Solar PV capex cuts will ease capacity growth in time for recovery

USA: Much like the boom-to-bust IC industry in recent decades, manufacturers of solar-energy cells and thin films are having a difficult time matching investments for new production capacity with the recessionary and recovery throes of the fledgling photovoltaic (PV)-device market, based on the analysis in a new 2009 report from IC Insights: Solar Energy: Growth Opportunities for the Semiconductor Industry.

The mismatch of photovoltaic capacity expansions and slumping market demand is underscored by the expected 32 percent increase in global PV production capacity in 2009 despite a forecasted 22 percent decline in solar system installations this year, according to the new report.Source: IC Insights

Although PV-device manufacturers made known their intentions in late 2008 to trim capital spending, many of the top suppliers have been unable to abruptly halt those expenditures in 2009. Consequently, global PV solar-device production capacity is expected to rise 32 percent in 2009 to a total output capable of generating 11.5 gigawatts of electricity.

This follows a 69 percent increase in installed photovoltaic cell and thin-film (TF) plant capacity in 2008 to 8.7GW, says IC Insights' new report. Cuts in capital spending will slow capacity expansion to just 15 percent in 2010, but that will come when the solar market begins to recover with a 37 percent growth in system installations next year, based on the repor's 2009-2013 forecast.

In 2010, IC Insights believes that capex spending levels for PV cell and TF module capacity will fall further than the 23 percent decline forecast for 2009 as producers confront rising inventory stockpiles and plummeting capacity utilization.

The report shows global solar PV cell and TF capital expenditures falling 40 percent in 2010 to about $680 million from $1.13 billion in 2009, excluding capex on assembly of cell-based modules and panels. However, solar PV capital expenditures will begin a steady recovery in 2011, rising 13 percent that year to $772 million but surging 74 percent in 2012 to $1.34 billion, based on IC Insights' five-year forecast (see Fig. 1).

With PV manufacturers unable to abruptly curb additions to production plants, capacity utilization rates for solar devices are forecast to plummet from 83 percent in 2008 to 54 percent in 2009 and to 52 percent in 2010.

However, IC Insights is forecasting a steady rise in plant capacity utilization to 63 percent in 2011 and to 82 percent in 2013. The efforts to achieve high levels of capacity utilization will stretch out to the end of the forecast period and will be an important contributor to the industry's reduction of the cost per watt of solar systems.

The new 2009 solar report estimates that plants in mainland China and Taiwan accounted for 39 percent of total global PV device production in 2008, with European production at 28 percent of the worldwide total and Japan 16 percent. US producers captured only 10 percent of the total in 2008, based on IC Insights' data.