The 2012 solar year in review and what lies ahead in 201328. December 2012 | Top News, Global PV markets, Industry & Suppliers, Investor news, Markets & Trends | By: Cheryl Kaften
During 2012, many PV manufacturers endured a long, uphill battle, staggering under steep price cuts, excess inventory, shrinking margins and political headwinds; and all the while, jostling for position with other technologies. However, those that have demonstrated the stamina to survive, and that can hold their ground in 2013, have a chance at remaining in top demand for years to come.
Indeed, in a recent discussion with pv magazine, Michelle Thatcher, national director of the San Diego-based U.S. Green Chamber of Commerce, commented, "Over 100 solar manufacturers have left the industry since the year began, but those that remain are becoming more consolidated and stronger." She believes there is "more weeding out of this industry" to come, "as inventory levels are still much higher than demand." The result, Thatcher said, will "be better for the overall health of the solar Industry."
What’s more, while the manufacturing sector got walloped, downstream in the solar supply chain, business continued at a brisk pace during 2012. Low module prices, hovering at around $0.65 and down about 30% this year alone, drove installations worldwide.
It is forecast that around 20 GW of PV capacity will be installed this year by half a dozen nations on three continents. While the industry won’t come close to matching the capacity installed in 2011, deployments won’t be nearly as negligible as pundits had predicted.
Along with Germany, which had installed 6.8 GW as of October and was well on pace to install 8 GW by year-end, some of the markets that have seen the most activity, according to the Austin, Texas-based Mercom Capital Group and New York City-based Bloomberg, are:
- China, which will install about 4 GW of PV this year, and has set a national solar power capacity target of 21 GW by 2015 (although word is that the target soon could be boosted as high as 40 GW);
- Italy, which is expected to end 2012 with installations in the 3.5 GW range, after experiencing a "mini rush" before Conto Energia V became effective;
- The United States, which is predicted to have installed about 3 GW in 2012, partly fueled by another dash for cash – this one driven by the expiration of the 30% U.S. Treasury grant program at the end of 2011;
- India, which has achieved momentum from its Jawaharlal Nehru National Solar Mission (JNNSM) – with a goal to install 20 GW of solar power by 2022 – and has hit its stride, installing slightly over 1 GW in 2012; and
- Japan, which arguably has had the best FIT worldwide as of July, with PV systems below 10 kW receiving ¥42/kWh (US$0.53 or €0.40) and systems above 10 kW receiving ¥40 (~$0.51 or €0.39) – and was estimated to hit 0.9 GW of utility-scale solar projects this year.
In a good news/bad news scenario at the consumer level, experts soon expect to see a sales uptick directly linked to the real and disturbing effects of global warming. Frequent battering by superstorms, followed by prolonged power outages, has convinced individuals and groups of homeowners who might otherwise have remained on the fence to invest in energy independence.
In 2013, consumers will be looking for backup in the form of low-cost, reliable rooftop systems; combined with power storage and grid integration. Other major consumer-level trends will include community solar, innovative third-party solar leasing arrangements, and the development of plug-and-play packages.
At the utility scale, solar is increasingly being perceived as the fastest way to add more capacity to the grid – a key advantage over coal, nuclear energy and natural gas. Based on the latest figures from Wiki-Solar, utility-scale (10 MWs or more) PV installations have reached 8.5 GW this year, more than doubling the 2.3 GW deployed in 2011. The database lists San Diego Gas & Electric, Pacific Gas & Electric, NV Energy, Electricity Generating Authority of Thailand and Ontario Power as the top five in solar off-take.
Also, in an interesting twist, ambitious plans are afoot in several nations in the Middle East, including Saudi Arabia, the United Arab Emirates and Qatar, to build enormous, utility scale domestic solar plants, so that more oil can be reserved for export to the rest of the world.
David Gower, business manager for Intertek’s Center for the Evaluation of Clean Energy Technology (CeCeT) in Cortland, New York, told pv magazine, "Utilities are beginning to realize the advantage of deploying solar PV in combination with storage technology … I expect the recognition of distributed generation to become the final credibility step for solar in competition with traditional generation – and I think 2013 will be the moment when this [awareness] will heighten the discussion of about the benefits of solar PV beyond just being renewable … It is quickly deployable; it eliminates transmission losses, and it can be especially helpful [in meeting] peak load demand that otherwise costs utilities a lot of money."
All in all, while acknowledging that it hasn’t been an easy year to be in solar, many in the industry – still in its formative stages – are optimistic about prospects for the next 12 months.
"It's accurate to say that 2012 was rough for solar manufacturers, but business wasn't as dismal for everyone else," commented Deep Patel, founder and CEO of GoGreenSolar.com, a West Covina, California-based manufacturer and installer green power systems for both ratepayers and public utilities.
He told pv magazine, "The falling price of PV enabled more consumers to go solar, which meant more business for [installers and balance of system producers]. This year also saw both Enphase and SolarCity go public [in the United States]. Needless to say, it's an exciting time to be in solar and we're looking forward to another great year!"
Departures and deals
But before brighter prospects are considered, let’s take a moment to say good-bye to some small risk-takers that stumbled and fell, some larger competitors that succumbed to takeovers, and some major conglomerates that cut their losses by pulling out of the sector during what they would describe as an "annus horribilus."
Just a few players on the long list of companies that filed for (self-administrative) insolvency include: Energy Conversion Devices (USA, February); Odersun (Germany, March); Q.Cells (Germany, April); Solarday (Italy, April); Abound Solar (USA, June); Global Solar Energy (Germany, June); Konarka Technologies (USA, June); Solarwatt (The Netherlands, June); Centrotherm Photovoltaics (Germany, July); SunStrom (Germany, July); VHF Technologies/Flexcell (Switzerland, September); 3S Soluciones (Spain, October); and Signet Solar (USA, November).
Some were lucky enough to find buyers with big pockets. In October, PV company, Q.Cells, for example, was acquired by South Korea’s Hanwha Chemical Corporation; and in September, BMW board member Stefan Quandt became the majority owner of Solarwatt.
Cecilia Aguillon, director of Marketing and Government Relations for Kyocera Solar, Inc., a U.S. división of the Kyoto, Japan-based Kyocera Group, revealed to pv magazine, "While our company installed more PV than ever before, we have to recognize that this was a very challenging year for many in the industry. Several well-known brands actually pulled out of the U.S. solar market in 2012, including Sharp, Schott, Siliken and Uni-Solar. In addition most of the top solar-only manufacturers posted big losses."
Among a number of companies that were "regionally challenged" was the Oerlikon Group, which in October divested itself of Switzerland-based thin film producer Oerlikon Solar, selling off to Japan’s leading semiconductor equipment supplier, Tokyo Electron. In addition, German industrial group Siemens pulled the plug on its hemorrhaging solar power business in October, stating, "Due to the changed framework conditions, lower growth, and strong price pressure in the solar markets, the company's expectations for its solar energy activities have not been met."
In addition, the U.S.-based thin film manufacturer First Solar, ranked among the top ten producers worldwide in 2011, let it be known in April that it would close its manufacturing facilities in Frankfurt Oder, Germany, at the end of the year. However, things had begun to look up by December, when the company announced that that there was investor interest in its German plants – and that it had closed a deal for its first commercial demonstration project in China.
First Solar CEO Jim Hughes told pv magazine, "The market feels better at the end of the year than it did at the beginning of the year. Through the third quarter, we maintained a book-to-build ratio of 1:1, which is a pretty good accomplishment in this environment. Looking forward, we will see the emergence of new markets as major players, such as the Middle East and India. And there are signs of growth in the Latin American market. Additionally China will be significant in 2013."
Tricks of the trade
Bonn-based SolarWorld AG ended the year on a sour note, announcing in December that it expected to see revenues "far below" 2011 levels, especially in Germany – and that it would not be averse to forming a strategic partnership with a financially strong investor. The company, which also has a U.S. division, may be best known at this point as the agitator behind the anti-dumping and countervailing duty trade cases brought against China’s solar manufacturers by the U.S. Commerce Department in 2011 and the European Commission in 2012.
In both cases, SolarWorld and its upstream supply chain allies complained that they could not compete with the below-market prices being charged by China’s PV manufacturers. They were opposed on both sides of the pond by the downstream sector of the industry, which asserted that low prices were driving installations.
While the European case has not been settled yet, in November, the U.S. International Trade Commission (ITC) voted 6-0 that imports of Chinese solar cells had materially injured solar manufacturers – and announced that America would levy tariffs ranging from 24 to 36% on PV modules that include cells manufactured in China.
In a recent interview with pv magazine, Kevin Kilkelly, president of SolarWorld Americas, was still in a celebratory mood. "The duties imposed this year on solar cells and panels made in the People’s Republic of China are an important step toward restoring free trade and fair competition in the industry," he commented, adding, "The well-documented decline in module pricing has begun to self-correct to accurately reflect gains in engineering and technology – rather than artificial market distortions – leading to a more sustainable value chain for the entire industry."
However, Intertek’s David Gower disagrees. "The tariff wars over solar are likely not going to have a significant impact one way or the other," he told pv magazine. "The way the policy was written, it focuses on the PV cells, so Chinese manufacturers are just sourcing their cells from other nearby countries, which does do much to impact the cost of their product and enables them to qualify not to pay the tariff."
He continued, "Manufacturers in the United States and Europe are going to realize that they need to take another approach, hopefully by innovating the next generation of solar, [which will be] harder for the Chinese to copy and sell cheaply. The overall effect of this policy could slow down the industry, but hopefully the industry will realize that it is only hurting itself… [and] that the real job growth comes from the installers on the roofs, not manufacturing of modules."
Meanwhile, the number of trade cases continues to multiply, as China strikes back at its adversaries with complaints about the dumping of polysilicon; and India’s Ministry of Commerce lodges pricing and subsidy complaints against China, Taiwan, Malaysia, and the United States.
What’s more, the domestic content requirements imposed by Ontario, Canada’s feed-in tariff have been challenged by Japan and the EU, with successful results to date. In a panel report issued on December 19, the World Trade Organization (WTO) confirmed that Ontario’s domestic content requirement, which mandates that 60% of system components must be sourced within the province, breaches the non-discrimination principle enshrined in the General Agreement on Tariffs and Trade (GATT) and the WTO Agreement on Trade-Related Investment Measures (TRIMS).
Looking at the WTO docket to date, opinion in the industry is that the trade relations may get worse before they get better. As Jigar Shah, who headed the effort for U.S. installers (Coalition for Affordable Solar Energy) during the hard-fought Commerce Department trade case, recently observed to pv magazine, "Trade cases will heat up in 2013 because governments around the world are trying to get more than their fair share of the jobs and investments from solar, even though the data show that only 3% of global jobs are in solar panel manufacturing within the solar industry."
Circumventing the problem
For the moment, in addition to sourcing its cells from nearby Asian markets and creating pushback with its own trade cases, China is using other strategies to circumvent the U.S. tariffs. First, China will make an effort to foster domestic solar sales – a deviation from its past model, under which 90% of products manufactured domestically, had been destined for export. Total PV installations in China next year are predicted to surpass 6 GW, which would enable the nation to surpass Germany as the number one domestic solar market on the planet.
In addition, Chinese manufacturers are looking at emerging markets for growth. For example, in September, Changzhou-based Trina Solar announced that, from a base in Santiago, the company would serve commercial, utility and off-grid customers throughout Latin America with a focus on Chile, Mexico, Brazil and neighboring countries.
Meanwhile, there is unconfirmed chatter that the Chinese government already has decided which companies it will support in their fight for market survival. Philip Grothe, a consultant at Bonn-based Simon-Kucher & Partners, told pv magazine, "Earlier this year, a list of 'six big and six little' solar companies that would receive preferred lending treatment from the China Development Bank was widely circulated among industry analysts and executives. However, the bank did not respond to questions about whether such a list actually existed."
However, a senior representative of the Renewable Energy Working Group within the European Chamber of Commerce in China, based in Beijing, indicated that there is a good possibility that the list actually exists – telling pv magazine, "Li Junfeng a director for Energy and Climate Policy at China’s National Development and Reform Commission (NDRC) said in an October 2012 interview with The New York Times that, if "one third [of the Chinese solar panel sector] of them will survive … that’s good, and two-thirds of them will die, but we don’t know that happens" – implying that that massive jobs throughout China are in jeopardy as well, thus undermining China’s undertaking to promote renewable energies.
Shrinking subsidies, new financing models
While China continues to subsidize its solar industry on a significant scale, and Japan launched a popular FIT program, governments worldwide, including the United States and Germany, are phasing out support.
Jigar Shah is relatively complacent about this development. "Government subsidies will be phased out for solar by 2017 globally because the solar industry won’t need them – and, in fact, is in danger of being held back by them," he stated. Rather he predicts, "Solar energy will attract more capital in 2013 than any other power sector industry in the world –over $100 billion [€76 billion] in deployment capital."
Kevin Kilkelly of SolarWorld Americas also believes that, particularly in the United States, there are alternatives to government financing that will work. "With the U.S. economy showing signs of continued improvement in 2013 and the housing market trending upward, I am optimistic that people will feel more confident investing in solar for their homes and businesses. Novel financing options, in both the commercial and residential space, are gaining traction, creating opportunities for more installations across many regions of the country,"
He continued, "We will see new markets opening in emerging solar states, like Georgia and possibly Virginia, while in mature markets, like California or Hawaii, only small state incentives will be needed to sustain continued growth. Reductions in balance of system and installation prices will spur further declines in overall system costs."
Among the new trends in financing, the two that stand out are solar leasing and community solar projects. Like car leasing, solar leasing involves low up-front costs. Someone else owns and maintains the equipment, while the consumer enjoys the benefits for a low monthly fee. Assuming that the monthly lease payment is lower than what the homeowner would pay per month for electricity, leasing makes good economic sense.
For those who cannot afford, or do not have the space, to invest in solar on their own roofs, investing in community solar enables them to enjoy the advantages of renewable, distributed energy at a low price. It has the potential to open up a new level of private investment into renewable energy.
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