9 March 2010


Solar installations to grow at 23% annually to 2015, but revenue to lag at 14%

Reeling from a stormy 2009, the solar market will soon see lopsided supply and demand rush back into parity, according to a new report from Lux Research.

Strong demand growth in Asia and the USA will push the market to 9.3GW ($39bn in revenue) in 2010, while continued price reductions will open new markets and drive the solar market to 26.4GW ($77bn) in 2015. Meanwhile, China — to date a large manufacturer of solar modules and materials but not yet a large buyer of them — will become the world’s largest market for solar in 2015. However, the report ‘Solar’s Shakeout: Europe Loses Leadership as China Rises’ underscores that the renewed balance between supply and demand will arrive only after a wave of company failures and lower utilization rates.

The report analyzes economic competitiveness and other drivers for the industry’s six major technologies: crystalline silicon (x-Si), cadmium telluride (CdTe), thin-film silicon (TF-Si), copper indium gallium diselenide (CIGS), high-concentrating photovoltaics (HCPV), and solar thermal — also known as concentrating solar power (CSP).

“Solar’s short-term pain will enable it to exceed growth expectations over the very long term,” says senior analyst Ted Sullivan, the report’s lead author. “The volume of solar installations will grow at a 23% annual rate from 2010 to 2015, but revenue will grow by just 14%, as prices fall due to remaining over-capacity,” he adds. “While current subsidies in China and elsewhere will help soak up some of that capacity, there will be widespread company failures throughout the value chain first.”

The report updates earlier market size and demand forecasts, extends Lux Research’s outlook through 2015, and adds three new geographies — Czech Republic, New Jersey, and Ontario — due to their high levels of subsidies and rapidly developing markets. It also compares Lux’s demand model for each geography against the expectations of installers and project developers, and against projections for supply-side capacity and production.

Among the report’s key findings are:

  • Capacity remains well above demand, signaling violent changes ahead. The supply and demand curves are expected to move abruptly together over the next few years due to company failures — either through firms folding outright, or becoming ‘zombies’ that still exist on paper but produce little or no product. Demand will also increase in producing regions such as China, prompted by government subsidies and other factors.
  • Low-cost x-Si technologies dominate, but thin-film and CSP nibble at the margins. As financing begins to return to solar in 2010, crystalline silicon players will continue to use low price as a weapon against new technologies that don’t share its ‘bankability’ or scale. Even so, new technologies such as CSP, CIGS and even HCPV will gain at the margins. The future of thin-film silicon remains more questionable.
  • Solar adoption will be a multi-decade story. While it won’t meet outsized expectations in the near-term, solar will wildly beat them long-term — albeit often in unexpected ways. At its core, solar is an energy and construction industry, not a consumer-oriented one like semiconductors or IT. As a result, its adoption cycle is determined by replacement cycles for residential and commercial roofs (typically 15–20 years) and for natural gas power plants (up to 30 years).

“The continuing glut threatens low-quality and high-cost players alike,” says Sullivan. “The decline of firms selling low-quality systems is intuitive, but over-capacity also threatens developed players like Evergreen Solar and Uni-Solar, which have incredibly innovative technologies but high operating costs and insufficient scale,” he adds.

See related item:

Solar cell to return to high growth in 2010

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