The global solar PV industry is going through what McKinsey & Co recently described as the darkness before the dawn – a massive shakeout as subsidies are wound back, demand plateaus (at least temporarily), and the rewards go to the cheapest, most efficient and best managed. Some 200 solar manufacturers that displayed last year failed to make an appearance at this year’s InterSolar conference, one of the biggest on the annual calendar, with most unable to cope with the 45 per cent cut in module prices over the past 12 months.
But getting through the current shakeout may be not be a guarantee for success, even if the prospects of volume look promsing. According to Dieter Manz, the CEO of Manz, a German electronics (LCD and solar PV) manufacturer, the solar PV industry is likely to more than triple by 2015 to 100GW a year, and that will be the signal for a range of new competitors – this time the deep pocketed LCD manufacturers such as Samsung, LF and Foxconn, to enter the market.
Manz told Bloomberg last week the major LCD manufacturers would have little problem converting high volume LCD factories to produce thin-film solar panels, which he estimates could be produced at 30c/watt or less – less than half the current cost. The fact that they haven’t done so is because the volumes do not yet warrant their attention.
“In three years, more than half the players will be new entrants,” Manz told Bloomberg in the interview “Samsung, LG, Foxconn, all of them will come. For them it was too small before, so they wait for the market to be 100 gigawatts and then they step in.” He said large volume LCD factories could easily be converted to produce 5GW of thin film solar.
The efforts to reign in the world’s biggest solar PV, Germany, are likely to prove fruitless this year, with both Suntech and Trina Solar predicting the german market will be around 6-7GW in 2012, not far short of 2011. The government has been trying to reduce installations by half to around 3.5GW.
The market is most definitely shifting to the East. China is predicted to install 5-6GW of solar PV in 2012, and according to JA Solar, this will jump to 10GW in 2013. That should make the interim forecast of 30GW by 2015 by the Chinese government easily attainable, and will likely push demand beyond the 100GW of installation made as the “high-side” prediction by the Chinese solar industry last December.
But Japan is also looking at a massive jump in installations. Even as European countries wind back their subsidies as PV costs fall, Japan this week is expected to formally a feed in tariff for solar PV that will mandate a payment of 42 yen per kilowatt hour (53c/kWh) – which is twice the rate of Germany and three times the current wholesale rate in Japan. Around 1.3GW was installed in Japan in 2011, but this is expected to at least treble with the new FiT.
Solar’s impact down under
It was interesting to note Energy Minister Martin Ferguson telling a CEDA function of how the deployment of solar PV had been one of the major factors in the significant reduction in demand for electricity in Australia. He said the greater uptake of rooftop solar power had reduced the network load, along with lower demand from energy-intensive industrial industries including aluminium, steel, a delayed CSG start up, milder seasonal weather patterns; and the elasticity of demand – what he noted was a greater than expected demand-side response to higher electricity price rises.
Ferguson noted that all these factors were suppressing wholesale electricity prices to around half of what they were five years ago, (as we mentioned last week).
But as he also said: “The flow on affect will be to lock coal fired electricity generation into the market as the incentive for new investment in cleaner forms of baseload electricity generation, such as gas, is weakened.”
Which makes you wonder why the government needs such generous compensation packages for the coal-fired generators. As we have noted before, it simply puts up the price of the proposed contracts for closure.