In the near term, there is some uncertainty on the solar industry, but the medium'” to long-term forecast remains healthy for the PV market.
Uncertain times in the solar industry?
Rapid growth in the PV market, fuelled by government incentive programs, decreasing costs, technological advancements, and environmental concerns have led to demand for PV outstripping supply in recent years, whichincreased prices and margins.
This situation encouraged existing producers of silicon, cells and modules to increase capacity and new producers to enter the market. Now so much capacity is expected to enter the market over the
next several years in every category (i.e. c-SI, a- SI, Cdtel, multi-junction combinations, CIGS and CPV) it appears likely that supply will outstrip demand during 2009 and 2010. At the same time, Germany (47%) and Spain (23%), which together accounted for 70% of worldwide PV demand in 2007, have reduced their feed-in tariff programs.
In 2009 Germany will begin to reduce its annual feed-in tariff rates for rooftop installations by 8- 9% and ground-mounted systems by 10%, down from an annual decrease of 5%. While incentives for CSP are unchanged, Spain recently announced cutting its subsidies for PV by 75% and capping annual subsidies at 300MWe (200MWe for rooftop and 100MWe for ground-mounted systems). As a result, demand there is expected to decline significantly from an expected 1.2 GWe in 2008.
In South Korea the feed-in tariff for major projects will fall by 30%. The U.S. Congress has not passed an extension of the 30% federal ITC which expires on December 31, 2008 and will drop to 10% thereafter unless extended.
The 30% ITC together with state incentive programs is an important component to financing solar projects in the U.S. Despite the delay but driven by California’s RPS of 20%, PG&E announced a plan to purchase 800 MWe from plants installed by Optisolar and SunPower.
Other countries with favourable feed-in tariffs are poised for rapid growth after addressing some the structural obstacles which have held back more rapid growth in these markets (e.g. Italy and Greece).
Japan is evaluating a new subsidy program to encourage its producers to sell more modules domestically and return growth to that market. Other markets with excellent growth prospects include Australia, France, Belgium, the Czech Republic, the Netherlands, Portugal and the Middle East.
Many analysts expect annual demand for PV to increase from 3.8 GWe in 2008 to 8-10 GWe in 2011. Meanwhile, with the world’s 20 largest module producers announcing plans to increase annual capacity by 500 MWe to 1 GWe per year, and many thin film companies (led by CIGS) entering the market with large volumes, supply could reach 15 GWe to 26 GWe by 2010.
In any event, prices will likely decline and margins will be compressed. Well-positioned PV companies with
low-cost strategies, differentiated technologies and solid business models should be able to handle these choppy waters. But some consolidation appears likely and some companies will be forced to drop-out out of the race.
There are over 160 cell producers and 300 module producers in the world. By comparison, the 13 largest wind turbine manufacturers account for 96% of the market, according to Sun & Wind.
Lower prices for PV modules will enable the industry to compete more effectively with fossil fuels and enable it to reach grid parity more quickly. Regions will reach grid parity at different times due
to different insulation levels and local utility pricing. In many markets the increasing costs of fossil fuels will rise to meet and eventually exceed the declining costs of PV.
According to Deutsche Bank, grid parity could be reached in a large number of markets with total installed system costs of $3.80/W ($0.10-$0.17/kWh). By comparison, power from natural gas peaking plants can cost $0.15-$0.30/kWh and energy bought on the spot markets even more.
Once grid parity is reached the industry will no longer be dependent on the variability of government incentives and will likely experience rapid, perhaps even, explosive growth.
Beyond 2011 the emergence of 3rd generation solar (i.e. organic dyes and quantum dots) and advanced storage technologies will further enhance growth prospects.
CONCENTRATING PV (CPV)
CPV is a very promising technology that is starting to get more traction in the marketplace.
Compared to c-Si’s theoretical maximum efficiencies of 27-31%, CPV has the potential to achieve efficiencies of 50%+.
CPV uses Fresnel lenses or parabolic dishes to concentrate the sun’s rays by 500-1,000x onto gallium arsenide (GaAs) semiconductors or multi-junction cells. IBM recently announced development of a CPV cell which can withstand 2,600 x magnifications using special cooling technology for high power computer chips. Large CPV systems have the potential for installed costs of $3.00/W.
SOLAR THERMAL DEVELOPMENTS
Led by Spain and the U.S., 7.5 GWe of CSP production capacity is expected to come on line by 2012.
In August, WorleyParsons announced that Australia could install 34 CSP power stations by 2020 and is currently studying potential sites for its first 250 MWe power station there.
Other markets with plans for CSP include: Algeria, Morocco, Israel, China, South Africa and Egypt. In July, Iberdrola announced plans to build five 250 MWe CSP plants.
CleanEdge’s CSP calculations show average pricing of $3.50/W in 2007 ($0.18/kWh), declining to around $1.00/ W in 2025 due to economies of scale in the production of components and installation of power plants.
With these new capacity planned and in progress, the significance of solar power industry is anticipated to grow over the next 10 years. Consolidation in the global solar sectors is already happening led by solar companies in China, US and Germany; some of the medium sized solar companies are expected to be acquired in the future; the market is likely to become less fragmented as the result.