Wednesday, February 17, 2010

2010 PV market

Solar market begins recovery in 2010
While module shipments on a gigawatt basis are expected to show recovery in 2010, revenue recovery won’t be fully evident for a few more years, experts say.
By Ann Steffora Mutschler, Contributing editor -- Electronic Business, 1/12/2010
Simply put, 2009 was a very difficult year for the PV (photovoltaic) industry. For the first time, the PV market experienced a major market downturn during which contraction occurred on both a megawatt and revenue basis, with the revenue contraction much more severe due to ASP (average selling price) pressures.

According to experts, there are some reports of strengthening market conditions in the latter part of Q4, evidenced by the recent report that financing of $715 million (500 million Euro) has opened up for a solar PV projects portfolio in France and Italy.

Germany also appears to have some strength, according to James Hines, research director for semiconductors and solar at market research company Gartner Inc. “We’ve even heard of some products seeing increasing lead times as a result of an uptick in demand out of Germany particularly for some of the invertors and certain premium suppliers of panels have reported that they are sold out. In fact, SunPower is one of them and suggested they are sold out in their residential and commercial rooftop segments going into 2010.”

While this is an encouraging sign, he pointed out that it is limited at this point and not a broad-based market condition – there are a lot of suppliers that still have excess capacity and Gartner expects pricing pressure to continue through 2010. “The way we would characterize the market in 2010 is that this is the start of the recovery, but we will continue to have ASP weakness throughout the year,” Hines noted.

All eyes on the US

With the United States being one of the biggest developing markets, there is much interest here as to how it will fare in 2010.

Paula Mints, principal analyst for the PV services program and associate director of the energy practice at Navigant Consulting observed, “The US is still a developing market. There is only one state that continues to have incentives significant enough to drive the market, and that would be California. It’s not just the RPS [renewable portfolio standard], it’s not just the stimulus money which doesn’t all go to us; it’s also the debt markets recovering because this is expensive stuff to invest in.” For 2010, she projected sales of between 530 and 800MW into the US market.

However, the stimulus money is only part of the drivers, pointed out Henning Wicht, senior director and principal analyst at iSuppli Deutschland GmbH. “We expect the first wave of ground installations for utility scale projects to start especially in California. This is more about asset evaluation for the utility companies. So we definitely see strong growth in California.” He predicts installations will grow from 305MW in 2009 to 650MW in 2010 in the state.

“The issue in the US, and maybe to a lesser extent in Europe, is that we have two things that a coming together to drive some demand going forward,” Hines said. “One is the loosening up of credit markets and availability of project finance, which appears to be getting better but it is a very slow thaw. The other factor is the availability of stimulus funding. There is a fair amount of money in the US stimulus package that is available for solar projects but it has taken a long time to go through the administrative gauntlet to get the money actually into the hands of people that can actually do something with it and that continues to be an issue but we certainly see some of it starting to flow now.”

Gartner expects that to increase in 2010 and drive some of the demand. The company also expects a certain amount of latent demand from 2009 to begin to materialize in 2010 as these government incentive programs kick in and finance starts to free up, but it is a slow process, Hines reminded.

Gartner has raised its global PV solar module forecast since September, when it projected 4.6GW. It now it expects the 2009 figure will be closer to 5.3GW, growing to 20.9GW in 2013. This projection translates to $11.2 billion in 2009, growing to $26.5 billion in 2013, Hines said. (See figures below.)

In terms of PV shipments to the first point of sale, Mints projected between 5 and 6GW being shipped into the global market in 2010, from 4.7GW in 2009.

She asserted that it is important to look at shipments to the first point of sale in the market because due to the low cost of product in the market, many people are buying instead of making, which causes some numbers to be skewed based on recounting. “You can’t turn one megawatt into 10, no matter how many times you sell it,” Mints said.

She also believes 2010 will be “a wild and wacky year in terms of trying to size the industry. … Another interesting point on assessing 2009 is that because the year began with so much inventory – with just a bit remaining going into 2010 – installations as opposed to lagging sales in 2009 are probably going to be stronger than sales, and that may be confusing.”

For 2009, Mints expects revenue to be approximately $10 billion to $11 billion, for technology to the first point of sale (not resales) down by $20 billion from 2008. She projects $15 billion in revenue for 2010.

In terms of recovery, Gartner believes on a gigawatt basis, there will be growth from the earlier peak in 2008, but the same is not the case for revenue. Full recovery won’t happen there until 2012, Hines remarked.

“Between now and then, we’re going to have a market that has two faces to it. One is we’re going to get back to some fairly robust growth numbers, especially as we head into 2011 and 2012 in revenue terms. But at the same time, it’s going to be a market in which the total opportunity until 2012, is less than what it had been in its previous peak and therefore there will be margin pressure throughout the supply chain and the shakeout that’s been expected for several years is going to happen, and is already starting to happen,” Hines said.

The shakeout will begin to pick up steam in terms of M&A (merger and acquisition) activity with some start-up companies not making it in 2010 and 2011, while other suppliers show success during this period, and still others are either absorbed or go by the wayside, Hines said. “The large players with low cost structures – in particular – the ones that have managed their cash well are in a position to survive and even benefit from the opportunities created by these changing market conditions,” he added, pointing to Suntech Power and Yingli – both in China – as strong contenders, along with Sharp.

Overall, Wicht believes the market is doing better. “What we see from a supply/demand perspective is that the gap between module supply and installation is not getting bigger. From that point of view, we see that the oversupply of modules has peaked already. There is still a huge oversupply and there is a lot of capacity coming online in [2010] but the price collapse we have seen [in 2009] … will be smaller.”

Interesting to watch for in 2010 is whether or not any large semiconductor companies will invest in the solar industry. Indeed, TSMC recently confirmed it will invest approximately $193 million (NT$6.2 billion) in solar cell manufacturer Motech Industries Inc as the foundry expands operations in the solar arena.

Companies including Samsung, LG, and some Japanese vendors are also said to be looking closely at the solar market opportunity. Gartner estimates the total available market for semiconductor vendors in the PV space to be approximately $2 billion in 2013 for solar-related applications, most of which would be invertors and power optimization devices.

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