So far we have seen the U.S. announcing final anti-dumping tariffs against Chinese manufacturers (which has yet to have much of an impact on U.S. installations), followed by the European Union filing a similar case also against the Chinese.
Meanwhile, China announced its own anti-dumping case against polysilicon suppliers from the U.S., EU and South Korea, while India just initiated an anti-dumping investigation regarding imports of solar cells against Malaysia, China, Taiwan and the U.S. further escalating the solar trade wars.
However, 2012 could have been far worse. At the beginning of the year, installation forecasts for 2012 looked pretty scary. Germany was not expected to install more than 3.5 GW and everyone was looking for the emerging markets to supplement the demand. But, defying the odds, Germany has once again come to the rescue, and could be the reason why photovoltaic installations are expected to show growth year over year in a challenging climate.
Low module prices continue to drive installations; Tier 1 module prices are hovering around US$0.65 and will probably end up down about 30% this year. Along with Germany, some of the markets that have been driving installation growth this year are Italy, China, France, Japan, the U.S. and India.
Germany has installed 6.838 GW as of October 2012 and is well on pace to install 8 GW this year. Originally, it was only expected to install 2 to 3.5 GW based on earlier industry forecasts.
The German Federal Network Agency (Bundesnetzagentur) recently announced a reduction in feed-in tariffs (FIT) for photovoltaic installations between November 1, 2012 and January 31, 2013. As such, FITs will decrease by 2.5% per month.
Italy replaced its solar policy, the Conto Energia IV, with the Conto Energia V this summer, which calls for a 700 million (around $883 million) subsidy cap and also provides a FIT premium for solar panels made in Europe to the tune of around 20 or $25)/MWh.
Italy will not get anywhere near its 2011 installation levels, which reached over 9 GW, with 2012 expected to finish in the 3.5 GW range.
France has been all over the place when it comes to solar policies this year, cutting its FITs a few times, and then shifting from a FIT to a bidding system for large-scale projects above 100 kW. However, in a reversal, the new administration announced in November a rare tariff increase for photovoltaic systems smaller than 100 kW to 0.184 (around $0.240)/kWh from 0.175 (around $0.229)/kWh.
A "Made in EU" bonus totaling 10% was also announced in October. Despite this, recent indications are that FITs for ground mount installations will be cut from 0.10 (around $0.13) to 0.08 (around $0.11).
At the end of the third quarter, installations in France had already reached about 1 GW. The country introduced a 500 MW hard cap on new annual installations in 2011 and the current French market is largely a reflection of grandfathered projects from 2010 coming online. There are about 3.5 GW of grandfathered systems with 2 GW expected to be connected in 2011 and 2012.
The U.S. continues its strong installation growth in 2012 with the help of utility-scale projects, solar leases and low module prices. The uncertainty surrounding the anti-dumping case against Chinese manufacturers has ended as the final ruling was released in November. So far, the impact from the anti-dumping ruling seems to have had minimal impact on installations and panel prices.
The U.S. does not have a central, cohesive solar incentive policy. Instead, the market is driven by state Renewable Portfolio Standards (RPS), state and municipal rebate programs and the 30% federal investment tax credit (ITC).
California, the largest solar market in the country, is fueled by an aggressive RPS of 33% by 2020. Almost 30 states have some sort of RPS in place, and about half of them have a solar carve-out. Solar lease programs, where consumers lease systems instead of making the upfront investment, are extremely popular, especially in California, and are largely driving the residential markets there.
U.S. installations may come close to doubling in 2012 compared to 2011.
The National Energy Administration (NEA) of China has a solar power capacity target of 21 GW by 2015. This has set the pace for Chinese installations in 2012, which could more than double compared to 2011 installations of over 2 GW.
The installations in the first half of 2012, according to National Development and Reform Commission (NDRC), was slow at 1.3 GW, which means about 4 GW must be installed in the second half of the year.
To support the new 21 GW target, there has to be policy support. According to reports, Chinas National Grid would purchase excess distributed photovoltaic power (after consumption) at Rmb1 (around $0.16)/kWh, a much higher tariff than previously expected. This tariff is expected to yield a healthy IRR, which could help push distributed generation installations.
China still has multiple challenges to address including an economic slowdown, tightening credit by the state owned banks, significant debt exposure to solar manufacturers, bankability issues, low tariffs, bureaucracy, cumbersome permitting processes and transmission bottlenecks.
Japan has set a goal of achieving 28 GW of cumulative photovoltaic installations by 2020. The Ministry of Economy, Trade, and Industry (METI) announced a FIT program in the summer, which will be valid for 20 years.
The FIT is one of the most attractive in the world right now, with photovoltaic systems below 10 kW receiving ¥42/kWh (around $0.53) and systems above 10 kW receiving ¥40 (around $0.51). For systems less than 10 kW, the government will purchase only the excess power produced for a 10 year period, and for systems larger than 10 kW, the government will purchase all of the power produced.
Positive effects of the new FIT program are already being felt, with 65% growth in Japans domestic photovoltaic shipments. Domestic shipments in the first three quarters in 2011 amounted to about 890 MW compared to almost 1.5 GW in the first three quarters in 2012. Japan could potentially double its installations in 2012 compared to 2011.
Indian solar installations have been driven by the Jawaharlal Nehru National Solar Mission (JNNSM) with a goal to install 20 GW of solar power by 2022, and various state policies and state RPOs. The country is on pace to install over 1 GW in 2012.
JNNSM and most states use a reverse auction process to select projects, while the state of Gujarat (which has the most installations of any India states so far) has a FIT policy in place. India went quickly, from almost no installations three years ago to an estimated 1 GW this year, and has been considered one of the most promising solar markets along with China and Japan.
All of that could change with added uncertainty caused by the recent announcement by the government of India to launch an anti-dumping investigation against China, Taiwan, Malaysia and the U.S. in relation to solar cell imports.
Considering India uses a reverse auction model where the lowest bidders win projects, any increase in module costs will make most projects unviable as the projects are being executed on razor thin margins.
The state of Tamil Nadu recently announced a new policy with a goal of installing 3,000 MW by 2015 using a reverse bidding process. Though encouraging, state utilities in India continue to operate under massive losses, and are less than prompt when it comes to paying power generators.
Edited by Becky Beetz.
About the author
Raj Prabhu is Managing Partner at Mercom Capital Group, a clean energy communications and consulting firm with offices in the U.S. and India. Mercom consults its clients on market entry, strategy, policy, due-diligence and joint-ventures. For more information, visit: http://www.mercomcapital.com. To get a copy of Mercoms market intelligence reports, visit: http://mercomcapital.com/market_intelligence.php