News

21 April 2009

 

PV overcapacity to drive 32% drop in market in 2009

Worldwide installations of photovoltaic (PV) systems will fall 32% from 5.2GW in 2008 to 3.5GW in 2009, forecasts market research firm iSuppli Corp. A 12% drop in average price per solar watt will lead to revenue generated by PV system installations plunging by 40.2% from $30.5bn in 2008 to $18.2bn.

Graphic credit: iSuppli Corp.

 

 

 

 

 

“For years, the PV industry enjoyed vigorous double-digit annual growth in the 40% range, spurring a 'wild-west' mentality among market participants,” says Dr Henning Wicht, senior director and principal analyst for iSuppli. “An ever-rising flood of market participants attempted to capitalize on this growth, all hoping to claim a 10% share of market revenue by throwing more production capacity into the market,” he adds. “This overproduction situation, along with a decline in demand, will lead to the sharp, unprecedented fall in PV industry revenue in 2009.”

However, the PV market downturn in 2009, like the PC shakeout of the mid-1980s, is likely to change the current market paradigm and could actually have a positive outcome for the solar industry, cutting down on industry excesses and leading to a more mature and orderly supply chain when growth returns in 2010 and beyond, believes the firm.

Graphic credit: iSuppli Corp

 

 

 

 

 

“The number of new suppliers entering and competing in the PV supply chain will decelerate and the rate of new capacity additions will slow, bringing a better balance between supply and demand in the future,” says Wicht.

The single event most responsible for the 2009 PV market slowdown was a sharp decline in expected PV installations in Spain. In 2008, Spain accounted for 50% of worldwide installations. An artificial demand surge had been created as the time approached when the country’s feed-in-tariff rate was set to drop and a new cap of 500MW loomed for projects qualifying for the above-market tariff. This set a well-defined deadline for growth in the Spanish market in 2009 and 2010.

While the Spanish situation is spurring a surge in excess inventory and falling prices for solar cells and systems, this will not stimulate sufficient demand to compensate for the lost sales in 2009, says iSuppli. Even new and upgraded incentives for solar installations from nations including the USA and Japan—and attractive investment conditions in France, Italy, the Czech Republic, Greece and other countries—cannot compensate for the Spanish whiplash in 2009. The impact will continue into 2010, restraining global revenue growth to 29.2%.

Beyond Spain, the PV market is being adversely impacted by the credit crunch. “Power production investors and commercial entities are at least partially dependent upon debt financing,” Wicht notes. “Starting in the first quarter of 2009, many large and medium solar-installation projects went on hold as they awaited a thaw in bank credit flows.”

After 2010, the fundamental drivers of PV demand will reassert themselves, bringing a 57.8% increase in revenue in 2011 and similar growth rates in 2012 and 2013.

“PV remains attractive because it continues to demonstrate a favorable return on investment (RoI),” Wicht says. “Furthermore, government incentives in the form of above-market feed-in-tariffs and tax breaks will remain in place, making the RoI equations viable through 2012,” he adds. “Cost reductions will lead to attractive RoI and payback periods even without governmental help after 2012.”

Also, lower system prices will open up new markets by lowering incentives and subvention costs. The lower the PV system prices are, the lower the incentives will have to be. Developing regions will be big the beneficiaries of these lower prices and thus will grow faster than the global average, Wicht forecasts.

See related items:

Solar panel sales growth 48% in 2008, but to slow to 26% in '09

Growth forecast for 2009 solar installations cut from 49% to 26%

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Visit: www.isuppli.com