PV Industry Quarterly Update - Q2’2012
PV Industry Quarterly Update-Q2’2012
By Melody Song, SEMI Industry Research and Statistics
While global PV demand continues to grow, due to oversupply and falling prices, manufacturers’ profitability continues to be a challenge, significantly impacting equipment spending and investing confidence. Capacity rationalization continues to occur in the industry as several companies declared bankruptcy, reduced workforce and investments, or exited the industry. Some analysts, however, have also reported decreasing rates of price reduction, helping to stabilize balance sheets. On the demand side, markets continue to respond to changes in subsidies and government policies, both positively (China, Japan) and negatively (Germany and other EU countries).
Figure 1: Projected PV Manufacturing Capacity Retirement 2010-2015 (Source: GTM Research)
Industry Shakeout Continues
During the last several months, the industry has been overwhelmed with announcements of company failures, company restructuring and reduced private investment in the solar industry. The industry dynamics have been so disconcerting that Ernst & Young and Bloomberg New Energy Finance have estimated at least half of the world’s existing PV manufacturers will either go bankrupt or be taken over. Greentech Media estimates 21GW of existing module manufacturing capacity will be taken offline by 2015, and wafer, cell and module manufacturers will retire a combined 60GW of capacity during the same time period.
Just during the last three months, the number of dismal announcements on both manufacturers and suppliers has been alarming:
- CPV leader Amonix announced the closing of its Las Vegas factory on July 18, 2012.
- Centrotherm filed for bankruptcy protection on July 11, 2012.
- Abound Solar filed for Chapter 7 bankruptcy on July 2, 2012.
- GE has suspended the build-out of its Colorado CdTe production plant.
- Konarka Technologies, a U.S. organic thin film PV manufacturer, filed for bankruptcy protection in June, 2012.
- SolarWorld announced that it would cut around 10% of its workforce by the end of this year.
- Germany’s Schott Solar announced that it would exit crystalline PV production later this year, but will continue its thin-film module business.
- Germany’s aleo solar AG announced that it would close its module factory in Spain by the end of the year.
- Italy-based PV module manufacturer MX Group ceased production in June 2012
- Germany’s Solarwatt filed for insolvency in June 2012 due to liquidity problems and debt overload
- U.S.-based Global Solar Energy’s German subsidiary, Global Solar Energy Deutschland GmbH (GSED) has applied for insolvency proceedings.
- Swiss silicon thin-film firm, Pramac, a customer of Oerlikon Solar since 2008, filed for insolvency in May 2012.
- Spain’s wafer manufacturer Silicio Solar filed for insolvency in May 2012.
- German CIGS thin film producer Inventux filed for insolvency in May 2012.
Figure 2: SEMI PV Equipment Billing and Bookings Report (Source: SEMI)
As SEMI reported previously, PV Equipment Billings and Bookings Report showed significant decline in both billings and bookings starting in 3Q’11 and the B2B ratio has stayed below parity since 2Q’11. In the last report, for Q1’12, both billings and bookings (excluding a one-time large order from Algeria) declined to their lowest levels since the start of the data collection program.
In addition to market dynamics, new technology platforms offer potential for further cost reduction. Mono/Quasi-mono ingot growing, larger ingots, the use selective emitters (0.6%-2.0% increase in efficiency), rear-side passivation, and new wafer technology to reduce thickness and silicon consumption have enabled meaningful cost reduction. Material price and usage reductions have also improved manufacturing cost structure. Polysilicon is estimate to decline from $40-55/kg in 2011 to a projected $21/kg in 2016 by some estimates. Silver consumption is estimated to fall 0.28g/cell in 2010 to 0.10g/cell in 2016. Module materials have undergone a 20-29% reduction in price of EVA/Glass/Backsheet/Frame/J-Box over the past year.
Demand Moves East
While balance sheets and the supply chain are suffering, global shipments have slowed, but revenue declines have been significant for many cell and module manufacturers. Demand is also moving increasingly to Asia and US. Sharp module price declines since 2011 of 50% have stimulated record installations globally, however, the effect on PV manufacturers have been severe. Current margins from a majority leading cell and module makers have dropped to single-digit percentage points for public-traded PV companies with some margins in the negative territory. The 2012 outlook sees volume/shipment upside likely, but the path to profitability still unclear.
Figure 3: Cell and Module Makers Performance, Shipments and Revenues (Source: SEMI. Data from company financial reports and compiled by SEMI. Companies included: Canadian Solar, China Sunergy, First Solar, SunPower, Suntech, Trina, and Yingli.)
Germany finalized the new FIT scheme at the end of June, 2012. The 20-30% cuts announced in April will remain and a new system category was added (10-40KW). Monthly FIT cuts of 1% will begin in July, and yearly cuts will again start in 2014. Incentives will also be capped at 52GW.
According to Deutsche Bank, given the new FIT rates, project IRRs become less attractive (even below threshold levels) and will slow down German market in 2H’12 and into 2013. Returns on large-scale installations will essentially wipe out this market segment in 2013.
Figure 4: Regional Market Update - Germany (Source: Deutsche Bank, SEMI. For 2Q’12 onwards, <=30KW replaced with <=10KW, 30-100KW replaced with 10-40KW, and 100KW-1MW replaced with 40KW-1MW)
In China, earlier this year the China government talked about raising 2015 PV target to 15GW from the original target of 5GW. In June, the government raised the target again to 21GW. Now the government is considering raising the target once again to 25GW, which implies ~5.4GW average annual installations in the four-year period from 2012-2015. The government has emphasized that distributed generation systems are preferred over large ground systems to alleviate transmission bottlenecks. More subsidy programs are on the way – the central government is working on several more solar subsidy programs in addition to the existing FIT program and the Golden Sun program.
In Japan, the new FIT program and falling system costs have analysts estimating that new PV installations will more than double to 6GW by 2014. Potential incentive change deadlines may stimulate an installation rush. With government support and anti-nuclear sentiment, renewable energy could account for 35% of electricity consumption in 2030, with PV targeted at 28GW by 2020 and 53GW by 2030.
The U.S. finished a strong quarter in Q1’12 with 506MW installations, up 85% YoY. 3.3GW installations are expected for 2012, according to Greentech Media. The anti-dumping tariffs have not appeared to materially affect the overall market dynamics in the US. According to Greentech Media, module ASP is still trending down in the US market. The impact of Section 1603 expiration will not be felt until later 2012 and 2013 due to “safe harboring” at the end of 2011. The utility segment will increase its market share from 2012 onwards from 1.5GW currently operating with over 4GW under construction. Approximately 10GW have been signed Power Purchase Agreements and are waiting for permitting/financing/construction, and another 35GW in various beginning stages.
The final major development in the PV industry this quarter was the escalating trade war between US and China and the threat it will escalate to include Europe. On May 17, 2012, the U.S. Department of Commerce (DOC) levied a second round of preliminary tariffs, the anti-dumping tariffs against Chinese solar module imports, with tariffs ranging from 31% to 250%. Final determination on anti-dumping and countervailing duties will be announced in October/November timeframe. Following the US government’s action, several countries in the Europe, including Germany, are initiating similar investigations on imports of Chinese solar products to the EU. In response to the US tariffs, China’s Ministry of Commerce, on July 21, 2012, announced that it will start its own investigation on imported solar-grade polysilicon from US, and is initiating investigations on these imports from South Korea.
SEMI PV Group, The Grid – July 2012