Solar photovoltaic manufacturers must be starting to breathe again. Over the past few years, they’ve struggled to keep their heads above a tide of overproduction that’s been washing out weaker competitors and strengthening others. Now, a growing body of evidence shows that the tide is changing. Case in point, a new report from Lux Research anticipates that the solar market will recover by 2015 and grow to a $155 billion annual industry by 2018.
The report anticipates that the PV market will start seeing a healthy 10.5 percent compound annual growth rate (CAGR) by 2018. “In the most likely scenario, the PV market will grow at a modest clip to 35 GW in 2013 before rapidly ramping up to 61.7 GW in 2018.” That’s about double the 31 gigawatts installed in 2012.
“We predict oversupply to end in 2015,” says Lux Research’s Edward Cahill, a research associate with the company and lead author of “Market Size Update 2013: Return to Equilibrium”. He adds,
“Manufacturers will still struggle through 2013 and 2014, but 2015 will bring a resurgence in gross margins, which is when they will have money to spend on new equipment and technologies and thus solar’s great recovery.”
The report states, “Record low prices from gross margins reaching near zero or below have made solar installations competitive in more markets.
The US, China, Japan, and India will take over where Germany and Italy left off, driving global demand from 31 GW in 2012 to 62 GW in 2018.”
The low PV prices also weeding out the noncompetitive manufacturers as consolidation reduces global capacity, it says.
“Rising demand and falling capacity will bring the two within 12 percent of each other in 2015, easing price pressure, returning manufacturers to profitability, and returning the industry to equilibrium.”
“Low prices makes solar more competitive in more markets, increasing demand,” Cahill explains.
“Low prices also make manufacturers sell near or below 0 percent margins. As these trends continue, demand increases and supply decreases. This will alleviate some prices pressure and enable companies’ gross margins to increase. However, costs are also coming down, meaning prices will likely stay flat while margins increase and costs decrease.”
In creating the report, Cahill and Lux analyzed the levelized cost of energy (LCOE) in 156 geographies, which it says accounts for 82 percent of the world’s population. While PV installations grew from 27 gigawatts in 2011 up 77 percent from the year before, it slunk to a 15 percent growth rate in 2012. The report states, “If demand continues to slow and even slide from subsidy cuts in Europe, overcapacity will continue to erode margins, large manufacturers will fall, and solar could become a niche technology. However, installations and market conditions will improve, resulting in 11 percent CAGR through 2018.”
Silicon PV will remain the dominant form of PV, but thin-film PV may also start to grow again, according to Cahill. Many thin-film companies have failed over the past few years—like Solyndra and Abound Solar—in the face of silicon PV price drops. But, he contends, “Thin-films will survive in their own target markets.”
First Solar’s cadmium telluride is still the cost leader will keep doing well in the utility-scale market and he anticipates that CIGS (copper indium gallium selenide) can improve.
“If it can accelerate cost reductions as CIGS players predict and improve module efficiency, it will have a play, especially on commercial rooftops where it can be cheaper and high efficiency is not as crucial as for residential rooftops.”
He’s not so charitable to amorphous silicon PV. “Amorphous silicon will be a victim of hyper-competition and will not survive in traditional PV markets due to high costs from poor manufacturing yield and module efficiency.”
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