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Demand shift impacts pricing
Factfile |
PV price industry metrics
Demand shift impacts pricing
D
ESPITE TARIFFS, quotas, retroactive changes to FiTs, continued slowing of demand in Europe and rising prices in most regions, the PV industry is pressing on. Paula Mints discusses the trends.
Tariff decisions in the US render it a certainty that module prices will rise in that country as the US does not have enough crystalline cell and thin film capacity to serve its own market. Announcements about multimegawatt projects in Japan, the US and Chile are contradicted by project backlogs in those countries. And yet, there is still a whole lot of installing going on. Project announcements from China, where the lag from installation to grid connection is gigawatt deep, have begun including the tag line: “Already connected to the grid.” Meanwhile, China’s focus on distributed generation PV has led to a slow start in terms of installations in that country. In China, distributed generation PV installations are for commercial applications. Ownership issues (the government owns the land, rooftop ownership is primarily private) as well as the composition of the available rooftops (aluminum with a typical rooftop lifetime of eight years) have rendered the DG application in China a slow starter.
PV supply/demand picture Supply (statistics about shipments) and demand (statistics about what
customers purchased at the first point in the value chain) are analogous to accounting ledgers in that they must be equal — that is, what was shipped must equal what was bought. Installations are a different metric from shipments, and demand and grid connections are a different metric from installations. Many times, in attempting to right-size industry statistics, installations are assumed to be synonymous with demand, and grid connections are assumed to be synonymous with installations. The result of these combination assessments of PV industry size can more confusing than descriptive. The data presented here (see Figure 1) describe shipments to the first buyer (first point of sale in the market. PV shipments for Q1 2014 were 9.1-GWp, compared to 7.3-GWp for Q1 2013 and showing growth of 12% over shipments of 8.8-GWp for Q4 2013. Drivers for growth during Q1 include continued high demand from the US, Japan and China. Given the current trade disputes in the US and Europe directed at imports of cells/modules from Taiwan and China, the ROW (the Philippines, Malaysia, South Korea, India and Singapore)
Figure 1. Q1 2014 Regional Shipments & Q2 2014 Estimate.
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July/August 2014 | Renewable Energy Focus
are expected to increase while shipments from Taiwan may slow, at least in the near term. Figure 1 presents Q1 2014 regional shipments as well as an estimate for Q2 2014. Figure 2 presents Q1 2014 technology shipments as well as a Q2 2014 estimate. During Q1 crystalline technologies had a 93% share of total shipments. Polycrystalline had the leading share at 61%. During Q2 2014 the share of monocrystalline is expected to tick up. Figure 3 shows the history as well as an estimate for 2014 for global capacity, production, shipments and inventory. Manufacturer inventory is expected to be 4% of production, ~1.4GWp, at the end of 2014. The PV industry currently finds itself trying the figure out the conundrum of a more diversified portfolio of markets — all of which have restrictions, risks, or lack incentives necessary to drive accelerated demand. Figure 4 presents a regional supply (shipments) and demand (first customer) for 2014. China’s share of global shipments from in-house manufacturing decreased in 2013 and is expected to decrease again in 2014 as it continues to acquire cells and modules from Taiwan and the ROW region (Singapore, India, South Korea, the Philippines and Malaysia) to serve tariff/quota markets in the US and Europe. Following the tariff decision in the US on imports from Taiwan/China, Taiwan’s share is expected to decrease as shipments from the ROW region increase. The available markets, including Japan and other than China, are not sufficient to absorb available excess capacity.
Cell/thin-film metrics At the beginning of 2014, PV cell and module prices are differentiated
Figure 2. Q1 2014 Technology Shipments & Q2 2014 Estimate.
About: Paula Mints is founder and chief market research analyst at SPV Market Research. She previously served as a director in the energy division at Navigant Consulting, with responsibility for its Solar Services Program. Prior to that, Mints was senior market analyst at Strategies Unlimited.
Factfile
Copyright 2014 SPV Market Research do not reproduce without permission.
Figure 5. PV Costs, Prices, Price/Cost Delta, 2003-2014 Estimate. Figure 3. Capacity, Production, Shipment, Inventory Estimate, 2009 – 2014 Estimate.
Figure 4. PV Costs, Prices, Price/Cost Delta, 2003-2014 Estimate.
by country and are higher in countries where government tariffs have artificially increased prices as well as in countries such as Japan where demand is high. In Q1 2014 the global ASP for modules was $0.70/Wp and PV manufacturer cell/module revenues were $6.4-billion up from $5.9-billion for Q1 2013. Currently module ASPs are increasing in some areas because of strong demand. In areas where tariffs have been imposed, module prices are forced up for affected manufacturers while manufacturers from unaffected regions react by both building in risk and taking higher margins. Figure 5 presents PV costs/prices and the cost/ price delta from 2003 through an estimate for 2014. The global ASP for 2014 is expected to be $0.80/Wp.
Outlook for 2014 As 2014 passes the halfway mark, it is worthwhile to assess the economic and political conditions in the markets that the PV industry relies on for its demand. The US and Japan continue as strong markets in 2014. In the case of Japan, its FiT, and installation
Figure 6. 2014 PV Industry Metrics: Inventory, Capacity, Production, Shipments and Defective Modules.
backlog, should encourage a strong performance through 2015, though in 2016 softening in the market is expected. The US continues to show strength, with demand driven by the end of the country’s ITC (the impending end of an incentive always serves to spur activity) as well as growth in the residential application primarily due to the country’s residential lease model. Though China has underperformed thus far in 2014, the market is expected to hit the governments reduced target of 10-GWp and may overshoot this target should the government rethink its focus on rooftop DG. Demand for PV systems in the UK continues to be strong, particularly as it approaches changes in its incentive structure. Germany and other EU markets continue to slow as incentives time out and restrictive retroactive changes to FiTs and tax structures discourage investor activity. The countries in Latin America including North America (Mexico), Central and South America as well as the Caribbean continue to show growth, albeit slowly. It is unlikely due
to a combination of administrative hurdles, low incentives and unfriendly tax structures in some countries to show the surge in demand typical of incentive-driven markets. Latin America is likely to present a more conservative growth pattern. Another area of note, the markets on the continent of Africa and in particular the Republic of South Africa, currently show the promise of offering the solar industry (PV,CPV and CSP) a high megawatt level of activity going forward, at least for the next few years. The Middle East currently as high political risk and is unlikely to see significant growth until current tension subside. Eastern Europe is also an area unlikely to see strong growth for the PV industry in the near term for obvious reasons. Figure 6 presents the various metrics that make up the PV industry in 2014, including inventory at the beginning of the year, commercial capacity to produce PV technology (c-Si cells and thin film modules), production, shipments, defective modules and inventory estimated to move from 2014 into 2015.
July/August 2014 | Renewable Energy Focus
15
PV price industry metrics
Demand shift impacts pricing
D
ESPITE TARIFFS, quotas, retroactive changes to FiTs, continued slowing of demand in Europe and rising prices in most regions, the PV industry is pressing on. Paula Mints discusses the trends.
Tariff decisions in the US render it a certainty that module prices will rise in that country as the US does not have enough crystalline cell and thin film capacity to serve its own market. Announcements about multimegawatt projects in Japan, the US and Chile are contradicted by project backlogs in those countries. And yet, there is still a whole lot of installing going on. Project announcements from China, where the lag from installation to grid connection is gigawatt deep, have begun including the tag line: “Already connected to the grid.” Meanwhile, China’s focus on distributed generation PV has led to a slow start in terms of installations in that country. In China, distributed generation PV installations are for commercial applications. Ownership issues (the government owns the land, rooftop ownership is primarily private) as well as the composition of the available rooftops (aluminum with a typical rooftop lifetime of eight years) have rendered the DG application in China a slow starter.
PV supply/demand picture Supply (statistics about shipments) and demand (statistics about what
customers purchased at the first point in the value chain) are analogous to accounting ledgers in that they must be equal — that is, what was shipped must equal what was bought. Installations are a different metric from shipments, and demand and grid connections are a different metric from installations. Many times, in attempting to right-size industry statistics, installations are assumed to be synonymous with demand, and grid connections are assumed to be synonymous with installations. The result of these combination assessments of PV industry size can more confusing than descriptive. The data presented here (see Figure 1) describe shipments to the first buyer (first point of sale in the market. PV shipments for Q1 2014 were 9.1-GWp, compared to 7.3-GWp for Q1 2013 and showing growth of 12% over shipments of 8.8-GWp for Q4 2013. Drivers for growth during Q1 include continued high demand from the US, Japan and China. Given the current trade disputes in the US and Europe directed at imports of cells/modules from Taiwan and China, the ROW (the Philippines, Malaysia, South Korea, India and Singapore)
Figure 1. Q1 2014 Regional Shipments & Q2 2014 Estimate.
14
July/August 2014 | Renewable Energy Focus
are expected to increase while shipments from Taiwan may slow, at least in the near term. Figure 1 presents Q1 2014 regional shipments as well as an estimate for Q2 2014. Figure 2 presents Q1 2014 technology shipments as well as a Q2 2014 estimate. During Q1 crystalline technologies had a 93% share of total shipments. Polycrystalline had the leading share at 61%. During Q2 2014 the share of monocrystalline is expected to tick up. Figure 3 shows the history as well as an estimate for 2014 for global capacity, production, shipments and inventory. Manufacturer inventory is expected to be 4% of production, ~1.4GWp, at the end of 2014. The PV industry currently finds itself trying the figure out the conundrum of a more diversified portfolio of markets — all of which have restrictions, risks, or lack incentives necessary to drive accelerated demand. Figure 4 presents a regional supply (shipments) and demand (first customer) for 2014. China’s share of global shipments from in-house manufacturing decreased in 2013 and is expected to decrease again in 2014 as it continues to acquire cells and modules from Taiwan and the ROW region (Singapore, India, South Korea, the Philippines and Malaysia) to serve tariff/quota markets in the US and Europe. Following the tariff decision in the US on imports from Taiwan/China, Taiwan’s share is expected to decrease as shipments from the ROW region increase. The available markets, including Japan and other than China, are not sufficient to absorb available excess capacity.
Cell/thin-film metrics At the beginning of 2014, PV cell and module prices are differentiated
Figure 2. Q1 2014 Technology Shipments & Q2 2014 Estimate.
About: Paula Mints is founder and chief market research analyst at SPV Market Research. She previously served as a director in the energy division at Navigant Consulting, with responsibility for its Solar Services Program. Prior to that, Mints was senior market analyst at Strategies Unlimited.
Factfile
Copyright 2014 SPV Market Research do not reproduce without permission.
Figure 5. PV Costs, Prices, Price/Cost Delta, 2003-2014 Estimate. Figure 3. Capacity, Production, Shipment, Inventory Estimate, 2009 – 2014 Estimate.
Figure 4. PV Costs, Prices, Price/Cost Delta, 2003-2014 Estimate.
by country and are higher in countries where government tariffs have artificially increased prices as well as in countries such as Japan where demand is high. In Q1 2014 the global ASP for modules was $0.70/Wp and PV manufacturer cell/module revenues were $6.4-billion up from $5.9-billion for Q1 2013. Currently module ASPs are increasing in some areas because of strong demand. In areas where tariffs have been imposed, module prices are forced up for affected manufacturers while manufacturers from unaffected regions react by both building in risk and taking higher margins. Figure 5 presents PV costs/prices and the cost/ price delta from 2003 through an estimate for 2014. The global ASP for 2014 is expected to be $0.80/Wp.
Outlook for 2014 As 2014 passes the halfway mark, it is worthwhile to assess the economic and political conditions in the markets that the PV industry relies on for its demand. The US and Japan continue as strong markets in 2014. In the case of Japan, its FiT, and installation
Figure 6. 2014 PV Industry Metrics: Inventory, Capacity, Production, Shipments and Defective Modules.
backlog, should encourage a strong performance through 2015, though in 2016 softening in the market is expected. The US continues to show strength, with demand driven by the end of the country’s ITC (the impending end of an incentive always serves to spur activity) as well as growth in the residential application primarily due to the country’s residential lease model. Though China has underperformed thus far in 2014, the market is expected to hit the governments reduced target of 10-GWp and may overshoot this target should the government rethink its focus on rooftop DG. Demand for PV systems in the UK continues to be strong, particularly as it approaches changes in its incentive structure. Germany and other EU markets continue to slow as incentives time out and restrictive retroactive changes to FiTs and tax structures discourage investor activity. The countries in Latin America including North America (Mexico), Central and South America as well as the Caribbean continue to show growth, albeit slowly. It is unlikely due
to a combination of administrative hurdles, low incentives and unfriendly tax structures in some countries to show the surge in demand typical of incentive-driven markets. Latin America is likely to present a more conservative growth pattern. Another area of note, the markets on the continent of Africa and in particular the Republic of South Africa, currently show the promise of offering the solar industry (PV,CPV and CSP) a high megawatt level of activity going forward, at least for the next few years. The Middle East currently as high political risk and is unlikely to see significant growth until current tension subside. Eastern Europe is also an area unlikely to see strong growth for the PV industry in the near term for obvious reasons. Figure 6 presents the various metrics that make up the PV industry in 2014, including inventory at the beginning of the year, commercial capacity to produce PV technology (c-Si cells and thin film modules), production, shipments, defective modules and inventory estimated to move from 2014 into 2015.
July/August 2014 | Renewable Energy Focus
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