to solar with a new subsidy plan and more than doubled its 2008 installed capacity. Is that sustainable? And that’s nothing compared to China’s almost 400% installed capacity jump in 2009 to 160 megawatts from the 45 megawatts it built in 2008. Will the Chinese government’s commitment to solar continue? And is India’s national commitment to build 20,000 megawatts of solar by 2022 for real? Is it even realistic for a country (India) that had a cumulative 120 megawatts of installed capacity at the end of last year to ramp up like that?

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There are answers to these and many other of the looming questions about sun in the world in Global Market Outlook for Photovoltaics Until 2014, from the European Photovoltaic Industry Association (EPIA). EPIA has a reputation for working hard to make its data accurate, an increasingly important issue as not-entirely-transparent players (like China) and not-entirely-accurate record keepers (like India and Italy) become more important factors in the market.

Speaking of Italy, the story there is worth noting. The Italian market may be what buoys the EU PV industry as Germany fades and India ramps up. Italy went from a 2008 installed capacity of 338 megawatts to 710 megawatts installed in 2009 and shows no sign yet of hesitation. It has a strong FiT, especially great sun (in the south) and traditionally high utility rates that make the high cost of solar less inhibiting. Other previously strong markets in Europe (Czech Republic, Belgium) have been forced to cut back on their overly-enthusiastic FiTs.

As always, the French are not following the trend but pioneering a new type of challenge. They have this year expanded their FiT, curiously emphasizing the up-to-now niche market of building integrated solar panels (BIPV). The problem in France is that they cannot get their solar capacity connected to the grid. Is this an issue with the notoriously slow French bureaucracy? Or is there nefarious obstruction from the nuclear energy industry-controlled power establishment?

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The UK, by moving toward the FiT and emphasizing solar water heating systems, will also be worth studying for new information about what can drive PV market expansion.

Finally, there are emerging markets all over the world that could break out if policies intended to support them succeed. Demand for PV is expected to burgeon in Canada, Australia, Latin America (Brazil, Mexico), Africa (Morocco, South Africa) and Asia (Taiwan, Thailand), according to EPIA.

The EPIA ran a Moderate scenario (slower, steadier growth) and a Policy-Driven scenario (bigger, bigger, faster, faster). It predicts 8.2-to-12.7 gigawatts of new installed capacity in 2010 and as much as almost 30 gigawatts in 2014.

This is, of course, the prognostication of an industry group. Its optimism is little tempered by the complexity of what might happen if Greece caves in and Portugal, Ireland, Spain and others follow. The best case scenario is based on the assumption, instead, that governments and utility ratepayers continue to underwrite the cost of FiTs and that PV production capacity, at present ready to meet the demands of best-case 2010 growth, will keep pace with the underwritten expansion and not throw supply chains into chaos.

The optimism in this case is not unfounded. It is validated by the very reasons that took the world from a gigawatt of PV installations in 2003 to 7.2 gigawatts of PV installations in 2009: The need for emissions-free, domestic, secure electricity generation is unabated and not likely to stop growing.

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THE DETAILS
PV began as a solution to the question of how to supply electricity to orbital spacecraft 40+ years ago. At the end of 2009, the global installed solar PV capacity was ~23 gigawatts, or the equivalent of 23 nuclear power plants.

At the end of 2009, Europe had the most installed PV capacity in the world, ~16 gigawatts, or about ~70% of all PV. Japan, with 2.6 gigawatts, was second and the U.S., with 1.6 gigawatts, was third. China ranked among the 10 nations with the most installed capacity for the first time in 2009 and if the government’s commitment is sustained it will rise in the standings.

The world's 2003 PV installed capacity was less than 1 gigawatt; in 2009, 7.2 gigawatts of capacity were installed. The 2007 to 2008 Compound Annual Growth Rate (CAGR) was 160%. Growth from 2008 to 2009 was not so humongous (15%) but was nevertheless impressive. Germany, which was second to Spain in 2008, was first in 2009. Spain and South Korea had the most notable drop-offs in 2009.

The 2008-09 financial downturn slowed the global solar PV industry but, thanks to the resurgences in Germany and Japan and the surges in Italy, the U.S. and China, did not stop it.

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Germany went from 2 gigawatts in 2008 to ~3.8 gigawatts in 2009, 52+% of the World PV market.

The EU cumulatively installed 5.6 gigawatts of PV in 2009, 78% of the World’s PV market. Germany’s 2009 installed capacity was 68% of the EU market.

Other 2009 growth came in Italy, the Czech Republic and Belgium. The latter 2 nations’ growth, because they are small and grew too fast last year, is not expected to be sustainable but Italy looks like it might be a bright spot for some years to come.

Only 185 megawatts of France’s 285 megawatts of 2009 installed capacity have been connected to the grid. This backlogging will need to be rectified if France is to continue to grow.

Portugal and Greece formulated ambitious plans in 2008 and 2009 but are presently awaiting a more stable economic environment.

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Spain’s drop from 2,605 megawatts of installed capacity in 2009 to 69 megawatts in 2009 was nothing short of dramatic. It wrenched areas of the Spanish economy and demonstrated the danger and damage that can be caused by a poorly thought through FiT.

China and India have announced enormous ambitions but remain uncertain factors. They must prove their intentions with installed capacity.

An earlier EPIA study (SET For 2020) concluded that PV can be as much as 12% of EU electricity by 2020 and be price-competitive in 76% of EU 2020 electricity markets without subsidies.

Presently, however, EPIA terms PV “pre-competitive” and finds its deployment almost entirely dependent on policies and politics. When support mechanisms are introduced, modified or ramped down, the PV marketplace locally and, in some cases globally, reacts. Suppliers and producers are affected.

An extensive EPIA data search concluded in March 2010 with the formulation of 2 scenarios, the Moderate Scenario and the Policy-Driven Scenario, for PV development through 2014.

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The Moderate Scenario assumes a business-as-usual market without significant new support mechanisms but on-going FiTs.

The Policy-Driven Scenario assumes new support mechanisms and, especially, strong Feed-in Tariffs. It also assumes strong political backing for PV as an essential future electricity supply, resulting in the elimination of barriers to growth. Permitting would be simplified and grid connection would be streamlined.

EPIA used its data and scenarios to make predictions about PV growth, nation by nation and technology-by-technology.

In the Moderate Scenario, EPIA predicts Europe’s market would grow ~6 gigawatts in 2010, flounder in 2011 and 2012, and rebound in 2013. In the Policy-Driven Scenario, Europe could install 8.7 gigawatts in 2010 and continue growing to 13.5 gigawatts in 2014.

EPIA predicts the world 2010 PV market to grow, in the Moderate Scenario, to 8.2 gigawatts. In the Policy-Driven Scenario, it expects the world 2010 market to be 12.7 gigawatts and then grow to ~30 gigawatts in 2014.

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The Moderate Scenario assumptions lead to a 14% 2010-to-2014 CAGR. The Policy-Driven Scenario assumptions lead to a 33% 2010-to-2014 CAGR.

The EPIA report provides detailed country-by-country historical analyses and 2010-to-2014 predictions for the leading PV markets. It also provides details for the most important emerging markets.

The EPIA analysis of global PV production capacity considered (1) announced capacity, (2) nameplate capacity, and (3) actual production.

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Unrealized expansion plans cause nameplate capacity to be lower than announced capacity. Expansion plans are unrealized when financing fails or the technology of production lines becomes obsolete or uncompetitive. Current production is lower than nameplate capacity because of the many reasons that a manufacturing facility is not fully productive (from maintenance to a lack of orders).

Using announced production capacities, 2009 showed regional variations.

Chinese and Taiwanese manufacturers did over 50% of C-Si cells and modules production. Europe accounted for ~20% for crystallized silicon (c-Si) cells production and ~30% for c-Si module production. Japan accounted for less than 10% and the U.S. for less than 5%.

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The U.S. had ~40% of solar grade silicon (Si) production capacity. Europe was first in Thin Film production capacity in 2009 with 30%.

EPIA predicts total PV production capacity to have a 20%-to-30% CAGR (Compound
Annual Growth Rate) for 2010-to-2014. Si (upstream) production capacity will grow ~30% with bigger growth in 2010 due to current lingering silicon shortages. C-Si cell production and c-Si/Thin Film module production capacity are predicted to have a 2010-to-2014 CAGR of ~22%.

Total 2009 announced capacity was ~24 gigawatts. It is predicted to grow ~30% in 2010 and then ~20% each year after and reach 65+ gigawatts in 2014.

In 2009, Thin Film capacity was ~22% of total capacity and it will grow to 25% in 2013. Si based Thin Film technologies capacity will grow in China and Taiwan. For Cadmium Telluride (CdTe) and Cadmium-Indium-Gallium-diSelenide (CIGS) Thin Film technologies (which do not use Si), production capacity will grow in the EU, the U.S. and Japan.

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70% of actual Thin Film production came from CdTe and one company (First Solar) in 2009. Si based Thin Film production is more diverse because during the recent silicon shortage many companies invested in production facilities. With silicon prices now falling, competition in the PV sector has never been greater.

The conflicts between announced capacities (the numbers used above), nameplate capacities and actual production could lead to large overcapacities. This could potentially impact PV's cost-competitiveness. The oversupply of solar materials could lead to a production ramp-up and cause shortages in the supply chain that distort market dynamics. This happened in 2009 in Germany.

A stable and sustainable market requires balancing of materials supply (semiconductors materials, glass, silver, chemicals and gases, etc.) to avoid cases of shortage or oversupply.

EPIA is working on further market analysis tools.

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QUOTES
- From the EPIA report: “The demand for PV systems is heavily dependent on the general economic climate and most importantly on governments’ support schemes. Sustainable Feed-in Tariffs, together with simplified administrative and grid connection procedures as well as priority access to the grid, are considered the way to ensure…stable and sustainable demand.”