PV module capacity growing faster than demand

PV module production capacity increased by nearly 70 percent over the course of 2010, states the company, reaching nearly 30 gigawatts (GWs) by the end of the year.

The primary reason cited for the record demand was attractive returns presented by incentive schemes, particularly in European countries like Germany, Italy and the Czech Republic. However, IMS says that like many others, these countries have reduced the rates they offer for electricity generated from PV systems from the start of 2011. As a result, whilst global PV installations are still set to increase this year, they will do so at a far slower rate.

Furthermore, the company believes that most suppliers, many of which remained "capacity-constrained" throughout 2010, are proceeding with aggressive capacity expansions. IMS forecasts that 35 GWs of annual capacity will be reached within the first half of the year, despite installations in the same period being predicted to reach no more than one fifth of that amount. "As a result,” says the company, "it is likely that there will be an oversupply of modules this year, leading to tougher competition and decreasing prices from suppliers."

"Leading module suppliers with healthy gross margins, proven products, and large contracted sales for 2011 remain optimistic, and can perhaps afford to be," adds Sam Wilkinson, research analyst at IMS Research. "However, in the short term, there is not sufficient demand to support the whole industry’s planned capacity expansions and IMS Research predicts that many smaller Tier-2 suppliers may face difficult times in 2011."

He concluded: "These suppliers experienced high demand for their products throughout much of last year and were able to capitalize on many larger companies being sold out. This is not likely to be the be the case this year, with demand increasing at a far slower rate and Tier-1 suppliers, who are typically favored by investors, bringing significant new capacity online."