PV market continued hot growth streak in 2011

Stefan De Haan, senior analyst

EL SEGUNDO, USA: The photovoltaic (PV) market enjoyed another year of sunny growth as solar installations climbed 40 percent in 2011, although dark clouds loom on the horizon over the industry’s reduced prospects this year, according to an IHS iSuppli PV market tracker report.

New PV installations in 2011 reached an estimated 25.0 gigawatts (GW), up from 17.9 GW in 2010, based on the latest confirmed data. The actual year-end figure is projected to be even higher, given last minute data made available by the German Federal Grid Agency showing an unprecedented boost in solar installations during the fourth quarter in Germany, among the two largest PV markets in the world.

If included, Germany’s new annual total of 7.5 GW, compared to the published figure of 6.9 GW, would boost the 2011 worldwide total to 26.5 GW. At that level, the annual expansion rate in 2011 would equate to 48 percent, up 8 percentage points from the current forecast. An official confirmation of the higher overall tally for 2011 is expected soon.

The two year run of notable growth including the blistering 146 percent expansion of 2010 will end this year when solar installations dip 6 percent to 23.3 GW. Given budget difficulties and political blowback, governments in many countries are expected to slash tariffs and reduce support, which would have the effect of discouraging builders and investors. But PV potential remains outstanding after 2012 as growth continues in emerging territories, with new installations forecast to reach 61.3 GW by 2016.Source: IHS iSuppli, USA.

Many winners emerge and one market crashes
Among the approximately 20 relevant regional solar markets that exist today, Italy and Germany continue to battle for the top spot as the country with the largest amount of new installations. Without the extraordinary year end rally in Germany, Italy would have been deemed the solar champion in 2011, with new installations in the country amounting to 6.9 GW. In view of the fourth quarter catch up race in Germany that brings the country’s total to 7.5 GW, the rankings in 2010 show Italy in runner-up position once again.

The third largest PV market in the world last year for new installations was the United States, with 2.6 GW, up 179 percent from 0.9 GW in 2010. China and France rounded out the Top 5, with 1.9 GW and 1.5 GW, respectively. France saw growth of approximately 104 percent, and China had even more outstanding expansion at 246 percent. The sixth largest market, Japan, will assume greater strategic importance moving forward, especially as European territories are projected to decline in 2012.

The highest growth rate for new installations, however, belonged to the United Kingdom, skyrocketing 1,367 percent in 2011 to 0.7 GW thanks to a flurry of activity in November, timed to beat announced plans by the government to drastically cut solar tariffs. India and Bulgaria also had explosive growth last year at 400 percent and 376 percent, respectively, although each had new installations topping out at just 0.5 GW and 0.1 GW.

The worst performance last year was posted by the Czech Republic, alone in its dramatic 96 percent plunge to a mere 0.06 GW or 60 megawatts of new installations in 2011, compared to 1.5 GW in 2010. Installations in the country have stopped almost completely, the result of drastic measures taken by the Prague government to end subsidies, at the same time that it launched a retroactive tax for existing plants and imposed a moratorium on grid connection.

Challenges lie ahead, softened by hoped-for stability
In spite of the overall robust growth for PV end markets, suppliers in 2011 on all modes of the solar value chain continued to suffer from eroding prices, disappearing margins and declining revenues, IHS discovered. During the fourth quarter the situation worsened in particular for polysilicon, a key component of solar panel construction, with spot prices falling 40 percent to $30 per kilogram.

The ongoing correction in the market is expected to continue in 2012, but there could be an upside to the projected slowdown this year. The PV module space could achieve stability in the second quarter, especially if utilization and inventory levels remain low, which then would bring the current overcapacity situation into balance.

And even though cell and module pricing will continue to be under pressure, their rate of erosion will decelerate this year compared to 2011, offering a spot of hope to companies girding for the near term difficulties ahead.

Source: IHS iSuppli, USA.