2012: A Delicate Balancing Act

By Bettina Weiss, Executive Director, Photovoltaics

In December 2010, I wrote the article “2012: Disaster Movie or Will the Romance Continue?” describing what some analysts at the time foresaw as a 2012 solar market disaster as German feed-in tariffs were reduced. We collectively asked the question “Is there enough global PV demand to offset the German market slump?” And yet, despite the step down in German feed-in-tariffs, the market managed to grow to 24GW in 2011 (17.1%) with Italy and Germany (50% market share), North America (9.2%), and Asia/newly development markets (18.7%).

In the latter half of 2011, the industry was burdened with over-supply and over-capacity which in turn caused price drops and shakeouts in the industry. Digitimes recently predicted that falling prices will stimulate demand in markets such as Japan, China, India and the U.S., and that these markets could effectively make up for the contracting demand in Europe. They also predicted the global solar market to grow by 11.9% to 26.9GW in 2012 and then rebound after 2012 when supply and demand is more balanced.

IMS Research also reported the solar market grew to 24GW in 2011 (+24%). "The PV market continues to diversify in 2011; this will create short-term pain for suppliers that can no longer solely rely on one market to fuel their growth, but creates long-term stability for the industry by helping to balance the effects of a single country's incentive policy and reduce large swings in supply and demand.”

NPD Solarbuzz reported the global PV market to be 23.6GW (+22% Y/Y) and went on to say “Global demand is projected to grow 6% in 2012, so market declines in Europe will be offset by 43% growth outside that region. Therefore, solar companies will face the challenge of re-building margins during a period of increasing diversity in end solar market mix.”

A Look Back at Analysts’ Predictions for 2011 (in 2010)

EuPD estimated the non-German solar market—led by Italy, Japan and the US—to grow from 6.2 GW to 8.6 GW, a robust 39%. This growth rate nearly assures a healthy solar market in 2011 regardless of the anticipated reductions in the German FIT.
GTM Research reported demand for PV would grow to 15 GW in 2011, 6% higher than 2010, stepping up into 17% to 19% from 2012.
Barclays Capital US Clean Technology Report stated “US solar market poised to overtake Germany from 2011.” Among their data points are financial projections by the top manufacturers: First Solar expects North America to be their largest market in 2011; SunPower expects 40% of their 2011 market volumes to be from the US; and Suntech expects volumes to double in North America in 2011.
IMS Research expected moderate growth in 2011 and 2012 despite a decline in German PV installations. Ash Sharma, PV Research Director, IMS Research told PV-Tech, “Despite a projected fall of the German market, we are still very positive about the development of the PV market in 2011 and see the market growing to at least 19 GW.
Morgan Stanley sees a significant correction in Germany in 2012, not 2011: “While we do realize that the current rate of installations is not sustainable in Germany and attractive FITs and low interest rates may have created bubble-like conditions, we suspect that the politicians and regulators may not disrupt the market in FY11, and let it correct significantly only in 2012.” (Morgan Stanley, November 15, 2010.)

While forecasts had varying degrees of precision, we remain committed to our belief that significant declines in the European PV market, especially in Germany, over the next few years can only be offset by the following market drivers:

China demand must significantly ramp up domestic demand to balance supply, but more importantly to meet their own growing energy needs
Solar markets must remain open to allow free market forces to determine supply and demand of best-in-class solar systems.
U.S. policies at the State levelneed to step up to enable the U.S. market to reach demand levels commensurate with their economic and solar resources.
The India government is encouraged to listen to its solar manufacturing supply chain to ensure sustained success of their National Solar Mission.

Albert Einstein famously said “We can’t solve problems by using the same kind of thinking we used when we created them”. Let’s hope that policy makers everywhere listen to their constituents and make better decisions about solar policy if they are serious about a future-oriented, comprehensive energy policy. SEMI PV Group stands ready to help its members navigate through these challenging waters. Healthy competition, continuous cost reduction and a level global playing field will guide us to other side of the “shakeout”. Solar is here to stay, grow and bring millions of people into the 21^st century.

SEMI PV Group – The Grid, January 2012