Wednesday, December 31, 2008

Outlook for solar photovoltaics in 2009!

Friends and dear readers, this is my last blog post for 2008! Indeed, what a year this has been!!

Let me bid this year goodbye with a general outlook on the global solar photovoltaics industry for 2009.

iSuppli had recently put out a report on solar eclipse coming in 2009! I had blogged about the possible solar sunburn ahead, as well, earlier last week!

Another point that has interested me is: what happens to the top 20 global solar photovoltaic companies, based on iSuppli's analysis! This blog post has perhaps been the most popular in recent times.

I was very lucky to re-associate with Dr. Henning Wicht, Senior Director, Principal Analyst, iSuppli Deutschland GmbH, in Munich, Germany, for this discussion, thanks to the efforts of Jon Cassell and Debra Jaramilla!

How bad is solar?
The first and the most obvious question: how bad is the global solar market right now and why?

According to iSuppli, bringing an end to eight consecutive years of growth, global revenue for photovoltaic (PV), panels is likely to plunge by nearly 20 percent in 2009, as a massive oversupply causes prices to drop!

Worldwide revenue from shipments of panels will decline to $12.9 billion in 2009, down 19.1 percent from $15.9 billion in 2008. A drop of this magnitude has not occurred in the last 10 years and likely has not happened in the entire history of the solar industry.

Dr. Henning Wicht says that the upstream part of the solar business (cell, module, etc.) will suffer from price decline due to strong oversupply. The downstream side will benefit (installation, end-user, investor, etc.) by lower system prices.

Therefore, what can the solar players do to get over this coming bad phase in 2009? Well, three things: improve the cost structure, improve the sales side, and diversify downstream… These points hold strong for all fully integrated and non-integrated solar panel suppliers as well. By the way, fully integrated solar panel suppliers are likely to suffer less severe losses than non-integrated competitors.

There must be some way around to to bring about some balance within the current imbalance in the demand and supply situation. While Dr. Wicht agrees this is a difficult one to answer this early, he adds that supply and demand are diverging heavily. "With the current trajectories even in 2012, 100 percent more modules are produced than installed," he says. I promise to discuss this question again with the good Dr. in another six months time.

Word of wisdom
There are various support programs in place, and it is important to know whether they will continue to remain beneficial, both to support markets to become independent sustainable and to develop the regional industry.

Dr. Wicht believes the support programs are still required and beneficial. "If China, India, Mexico and other sunny regions would start to support solar installations, that could change the picture drastically," he notes.

A note of warning for new entrants in the solar photovoltaic space! Be aware that this warning has been earlier highlighted in the global semiconductor outlook for 2009! In tune with what the various analysts have maintained earlier, iSuppli also forsees newcomers in the solar photovoltaic line having problems in getting the required credit for their projects.

What next for Europe, emerging regions?
According to iSuppli, the short-term boost in demand from Spain and Germany has kept the installation companies busy, and solar orders and module prices high. But this boom is over. So, what's next for European players?

According to Dr. Wicht, Germany and Spain should continue their leading role as solar installation regions, even after the boom. France, Italy and Czech Republic are attractive, but still much smaller markets, he maintains.

iSuppli has also mentioned that the race to larger manufacturing scale comes to an end when the production is not sold anymore! In that case, what's the case for the emerging nations, like China and India? Aren't there buyers in such places?

Dr. Wicht says: "Demand in the traditional solar markets is not elastic enough to absorb all of the solar production. Potential new markets, for example, China and India, do not yet have installation capacities and administration to significantly change the global solar demand short term."

iSuppli also feels that the newer Chinese and Taiwanese suppliers will be hit particularly hard during 2009. The reason being, many suppliers have expanded their production capacities heavily without securing equally the sales/downstream part.

Global top 20 rankings to change?
Now to the most interesting part! Most of you have read about the top 20 global solar photovoltaic suppliers. Following the iSuppli warning of a 'solar eclipse' in 2009, there is every likelihood that there will be changes in that table!

Dr. Wicht adds, "However, the top 10 companies are typically better placed than the competition regarding their cost structures, downstream integration and vertical integration."

Obama's solar plans!
Now on to yet other interesting point! The US President-elect, Barack Obama's, New Energy for America plan could well have a significant impact on the US solar industry.

The plan's provisions include:

• A federal renewable portfolio standard (RPS) that requires 10 percent of electricity consumed in the US to come from renewable sources by 2012.
• A $150 billion investment over 10 years in research, technology demonstration and commercial deployment of clean energy technology.
• Extension of production tax credits for five years to encourage renewable energy production.
• A cap-and-trade system of carbon credits to provide an incentive for businesses to reduce greenhouse gas emissions.

Dr. Wicht says: "We all know that Obama is in favor of renewable energy. However, he will not change a 160 percent oversupply of solar panels in 2009."

Bumpy ride to grid parity?
On another note, and a pretty favorite one: Is it going to be a "bumpy road" to grid parity? How will the subsidies be kept going?

Dr. Wicht notes: "Subsidies will continue. It will always be a bumby road because the ramping cycles differ heavily among silicon, cells, modules and the installation capacity. Please remember that the installation business will now benefit from low module prices. It will recover some of the margins it has lost in the last years due to high module prices."

Also, up to when will polysilicon constraints last? iSuppli had earlier indicated PV strategy changes. According to Dr. Wicht, the polysilicon prices are coming down already. "Our indication from October 2008 seems to be fairly good," he says.

Lastly, will iSuppli be still sticking by solar, semicon investments being equal by 2010?

Dr. Wicht says: "Please let me cite again our interview in October: The investments for solar production raising up to several hundreds of Mio USD, up to 1 Bio $ per production site. That is coming close to a semiconductor fab. The total capex of semiconductor is still 10 times larger than PV. However, PV is rising much faster."

That will be all for this year, folks!

Look forward to sharing much more captivating moments in semiconductors, electronics, solar photovoltaics, telecom, etc., in 2009!

Wishing all of you a very happy, prosperous and successful 2009. Be safe and look after yourself! See you next year!! :)

Friday, December 26, 2008

Why solar/PV is good for India? An ISA perspective!

Recently, the India Semiconductor Association (ISA) held an educative briefing session on the potential of the solar PV market in India, which was conducted by Rajiv Jain, Director, Government Relations, ISA.

This meeting was held well before iSuppli issued a warning that there could be global solar sunburn in 2009! I am sincerely hoping that most of the points mentioned by ISA's Jain still hold good in the coming year, and that India really does well and takes off in solar photovoltaics.

The ISA's vision: To help make India an attractive global destination for PV manufacturing and a world leader in solar energy.

Starting with the basics of photovoltaics, he said that it is a package of solar cells used to convert energy from sun to electricity. In simpler words, photons from sunlight knock electrons into higher state of energy, thus creating electricity. The electricity can be used to power equipment or recharge a battery. A typical PV system mainly consists of a PV module, battery, inverter, controller and junction box.

Focusing on the technological landscape, he touched upon the two key technologies for solar: crystalline and thin film.

Crystalline silicon is said to be the most mature Si wafer technology, with the largest market share. Though, high on cost, it has a typical efficieny of 14-18 percent. Crystalline silicon is said to suitable for rooftop applications.

Thin film is nothing but thin layers of photosensitive materials on glass. It is currently on high growth due to silicon shortage, and very low on cost due to low material consumption. The efficiency is about 6.5-8 percent.

A third technology, nanotechnology, is the future technology for cost reduction. It is more in the R&D space as of now.

Present scenario for solar
So what's the present scenario? In 2007, of $71 billion invested in new renewable energy (RE) capacity globally, 30 percent was in solar PV. It is the fastest growing area in the energy sector, with a CAGR of 47 percent over the last five years.

Grid-connected solar PV has been high growth market segment in 2007 (50 percent increase). Also, 86 percent of the PV installations are largely in four countries, with Germany at 47 percent being the outright leader.

Market drivers are said to be attractive feed-in tariffs, national PV market development and acceptance, RE obligations through solar PV, access to cheaper mode of finance, manufacturing incentives as well as strong R&D.

Why solar for India
I have addressed this in an earlier blog post. Here's what Jain had to say, and it is mostly in line with the earlier discussions.

First, India has among the highest solar irradiance globally. It also has the best quality reserves of silica in Orissa and Andhra Pradesh. India has also established itself low cost producer and assembler of solar PV cells and modules.

The major challenges include attaining scale and integration for cost reduction, and, R&D for development of the industry.

Solar insolation in India
To start with, the daily average solar energy incident varies from 4-7kWh per m2. Next, we have multiple sites with solar irradiation >2000 hours per year. In contrast, Germany has 900-1,200 hours per year. Further, most parts of India have 300-300 sunny days in a year translating into a potential of 600GW. Also, potential in some states like Rajasthan is 35-40 MW per m2.

It is well known that the Indian semiconductor policy of 2007 has triggered off the now well publicized efforts in solar initiatives. The government of India has received 16 applications with investments envisaged at app Rs. 1,55,000 crores.

The investments in solar PV manufacturing exceed Rs 1,25,000 crores. Generation based incentives (GBI) are going to be key.

Potential market segments in India
There are quite a few, actually. In rural electrification, the government of India's target is to achieve 'Electricity for all by 2012'. About 18,000 remote villages will likely be electrified through RE. About ~25 percent of the remote villages, i.e., 4,500 villages, form a very viable market.

Next comes telecom back-up power! PV is a cost effective alternative to diesel generators (DG) for back up power for shorter duration, as DG based systems suffer from several disadvantages.

Another key market could be grid connected solar PV based generation. Current tariffs do not provide attractive IRR to developers. Decreasing system prices are however, likely to improve the economics.

Finally, roof based BIPV is said to be an alternative to reduce the cost of power procured by commercial buildings.

ISA's recommendations
The ISA has also made salient recommendations via its report on the industry. These include areas such as manufacturing: with an aim to encourage companies investing in 'Scale and integration', provision of capital subsidy to larger number of units, availability of funds at a cheaper rate, and an emphasis on R&D.

Also, the ISA has recommended that GBI be given for a tenure of 20 years, with the present period being 10 years. Further, it has suggested an accelerated depreciation along with the GBI scheme, and the availability of GBI for an unlimited capacity for a period of five years. The ISA has recommended an enactment of the RE Law requiring utilities to progressively increase power purchase from RE.

On its part, the ISA has been working with the government of India and various state governments as well. It has a sound rapport with concerned ministries - MNRE, DIT and NMCC.

The ISA has also assisted in the technical evaluation of solar PV proposals received in Fab City, Hyderabad. It has also drafted a semiconductor policy for the government of Karnataka, which should be out early next year, hopefully. The ISA is also working with several other state governments to promote the industry in their states.

The second ISA Solar PV Conclave is scheduled for November 2009 at Hyderabad.

Very good intentions, all of these! Now, for the Indian industry and the government to deliver, and walk hand in hand!!

Tuesday, December 23, 2008

Solar sunburn likely in 2009? India, are you listening?

iSuppli's just issued a warning that 2009 could well see the coming of a solar market eclipse!

Come to think of it! Just last week, in the Semiconductor International webcast, the analysts did mention that there could be tough times ahead for solar! In fact, Aida Jebens, Senior Economist, VLSI Research Inc., did indicate that solar/PV would pick up in the next two years and that 2009 could be a tough year.

If you look at the India situation, I have been getting the feeling all the time that all of a sudden, too many companies were entering this market segment, as though it is a land of promised gold! Perhaps, it is, and one sincerely wishes that all of those investments proposed for solar do not come unstuck.

This August, following the announcement of the national semiconductor policy (the Special Incentive Package Scheme, or SIPS), the government of India received 12 proposals amounting to a total investment of Rs. 92,915.38 crore. Ten of these proposals were for solar/PV, from: KSK Surya (Rs. 3,211 crore), Lanco Solar (Rs. 12,938 crore), PV Technologies India (Rs. 6,000 crore), Phoenix Solar India (Rs.1,200 crore), Reliance Industries (Rs.11,631 crore), Signet Solar (Rs. 9,672 crore), Solar Semiconductor (Rs.11,821 crore), TF Solar Power (Rs. 2,348 crore), Tata BP Solar India (Rs. 1,692.80 crore), and Titan Energy System (Rs. 5,880.58 crore).

Then, late September, Vavasi Telegence (Rs. 39,000 crore), EPV Solar (Rs. 4,000 crore), and Lanco Solar (Rs. 12,938 crore), also announced major investments.

Now, given the quite ruthless kind of financial crisis the world is currently engulfed in, several have raised doubts whether solar players would be able to get the credit they need. Or, would they run into rough weather?

On paper, some of these companies are big corporate houses, with several years of standing. However, reality can be quite different, and can bite! I've yet to hear whether all of these companies have managed to raise the requisite capital. One sure wishes that they have all been busy and will be successful!

Otherwise, all one needs to look at is iSuppli's warning. According to iSuppli, 'Bringing an end to eight consecutive years of growth, global revenue for photovoltaic (PV), panels is expected to plunge by nearly 20 percent in 2009, as a massive oversupply causes prices to drop.'

Will it be a case of massive oversupply in India? We haven't exactly started. Hence, perhaps, we will come to deal with oversupply later. The key thing is to get all of these solar/PV projects off the ground!

The India Semiconductor Association (ISA), and now, SEMI India, have been promoting the solar/PV industry very aggressively. The work they've done so far has been commendable, and I've been witness to all of their activities. However, keep in mind that these are only industry associations, who can only advice, guide, debate and promote the industry, and also provide industry statistics for everyone to consume.

The real action can only happen once the proposals have been cleared by the Indian government and the players have managed to arrange for the requisite capital for their projects. The Indian fab story with SemIndia is all to familiar, and there should not be a repitition with solar/PV projects.

Therefore, the role of the government of India will be extremely critical and crucial. The good health of the Indian solar/PV industry is entirely in its hands, and not in the hands of the industry associations.

Perhaps, the Indian government could do well to look at how the Taiwan government is playing a critical role in reviving the hard hit DRAM industry and also at the German free state of Saxony, which has played a key role in financing the ailing Qimonda.

Otherwise, the Indian solar/PV industry could get hit, even before it takes off the ground! And, as a nation, we cannot afford that to happen!

India has so far has had a good story going in solar. There are hopes that solar/PV will trigger off a spate of manufacturing activities in India, besides creating lots of jobs. Don't think we can afford to spoil all of this!

The industry in India is still very much in its infancy. Let the baby play happily in the water (solar) tub, instead of throwing the water out! This baby needs a lot of hand-holding to get stronger in the years to come.

Wednesday, December 3, 2008

My blog is the world's best!

Wow! I am overwhelmed!

This morning, when I stepped into the office, I'd no clue what lay ahead. This blog had been recently nominated in Electronics's first ever Electronics Blog Awards 2008, under the Electronic Hardware category.

My blog was declared the winner in this category!.

Several friends and well wishers have requested me to post an image about the winner's announcement page, so here it is!All of the other bloggers in the list are equally worthy, and they are all winners. My heartiest congratulations to all of my fellow nominees. I haven't even met anyone of you, ever! Hope I can, some time soon.

I've always maintained that love writing (or blogging) about things that are close to my heart. Semicon and telecom are prime in that category, two topics that I am really very fond of.

My blog -- well, it all started as a regular affair. There are a whole lot of great bloggers out there, who also write on similar topics. I was and am just one among those. Nor was and am I ever looking for traffic, etc., as it is my contention that people will only stop by and read your blog post or article IF there's something of interest to them. So, I was my only reader ;) I thought!

I didn't even realize that so many people would be reading my blog posts. Well, things changed somewhere, I don't know how. Wish I could thank everyone personally!

Thanks, dear friends, for stopping by my blog occasionally. I just don't have words to express myself.

All I can say is a big thank you to Electronics Weekly for picking up my blog. Thanks to the person who nominated my blog, as I've no idea who nominated it. Thanks also to Google for creating the Blogspot platform so that people like me can blog. Many thanks to all of those friends, well wishers and readers who voted for me. Hope you all find my blog useful.

Dear friends and readers, please keep those suggestions coming so I can strive to improve myself even further over time.

P.S. A former colleague and close friend, Debashish Choudhury, has also added a link on Global SMT site. The link is given here. Thanks Debu for the honor! ;)

Cybermedia/CIOL, very kindly, posted a news release announcing my victory. Many thanks for to CIOL and Cybermedia.

Later, in the evening, Pradeep Gupta, CyberMedia's managing director, sent out an email to the entire company, announcing my win. Thanks a lot for this very nice and touching gesture, Sir.

Finally, Electronics Weekly sent a mail to me saying: "You were the clear winner in your category, so congratulations! If I may, I'll send you a 'Blog Awards, Winner' badge for your blog, to commemorate the victory!" Thanks to Electronics Weekly again!