NewEnergyNews: TODAY’S STUDY: PV IN THE WORLD/

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    Monday, September 19, 2011

    TODAY’S STUDY: PV IN THE WORLD

    PV Status Report 2011; Research, Solar Cell Production and Market Implementation of Photovoltaics
    July 2011 (Joint Research Center of the European Commission)

    Introduction

    Production data for the global cell production1 in 2010 vary between 18 GW and 27 GW. The significant uncertainty in the data for 2010 is due to the highly competitive market environment, as well as the fact that some companies report shipment figures, others report sales and again others report production figures. In addition, the difficult economic conditions and increased competition led to a decreased willingness to report confidential company data. The previous tight silicon supply situation reversed due to massive production expansions, as well as the economic situation.

    This led to a price decrease from the 2008 peak of around 500 $/kg to about 50–55 $/kg at the end of 2009, with a slight upwards tendency throughout 2010 and early 2011.

    The data, collected from various companies and colleagues were compared to various data sources and thus led to an estimate of 23.5 GW (Fig. 1), representing a doubling of production compared to 2009.

    Since 2000, total PV production increased almost by two orders of magnitude, with annual growth rates between 40% and 90%. The most rapid growth in annual production over the last five years could be observed in Asia, where China and Taiwan together now account for almost 60% of world-wide production.

    Public-traded companies manufacturing solar products, or offering related services, have attracted a growing number of private and institutional investors. In 2010 world-wide new investments into the renewable energy and energy efficiency sectors increased to a new record of $ 243 billion (€ 187 billion2), up 30% from 2009 and for the third year in a row solar power attracted, behind wind, the second largest amount of new investments into renewable energies [Wor 2011]. Europe was still the leading region in terms of renewable energy investments, totalling $ 94.4 billion (€ 72.6 billion), followed by Asia/Oceania with $ 82.8 billion (€ 63.7 billion) and the Americas with $ 65.8 billion (€ 50.6 billion) [Pew 2011].

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    Europe's leadership position was vested through a more than doubling of the investments in small-scale solar installations in Germany and Italy. However, renewable energy investments in the Asia/Oceania region grew faster than in Europe, mainly through the 39% increase in private investment in China's renewable energy sector to $ 54.4 billion (€ 41.8 billion), moving Asia to become the world's leading destination for renewable energy finance investments [Pew 2011].

    At the end of 2010 about 48% or $ 94.8 billion (€ 72.9 billion) of the $ 194.3 billion (€ 49.5 billion) global “green stimulus” money from governments, aimed to help relieve the effect of the recession, had reached the markets [Wor 2011]. For 2011 another $ 68 billion (€ 52.3 billion) are expected.

    The change of the market from a supply restricted to a demand-driven market, and the build-up overcapacity for solar modules, has resulted in a dramatic price reduction of more than 50% over the last three years. Especially companies in their start-up and expansion phase, with limited financial resources and restricted access to capital, are struggling in the current market environment. This situation is believed will continue for at least the next few years and put further pressure on the reduction of the average selling prices (ASP). The recent financial crisis added pressure as it resulted in higher government bond yields, and ASPs have to decline even faster than previously expected to allow for higher project internal rate of returns (IRRs). On the other hand, the rapidly declining module and system prices open new markets, which offer the perspectives for further growth of the industry – at least for those companies with the capability to expand and reduce their costs at the same pace.

    Business analysts are confident that the industry fundamentals as a whole remain strong and that the overall photovoltaics sector will continue to experience a significant long-term growth. Following the stock market decline, as a result of the financial turmoil, the PPVX3 (Photon Pholtovoltaic Stock Index) fell from its high at over 6,500 points at the beginning of 2008 to 2,095 points at the end of 2008. At the beginning of July 2011 the index stood at 2,107 points and the market capitalisation of the 30-PPVX companies was € 36,4 billion.

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    Market predictions for the 2011 PV market vary between 17.3 GW by the Navigant Consulting conservative scenario [Min 2011], 19.6 GW by Macquarie [Mer 2011] and 24.9 GW by iSuppli [iSu 2011], with a consensus value in the 18 to 19 GW range. Massive capacity increases are underway or announced and if all of them are realised, the world-wide production capacity for solar cells would exceed 80 GW at the end of 2012.
    This indicates that even with the optimistic market growth expectations, the planned capacity increases are way above the market growth. The consequence would be the continuation of the low utilization rates and therefore a continued price pressure in an oversupplied market. Such a development will accelerate the consolidation of the photovoltaics industry and spur more mergers and acquisitions.

    The current solar cell technologies are well established and provide a reliable product, with sufficient efficiency and energy output for at least 25 years of lifetime. This reliability, the increasing potential of electricity interruption from grid overloads, as well as the rise of electricity prices from conventional energy sources, add to the attractiveness of photovoltaic systems.

    About 80% of the current production uses wafer-based crystalline silicon technology. A major advantage of this technology is that complete production lines can be bought, installed and be up and producing within a relatively short time-frame. This predictable production start-up scenario constitutes a low-risk placement with calculable return on investments. However, the temporary shortage in silicon feedstock and the market entry of companies offering turn-key production lines for thin-film solar cells led to a massive expansion of investments into thin-film capacities between 2005 and 2009. More than 200 companies are involved in the thin-film solar cell production process ranging from R&D activities to major manufacturing plants.

    Projected silicon production capacities available for solar in 2012 vary between 250,000 metric tons [Ber 2010] and 396,650 metric tons [Ikk 2011]. The possible solar cell production will in addition depend on the material used per Wp. Material consumption could decrease from the current 7 to 8 g/Wp down to 5 to 6 g/Wp, but this might not be achieved by all manufacturers.

    Similar to other technology areas, new products will enter the market, enabling further cost reduction. Concentrating Photovoltaics (CPV) is an emerging market. There are two main tracks – either high concentration > 300 suns (HCPV), or low to medium concentration with a concentration factor of 2 to approx. 300. In order to maximise the benefits of CPV, the technology requires high Direct Normal Irradiation (DNI) and these areas have a limited geographical range – the “Sun Belt” of the Earth. The market share of CPV is still small, but an increasing number of companies are focusing on CPV. In 2008 about 10 MW of CPV were produced, market estimates for 2010 are in the 10 to 20 MW range and for 2011 about 100 to 200 MW are expected.

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    In addition, dye-cells are getting ready to enter the market as well. The growth of these technologies is accelerated by the positive development of the PV market as a whole.

    It can be concluded that in order to maintain the extremely high growth rate of the photovoltaic industry, different pathways have to be pursued at the same time:

    Continuation to expand solar grade silicon production capacities in line with solar cell manufacturing capacities;

    Accelerated reduction of material consumption per silicon solar cell and Wp, e.g. higher efficiencies, thinner wafers, less wafering losses, etc.;

    Accelerated ramp-up of thin-film solar cell manufacturing;

    Accelerated CPV introduction into the market, as well as capacity growth rates above the normal trend.

    Further photovoltaic system cost reductions will depend not only on the technology improvements and scale-up benefits in solar cell and module production, but also on the ability to decrease the system component costs, as well as the whole installation, projecting, operation, permitting and financing costs.

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    The Photovoltaic Market

    In 2010, the world-wide photovoltaic market more than doubled, driven by major increases in Europe. For 2010 the market volume of newly installed solar photovoltaic electricity systems varies between 17 and 19 GW, depending on the reporting consultancies (Fig.2). This represents mostly the grid-connected photovoltaic market. To what extent the off-grid and consumer product markets are included is not clear, but it is believed that a substantial part of these markets are not accounted for, as it is very difficult to track them. A conservative estimate is that they account for approx. 400 to 800 MW (approx. 1-200 MW off-grid rural, approx. 1-200 MW communication/signals, approx. 100 MW off-grid commercial and approx. 1-200 MW consumer products).

    With a cumulative installed capacity of over 29 GW, the European Union is leading in PV installations with a little more than 70% of the total world-wide 39 GW of solar photovoltaic electricity generation capacity at the end of 2010…

    click to enlarge

    The Photovoltaic Industry

    In 2010, the photovoltaic world market doubled in terms of production to 23 to 24 GW as well for installed systems where 16 to 18 GW 16 and 18 GW were reported by various consultancies and institutions. This mainly represents the grid-connected photovoltaic market. To what extent the off-grid and consumer-product markets are included is unclear. The difference of roughly 6 to 7 GW has therefore to be explained as a combination of unaccounted off-grid installations (approx. 1-200 MW off-grid rural, approx. 1-200 MW communication/signals, approx. 100 MW offgrid commercial), consumer products (ca. 1-200 MW) and cells/modules in stock.

    In addition, the fact that some companies report shipment figures, whereas others report production figures, add to the uncertainty. The difficult economic conditions contributed to the decreased willingness to report confidential company data. Nevertheless, the figures show a significant growth of the production.

    The announced production capacities, based on a survey of more than 350 companies world-wide, increased, even with difficult economic conditions. Despite the fact that a number of players announced a scale-back or cancellation of their expansion plans for the time being, the number of new entrants into the field, notably large semiconductor or energy-related companies overcompensated this. At least on paper the expected production capacities are increasing.

    Only published announcements of the respective companies and no third source info were used. The cut-off date of the info used was June 2011.

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    It is important to note that production capacities are often announced, taking into account different operation models, such as number of shifts, operating hours per year, etc. In addition, the announcements of the increase in production capacity do not always specify when the capacity will be fully ramped up and operational. This method has of course the setback that a) not all companies announce their capacity increases in advance and b) that in times of financial tightening, the announcements of the scale-back of expansion plans are often delayed, in order not to upset financial markets. Therefore, the capacity figures just give a trend, but do not represent final numbers.

    If all these ambitious plans can be realised by 2015, China will have about 46.3% of the world-wide production capacity of 102 GW, followed by Taiwan (15.8%), Europe (9.5%) and Japan (6.9%) (Fig. 6).

    All these ambitious plans to increase production capacities, at such a rapid pace, depend on the expectations that markets will grow accordingly. This, however, is the biggest uncertainty, as the market estimates for 2011 vary between 17 GW and 24 GW, with a consensus value in the 19 GW range. In addition, most markets are still dependent on public support in the form of feed-in tariffs, investment subsidies or tax-breaks.

    Already now, electricity production from photovoltaic solar systems has shown that it can be cheaper than peak prices in the electricity exchange. In the second quarter of 2011, the German average price index, for rooftop systems up to 100 kWp, was given with € 2,422 per kWp without tax or half the price of five years ago [Bsw 2011]. With such investment costs, the electricity generation costs are already at the level of residential electricity prices in some countries, depending on the actual electricity price and them local solar radiation level. But only if markets and competition continue to grow, prices of the photovoltaic systems will continue to decrease and make electricity from PV systems for consumers even cheaper than from conventional sources. In order to achieve the price reductions and reach grid-parity for electricity generated from photovoltaic systems, public support, especially on regulatory measures, will be necessary for the next decade…

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    Outlook

    New investment in clean energy technologies, companies, and projects increased to a new record of $ 243 billion (€ 187 billion), up 30% from 2009 and for the third year in a row solar power attracted, behind wind, the second largest amount of new investments into renewable energies [Wor 2011]. Europe was still the leading region in terms of renewable energy investments, but the growth rates of renewable energy investments in the Asia/Oceania region are already higher than in Europe and it is very likely that Asia is becomming the world's leading destination for renewable energy finance investments [Pew 2011]. The main driver there are the private investments in China's renewable energy sector, which increased by 39% to $ 54.4 billion (€ 41.8 billion). With this amount China was again the No 1 in the clean energy investment ranking followed by Germany $ 41.2 billion (€ 31.7 billion), which surpassed the USA, the USA $ 34.0 billion (€ 26.2 billion) and Italy $ 13.9 billion (€ 10.7 billion), which moved up from No 8.

    At the end of 2010 about 48% or $ 94.8 billion (€ 72.9 billion) of the $ 194.3 billion (€ 149.5 billion) global “green stimulus” money from Governments, aimed to help relieve the effect of the recession, had reached the markets [Wor 2011]. For 2011 another $ 68 billion (€ 52.3 billion) are expected.

    The Photovoltaic Industry has changed dramatically over the last few years. China has become the major manufacturing place for solar cells and modules followed by Taiwan, Germany and Japan. Amongst the 20 biggest photovoltaic manufacturers in 2010, only four had production facilities in Europe, namely First Solar (USA, Germany, Malaysia, Vietnam), Q-Cells (Germany and Malaysia), REC (Norway and Singapore) and Solarworld (Germany and USA). The focus of this report is on solar cells and modules
    with some additional info about the polysilicon supply.

    Therefore, it is important to remember, that the PV industry is more than that and looking only at the cell production does not grasp the whole picture of the whole PV value chain. Besides the information in this report about the manufacturing of solar cells, the whole upstream industry (e.g. materials, polysilicon production, equipment manufacturing), as well as the downstream industry (e.g. inverters, BOS components, system development, installations) has to be looked at as well.

    The implementation of the 100,000 roofs programme in Germany in 1990, and the Japanese long-term strategy set in 1994, with a 2010 horizon, were the start of an extraordinary PV market growth. Before the start of the Japanese market implementation programme in 1997, annual growth rates of the PV markets were in the range of 10%, mainly driven by communication, industrial and stand-alone systems. Since 1990 PV, production has increased more than 500-fold from 46 MW to about 23.5 GW in 2010. This corresponds to a CAGR of a little more than 36.5% over the last twenty years. Statistically documented cumulative installations world-wide accounted for 39 GW in 2010.

    The interesting fact is, however, that cumulative production amounts to 55 GW over the same time period. Even if we do not account for the roughly 6 GW difference between the reported production and installations in 2010, there is a considerable 9 to 10 GW capacity of solar modules which are statistically not accounted for. Parts of it might be in consumer applications, which do not contribute significantly to power generation, but the overwhelming part is probably used in stand-alone applications for communication purposes, cathodic protection, water pumping, street, traffic and garden lights, etc.

    The temporary shortage in silicon feedstock, triggered by the high growth-rates of the photovoltaics industry over the last years, resulted in the market entrance of new companies and technologies. New production plants for polysilicon, advanced silicon wafer production technologies, thin-film solar modules and technologies, like concentrator concepts, were introduced into the market much faster than expected a few years ago. However, the faster than expected price decline for solar modules of more than 50%over the last three years triggered by the overcapacity for solar modules and polysilicon has caught a significant number of market players unprepared.

    click to enlarge

    Especially companies in their start-up and expansion phase, with limited financial resources and restricted access to capital, are struggling in the current market environment.

    This situation is believed will continue for at least the next few years and put further pressure on the reduction of the average selling prices (ASP). The recent financial crisis added pressure as it resulted in higher government bond yields, and ASPs have to decline even faster than previously expected to allow for higher project internal rate of returns (IRRs). On the other hand, the rapidly declining module and system prices open new markets, which offer the perspectives for further growth of the industry – at least for those companies with the capability to expand and reduce their costs at the same pace.

    Even with the current economic difficulties, the number of market implementation programmes world-wide is still increasing. This as well as the overall rising energy prices and the pressure to stabilise the climate, will continue to keep the demand for solar systems high. In the long-term, growth rates for photovoltaics will continue to be high, even if economic frame conditions vary and can lead to a short term slow-down.

    This view is shared by an increasing number of financial institutions, which are turning towards renewables as a sustainable and lucrative long-term investment. Increasing demand for energy is pushing the prices for fossil energy resources higher and higher. Already in 2007, a number of analysts predicted that oil prices could well hit 100 $/bbl by the end of that year or early 2008 [IHT 2007]. After the spike of oil prices in July 2008, with close to 150$/bbl, prices have decreased due to the world-wide financial crisis and hit a low around 37 $/bbl in December 2008. However, oil demand has increased from about 84 million bbl/day in 1Q 2009 to around 90 million bbl/day in 1Q 2011, whereas the supply just increased from about 87 million bbl/day to a little over 88 million bbl/day.

    It is obvious that the fundamental trend of increasing demand for oil will drive the oil price higher again. Already in March 2009, the IEA Executive Director, Nobuo Tanaka, warned in an interview that the next oil crisis with oil prices at around 200 $/bbl due to a supply crunch, could be as close as 2013 because of lack of investments in new oil production. The oil price has rebounced and a significant number of investment analysts expect oil prices in the 110 to 120 $/bbl range towards the end of 2011.

    The Energy Watch Group estimated that world-wide spending on combustibles, fuels and electricity was between $ 5,500 billion (€ 4,231 billion) to 7,500 billion (€ 5,769 billion) in 2008 [Ewg 2010]. Between 8.5 and 11.8% or $ 650 billion (€ 500 billion) of this amount is spent on subsidies for fossil fuels ($ 550 billion) and fossil fuel producers ($ 100 billion) each year, according to a joint report of the IEA, OPEC, OECD, and World Bank which was discussed at the G20 meeting in Toronto in June 2010 [IEA 2010]. This annual subsidy would be sufficient to install about 200 GW of PV systems annually world-wide.

    The FT cited Fatih Birol, chief economist at the IEA in Paris, saying that removing subsidies was a policy that could change the energy game “quickly and substantially”. “I see fossil fuel subsidies as the appendicitis of the global energy system which needs to be removed for a healthy, sustainable development future” he told the FT [FiT 2010].

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    This is in line with the findings of a 2008 UNEP report Reforming Energy Subsidies [UNEP 2008], which concluded:

    Energy subsidies have important implications for climate change and sustainable development more generally through their effects on the level and composition of energy produced and used. For example, a subsidy that ultimately lowers the price of a given fuel to end-users would normally boost demand for that fuel and the overall use of energy.

    This can bring social benefits where access to affordable energy or employment in a domestic industry is an issue, but may also carry economic and environmental costs.

    Subsidies that encourage the use of fossil fuels often harm the environment through higher emissions of noxious and greenhouse gases. Subsidies that promote the use of renewable energy and energy-efficient technologies may, on the other hand, help to reduce emissions.

    The IEA study estimates that energy consumption could be reduced by 850 million tons equivalent of oil -- or the combined current consumption of Japan, South Korea,

    Australia, and New Zealand -- if the subsidies are phased out between now and 2020. The consumption cut would save the equivalent of the current carbon dioxide emissions of Germany, France, the UK, Italy, and Spain.

    Over the last 20 years, numerous studies about the potential growth of the photovoltaic industry and the implementation of photovoltaic electricity generation systems were produced. In 1996 the Directorate General for Energy of the European Commission published a study “Photovoltaics in 2010” [EC 1996]. The medium scenario of this study was used to formulate the White Paper target of 1997 to have a cumulative installed capacity of 3 GW in the European Union by 2010 [EC 1997]. The most aggressive scenario in this report predicted a cumulative installed PV capacity of 27.3 GW world-wide and 8.7 GW in the European Union for 2010. This scenario was called “Extreme scenario” and it was assumed that in order to realise it a number of breakthroughs in technology and costs as well as continuous market stimulation and elimination of market barriers would be required to achieve it. The reality check reveals that even the most aggressive scenario is lower than what we expect from the current developments.

    At the end of 2010 PV systems with a cumulative capacity of over 39 GW world-wide and over 29 GW in Europe were generating electricity.

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    According to investment analysts and industry prognoses, solar energy will continue to grow at high rates in the coming years. The different Photovoltaic Industry Associations, as well as Greenpeace, the European Renewable Energy Council (EREC) and the International Energy Agency, have developed new scenarios for the future growth of PV. Table 7 shows the different scenarios of the Greenpeace/EREC study, as well as the different 2008 IEA Energy Technology…

    To survive the price pressure of the very competitive commodity mass market, and to compensate the advantage of the big companies made possible by economies of scale that come with large production volumes, they have to specialise in niche markets with high value added in their products. The other possibility is to offer technologically more advanced and cheaper solar cell concepts.

    Despite the fact that Europe – especially Germany – is still the biggest world market, the overall world market is gradually changing into a more balanced one. The internationalization of the production industry is mainly due to the rapidly growing PV manufacturers from China and Taiwan as well as new market entrants from companies located in India, Malaysia, Philippines, Singapore, South Korea, UAE, etc. Should the current trend in the field of world-wide production capacity increase continue, the European share will further decrease, even with a continuation of the growth rates of the last years. At the moment, it is hard to predict how the market entrance of the new players all over the world will influence future developments of the markets.

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    A lot of the future market developments, as well as production increases, will depend on the realisation of the currently announced world-wide PV programmes and production capacity increases. During 2010 and the first half of 2011, the announcements from new companies wanting to start a PV production, as well as established companies to increase their production capacities, continued to increase the expected overall production capacity. If all these plans are realised, thin-film production companies will increase their total production capacities even faster than the silicon wafer-based companies and increase their market share from the 2007 market share of 10% to about 25% in 2015.

    However, the number of thin-film expansion projects which are caught between the fact that margins are falling, due to decreasing module prices and the need to raise additional capital to expand production in order to lower costs, is increasing.

    Already for a few years, we have now observed a continuous rise of oil and energy prices, which highlights the vulnerability of our current dependence on fossil energy sources, and increases the burden developing countries are facing in their struggle for future development. On the other hand, we see a continuous decrease in production costs for renewable energy technologies, as a result of steep learning curves. Due to the fact that external energy costs, subsidies in conventional energies and price volatility risks are generally not yet taken into consideration, renewable energies and photovoltaics are still perceived as being more expensive in the market than conventional energy sources.

    Nevertheless, electricity production from photovoltaic solar systems has already proved now that it can be cheaper than peak prices in the electricity exchange in a wide range of countries and are closing in on residential consumer prices. If the ambitious EPIA and SEIA visions can be realised, electricity generation cost with photovoltaic systems will have reached grid parity in most of Europe and the USA by 2020. In addition, renewable energies are, contrary to conventional energy sources, the only ones to offer a reduction of prices rather than an increase in the future.

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