Shrinking solar revenues forecast, despite new markets and growing installed capacity12. August 2011 | Top News, Markets & Trends, Global PV markets, Industry & Suppliers, Applications & Installations | By: Nicholas Stone
New research forecasts shrinking, and then flat solar revenues through to 2016, despite the fact installations are expected to grow 15.5 percent as new markets open up. Countries with attractive IRRs are also identified.
In a paper released, Lux Research has stated that while global installed photovoltaic capacity will grow from the 15.8 gigawatts (GW) added in 2010 to 37.5 GW in 2016, industry revenue will actually shrink in 2012, from 64.4 billion (€45.5 billion) in 2010 to $56.9 billion (€40.1 billion) in 2012.
Overall, the company says that demand will stay flat until 2016, at which time the market is expected to recover to $65.4 billion (€46.2 billion).
The reason cited for this negative preformance is price declines, which are expected to "outpace" volume increases.
Furthermore, the Boston-based company said that due to the increased demand from the German market over the past few years, the impact of subsidies and other unfavorable market elements have largely been staved off.
However, it believes that as manufacturers approach near-term limits on cost reductions, German demand will begin to decline. This, it says, is expected to severely impact the focus of the solar industry over coming years, thus pushing a lot of business into new and emerging markets – something that most analysts forecast last year.
"Demand will shift to Asia and North America and the solar market will grow in terms of megawatts installed," the report read, "but revenues will stay flat as price declines outpace volume growth."
In an overall market analysis released last month, the company already predicted these findings after discovering that, despite this short-term dip in the market, grid parities reached across countries will help to again drive up overall revenue.
This is lower than the industry’s past history of 30 percent and upwards of annual growth rates though, and speaks to its maturity and move away from subsidies as a driver of growth.
Although it has been widely reported before, the report stresses that it is now becoming more accepted that a variety of new markets will usurp the German-centric European prominence in photovoltaics.
Lux finds that solar demand will shift to a broader range of markets over the next five years, based on analysis of levelized cost of electricity (LCOE) and internal rate of return (IRR) across 156 countries, states and regions.
The Asian market is tipped by the report to provide the most stimulation, with Japan, China and India emerging to push significant volumes. The U.S. is also expected to develop as a heavyweight, given the government’s support of tax equity through 2016 and a myriad of state-level programs.
The report also suggests that with subsidies, a surprising number of markets have IRRs worthy of investment by project developers today. Lux said the most attractive markets for residential are Australia (52 percent subsidized IRR), Greece (32 percent) and Ontario (27 percent), while the most attractive commercial markets are New Jersey (42 percent), Portugal (37 percent) and Hawaii (34 percent).
For utility ground-mounts, Portugal (81 percent) is at the forefront by a long way, followed by New Jersey (58 percent) and Cyprus (44 percent).
By 2016, viable investment targets are expected to increase dramatically, to encompass 45 residential markets, 88 commercial markets, and 85 utility markets, marking a real moment for solar energy as it spreads across the globe.
Grid parity and demand
An anticipated future increase in the cost of retail and wholesale power is all that’s necessary to generate positive demand - even in countries without subsidies - the report said.
Brazil is projected to reach a 12 percent unlevered, unsubsidized IRR for commercial multi-crystalline silicon systems at the end of 2016 - even though solar will not yet have reached grid parity.
Commercial systems will, says the report, reach grid parity fastest, with ten different countries topped to be there by 2016. It adds that the number of commercial rooftop markets reaching parity will grow from one in 2010 to ten in 2016, including the Dominican Republic and Nicaragua.
Hawaii will reportedly be the first to accomplish residential grid parity in 2011; by 2016, a total of seven other residential markets will follow, including Italy, Denmark and the Ukraine.
For utility ground-mount, the number remains small.
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