China’s demand for solar PV is growing faster than expected and, along with rising demand in Japan, could see the two countries account for just under half of the world’s estimated 45GW shipments in 2014, according to new analysis by Deutsche Bank.
In a detailed research report, Deutsche says China’s PV demand is growing a lot faster than previously expected, driven by the utility-scale market. Analyst Vishal Shah predicts the country’s PV installations in 2014 could more than double the expected 2013 totals, and far surpass the Chinese government’s annual target of around 10GW.
“While 2013 demand in China is likely is fall short of the targeted 10GW annual run-rate, we anticipate 2014 demand to significantly exceed these levels, with installations potentially reaching 13- 15GW …in 2014 compared to 6-7GW… in 2013,” says the report.
“In a scenario where Japanese demand remains at 6-7GW run-rate in 2014 and Chinese demand increases to ~13-15GW, we believe China/Japan together could account for ~45% of the estimated ~45GW shipments in 2014,” Deutsche says. “Considering the upside to global demand prospects in other markets, we believe our global demand estimate of ~45GW could prove conservative.”
And the same goes for the China estimate, with Deutsche adding it believes the Chinese market “is just starting to ramp up.” The report notes that, with its history of constructive policy support, robust electricity demand, domestic air pollution problems, and the jobs boost from the PV industry, there is “potential for future upward revisions of targets” for China, which it notes has happened four times in two years already.
The report also compares the current state of the solar sector in China to EU markets like Spain, Italy and Germany: “Just like in the case of European solar sector, Chinese solar demand growth is currently driven by attractive project IRRs resulting from recently announced feed-in tariffs. IRRs for several utility scale projects are in the low/mid teens and low cost project financing is made available as part of the central government policy initiative to curb pollution/promote growth of the solar sector.
Shah names the major catalysts of this growth as: the recent announcement of pollution control measures; additional policy measures to drive a structural change in the supply and demand outlook for the solar sector over the next 12-18 months; the resolution of financing and land title constraints, and the establishment of new business models, and; and stabilisation of pricing/margins across the PV value chain due to emerging poly supply tightness.
“Assuming demand increases to ~50GW in 2014, we see a poly supply shortfall of ~40-45K MT in 2014 versus our current estimate of ~11K MT poly shortage in ~45GW demand scenario. Both price and availability of polysilicon could start to emerge as primary growth constraints for companies in 2014,” the report says.
Deutsche is forecasting global PV demand in 2013 to reach around 38GW and increase strongly in 2014 to as high as 45GW, with upside potential. “We now expect additional policy measures recently announced in China to drive a structural change in the supply and demand outlook for the solar sector over the next 12-18 months,” Shah wrote in the report.