PV 2013: No guts, no glory


Those are the findings of a report just released by the Boston-based research company. "While some historically strong demand markets will continue to pay dividends, the real winners going forward will need to make a few well-informed bets," said Matt Feinstein, Lux Research analyst and the lead author of the study, "Past is Prologue: Market Selection Strategy in a New Solar Policy Environment."

"Successful players will anchor business in key developed regions like the United States, Europe, Japan, and China, and place informed bets in markets like South/Central America, the Middle East, and Africa, through new offices or partnerships," he added.

Europe shines for distributed generation

In general, Feinstein said, established markets present opportunities for distributed generation, despite downturns in demand and reduced feed-in tariffs (FITs). Markets such as Germany and Italy have demonstrated a strong preference for rooftop systems and have solid existing sales channels.

What’s more, despite the crash of New Jersey’s Solar Renewable Energy Certificate (SREC) prices and the ramp-down of the California Solar Initiative, the U.S. states – particularly, Connecticut, Maryland and New York – remain attractive targets for distributed generation.

In Canada, the success of the Ontario Province’s FIT has been offset by significant interconnection problems and a WTO ruling against the validity of its domestic content mandate. However, Lux Research forecasts that, "If Ontario abolished the domestic content requirement, but kept the feed-in tariff in place, installers and EPCs would flood the market immediately – dwarfing the province’s current interconnection problems."

The Brazilian market, which largely runs on hydroelectricity, has also received significant attention recently. Like other developing nations, Brazil does not have a pervasive grid and distribution costs account for 40% of a

ratepayer’s bill.

To ease the load on the grid and to incentivize rooftop solar installations in areas that are distant from existing generation, the nation has established a net metering policy. Distributed systems under 1 MW qualify for the program, which credits customers that generate excess power with equal kWhs of free electricity to use at another time or at a different property.

Emerging markets will see significant utility-scale development

The emerging economies of India, China, South Africa, and Saudi Arabia are set to become utility-scale solar powers, according to Lux Research. Competition is booming in the last three in particular, and each will exceed installation targets.

While the U.S. states of California and Maryland remain robust utility-scale markets, Lux Research sees the long-term opportunity in South America. The prospect of large-scale installations is gaining traction in Chile, Argentina, and Peru, in particular. Indeed, developers have pointed to Chile as one of the nations in which they prefer to do business and to Peru as a pioneer in tax code favoring public-private partnerships (PPPs) that facilitate financing of solar as part of new infrastructure projects.

Three bold markets present themselves in EMEA – South Africa, Saudi Arabia, and the United Arab Emirates (UAE)/Qatar. Developers already have a major presence in South Africa, and that market will continue to thrive.

Saudi Arabia announced an extremely ambitious program in 2012. The King Abdullah City for Atomic and Renewable Energy (or K.A. CARE) established, under Royal Order No A/35 3/5/1431 A.H., plans to install 16 GW of photovoltaics and 25 GW of solar thermal generating capacity by 2032. The government will issue a draft request for proposals for a solicitation of 600 MW of utility-scale projects in Q2 2013, followed by two larger rounds (beginning in 2014) totaling 5 GW, split between photovoltaics and solar thermal.

APAC also offers several attractive markets for utility-scale solar. Notable among APAC markets, Japan instituted reforms to change its energy mix after the Fukushima-Daiichi disaster in 2011. While the country has backed off of a completely nuclear-free strategy, it is now incentivizing utility-scale generation, as well.

In addition, India is one of the surer bets in Asia, although that market also poses challenges. While the bottom-line demand figure will continue to grow, stakeholders should be mindful of two key issues: (i) the government’s preference for economic development and domestic content; and (ii) regulators that tend to award projects to low-cost, low-quality projects.

Developers are optimistic about the latter changing, as regulators become increasingly comfortable over time, and low-quality projects fail to obtain financing; the former, however, could remain a hurdle.

South Korea also is primed for a strong solar future, although the specific guidelines by which that market grows could change, based on the December 2012 presidential election. Meanwhile, Thailand and Malaysia are both serviceable secondary target markets in Southeast Asia.

Fortune favors the bold

Finally, in solar, Lux Research believes that firms that take calculated risks and expand quickly into foreign markets will experience success, as First Solar and many Chinese module manufacturers have demonstrated.

According to the report, foreigners should not dismiss China as a demand market for domestic players only. China will prosper as its market quickly grows under the Golden Sun initiative, as well as due to rising energy demand and an increased need for security.

Although Lux Research expects "preference to be given largely to domestic suppliers," foreigners such as First Solar and SunPower recently announced partnerships to secure footholds in the country – and others can take the plunge profitably, as well.

Edited by Becky Beetz.

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