Solar installations rise in second half—but module revenue growth stalls

EL SEGUNDO, USA: Despite a recovery in global solar installations in the second half of the year, plunging prices will result in zero revenue growth for the photovoltaic (PV) module business in 2011, according to research from the IHS iSuppli Photovoltaic Service.

The first six months of 2011 saw 6.6 gigawatts (GW) worth of PV installations worldwide, down 4 percent from 6.8GW during the same period in 2010. Global installations are expected to accelerate to 14.7GW in the second half of 2011. For the entire year, installations will amount to 21.2GW, up 21 percent from 17.6GW in 2010. The figure below presents a quarterly forecast of PV installations in 2011.Source: IHS iSuppli, USA.

“Following a sluggish first half, global solar installations are set to rebound during the final six months of 2011 because of a recovery in demand in the key German and Italian markets, resulting in robust 21 percent growth for the entire year,” said Stefan de Haan, principal analyst, photovoltaics, for IHS. “However, the weak conditions in the first half resulted in severe price erosion for solar modules. Because of this, industry wide revenues for both crystalline and thin film modules will stay more or less flat in 2011 compared to 2010.”

A tale of two halves
The weakness in the first half was primarily driven by developments in the world’s two largest solar markets: Germany and Italy.

In Germany, PV module prices were too high to attract investments in new installations until the beginning of May. A price collapse that occurred in May and June stimulated demand to some extent. However, since prices dropped so dramatically during the first half of the year, many investors still were waiting for further reductions before they put any more money into the market.

Meanwhile in Italy, turmoil associated with the implementation of the 4th Conto Energia—the country’s new energy policy—caused uncertainty and discouraged investors. The situation has stabilized now in both countries.

In Germany, modules are currently at €0.85 per watt, with residential systems offered at €2.2 per watt. Investment conditions are better than ever, particularly in the small rooftop segment. In Italy, the legislative framework has been clarified, and the important rooftop market remains essentially uncapped. As a result, IHS iSuppli does not expect any further delays in demand in either country.

Many installers report they are fully booked until the end of the year. As a result, IHS predicts installations in 2011 will amount to 6.9GW in Germany. This represents a 7 percent decline from the outstanding 7.4GW in 2010, but it still beats the expectations of most market participants. Installations in Italy will amount to 5.0GW, up from 3.6GW in 2010.

Show PV the money
Conditions in the second half of 2011 appear to be positive, and no major price declines are expected for the rest of the year. However, the situation for photovoltaic suppliers remains critical because of price erosion in the first half.

And while end-market demand will reach another all-time high this year, industry wide module revenues, which amounted to $34.6 billion in 2010, will not change significantly in 2011.

With another round of price drops projected for the first quarter of 2012, the PV environment will worsen next year. Capital-intensive expansions will meet decelerating end markets and declining revenues—an unhealthy cocktail with the potential to reshape the competitive landscape.

Source: IHS iSuppli, USA.