2013 review: Solar goes east - Growing global PV markets expected in 2014

by Christian Roselund 

After the upsetting experiences of 2012, 2013 was a much better year for the global solar industry. 2012 started with a trade war raging on three continents and collapsing PV prices across the value chain, which continually pushed more companies to bankruptcy.

In 2013 all this changed. There has been a conclusion to the trade dispute between the EU and China, and if it is not entirely satisfactory to ever stakeholder, it at least has returned a degree of stability and predictability to the industry. PV prices across the value chain stopped their collapse, in some cases rebounding by the end of the year, leading to margin recovery.

The global solar industry is in a very different situation than it was at the beginning of 2013. But it is also geographically in a different place – namely Asia. The shift in demand driven by booming Asian markets in has been the outstanding story of 2013. Almost overnight, as European markets have faltered, China and Japan have grown to the world's two largest PV markets, and this has changed the industry.

China became the world's largest PV market in 2013, with a large number of utility-scale projects commissioned in the Northwestern Region (Goldpoly)
China became the world's largest PV market in 2013, with a large number of utility-scale projects commissioned in the Northwestern Region (Goldpoly)


China takes the lead

The growth of the Chinese PV market has been very rapid, driven by substantial increases in national goals set by the central government. China has a good track record of setting ambitious targets for its solar industry and meeting them. In the wake of the global trade war and declining overseas demand, the nation has turned its attention to stimulating its domestic market.

The result is that China went from a market of less than 4 GW in 2012 to more than 8 GW in 2013, surpassing the United States and replacing Germany as the global market leader.

China passed a feed-in tariff in August 2011, and its role is significant. Although payment levels are low compared to international standards, costs are also low in China. However, the feed-in tariff is not the only driving factor. As is the case with Chinese PV manufacturing, there appears to be multiple avenues whereby the Chinese government is supporting a rapid growth in PV installations, including capital from state-run banks and cheap land.

While accurate statistics are hard to come by in China, it is clear that many large PV projects were completed in 2013, largely in Northwestern China. These include a mammoth 320 MW PV plant co-located with an existing hydroelectric project in Qinghai Province, completed in December 2013.

 

Rapid growth in Japan

Japan has also more than doubled its PV market to roughly 7 GW in 2013. The mechanism is simple: in the wake of the Fukushima disaster the nation implemented the world's most lucrative feed-in tariff. Once demand ramped up, it appears almost unstoppable, with this nation of only 378,000 square kilometers installing an average of nearly 20 MW of PV capacity each day during 2013.

Japan will add an estimated 7 GW of PV in 2013, showing rapid growth in all sectors (Sharp)
Japan will add an estimated 7 GW of PV in 2013, showing rapid growth in all sectors (Sharp)

This includes sharp growth not only in the residential but also the commercial and utility-scale sectors, with shipments into the commercial sector rising 7-fold year-over-year and shipments into the utility-scale sector increasing 10-fold in the third quarter of 2013.

And while the Japanese market has traditionally been dominated by domestic suppliers, this growth has opened the market to foreign manufacturers, with imports meeting more than half of demand in the second and third quarter of 2013.

 

The declining role of Europe

As Asian solar markets have risen, European markets have seen a relative decline.

The drive by Germany's prior center-right CDU/FDP coalition government to limit the nation's PV market via feed-in tariff reductions has worked, with a remarkably high degree of accuracy. Former CDU Environment Minister Altmaier aimed for a 3-3.5 GW annual PV market, and it appears that 2013 installations are likely to come in just below 3.5 GW.

Meanwhile, as Italy came closer to the EUR 6.7 billion cap on its feed-in tariff, the nation imposed a series of limitations on feed-in tariff eligibility, finally closing the program during the summer of 2013. Italy's self-consumption and net metering markets have not yet evolved to fill the gap, and as the last feed-in tariff plants are commissioned the nation's market has shown a significant decline.

For years the European PV market has shifted from one nation to another, driven by national feed-in tariffs. Spain, Czech Republic and Italy all boomed from 2008-2011, with Germany as a mainstay. However, with the decline of the Italian feed-in tariff, and reduced size of the German market, the European market will no longer be carried by any one or two nations. Neither France nor the UK has the political appetite for a large PV market, and the policies of the two nations reflect this.

European solar installations produced more than 70 TWh of electricity in 2012, and the continent remains a solar industry core area with a 2013 deployment of over 10 GW. However, from 2013 on this market is spread across multiple nations including Germany, France and the UK. Additionally, the European PV market is seeing qualitative changes, including the increasing importance of self-consumption and energy storage.

 

Hits and misses in other global markets

The U.S. market continues to grow, driven by a robust utility-scale pipeline. This includes some very large projects which were funded through the DOE loan guarantee program under U.S. President Barack Obama's “stimulus” legislation, more than 500 MW of which came online in late 2013.

The contributions of other nations, many of them in less affluent parts of the world, continue to represent more and more of the global PV market. However, this is very uneven from nation to nation. At the beginning of 2013 many had high expectations from India and Chile, and both nations disappointed.

India suffered from a lull between the completion of projects from phase 1 of its National Solar Mission and the commencement of state projects, and installed only 1 GW, representing flat growth from 2012. In Chile, projects approved by the government increased to over 5 GW, yet at the end of the year only 128 MW is under construction and less than 7 MW operational.

Scatec Solar commissioned the 75 MW Kalkbult PV plant in South Africa, the largest PV plant in the continent and one of the first large plants to come online under the nation's renewable energy solicitation. (Scatec Solar)
Scatec Solar commissioned the 75 MW Kalkbult PV plant in South Africa, the largest PV plant in the continent and one of the first large plants to come online under the nation's renewable energy solicitation. (Scatec Solar)

But where Chile fell flat, the Mexican market picked up during the year, with 219 MW of utility-scale PV projects under construction by the end of 2013. Additionally, in the last week of the year the Brazilian state of Pernambuco approved 123 MW of PV projects through a solar-only auction.

But of all developing markets, South Africa was the most impressive in 2013. The year saw hundreds of MW of modules and inverters shipped to the nation, as earlier projects began construction and new ones were awarded through consecutive rounds of the nation's renewable energy solicitations. This year South Africa also commissioned the largest PV project in the Southern Hemisphere, Scatec Solar's 75 MW Kalkbult PV plant.

 

Insolvencies and price recovery in the PV industry

The stabilization of PV prices in mid- to late-2013 was a great relief to many in the industry, at least those companies that remained to see it. The effects of two years of overproduction and collapsed prices continued to take a toll in 2013, with many of the remaining European PV makers going insolvent, and Bosch joining Siemens in quitting the industry.

In 2012 PV manufacturing was decimated by bankruptcies and insolvencies. In 2013 again Mercom Capital counted 28 more insolvencies; 18 of which were manufacturers. And in late 2013 a number of European PV developers including Gehrlicher Solar and SAG Solarstrom also filed for insolvency, hit by the difficulties in European PV markets.

But the biggest fall was that of Suntech, the world's largest PV module maker in 2011. Following the Global Solar Fund scandal in late 2012, Suntech fell to pieces in early 2013. The result is that the core of the company's manufacturing in its Wuxi Suntech subsidiary has been purchased by PV cell maker Shunfeng.

In early 2013 Suntech unraveled, leading to the sale of its main operating subsidiary to Shunfeng (Suntech)
In early 2013 Suntech unraveled, leading to the sale of its main operating subsidiary to Shunfeng (Suntech)

Suntech collapsed just before a return in prices which has brought a number of its competitors into the black by the end of 2013. Of the top ten PV module makers, only two – Yingli and ReneSola – reported negative operating margins in the third quarter of 2013. Yingli is within striking distance of profitability at -1.8%, and ReneSola's margins were impacted by a polysilicon plant closure.

Polysilicon and wafer prices have also recovered in the second half of 2013, with EnergyTrend reporting that polysilicon prices were near USD 18 per kilogram by the end of 2013. Even the long-depressed PV equipment sector appears to be showing the first signs of recovery, as evidenced by a rush of orders in December 2013.

 

Polysilicon, inverter businesses shift to Asia

While PV manufacturing from the ingot to module stages has been concentrated in Asia, until recently many other parts of the value chain, including polysilicon, inverters and manufacturing equipment, has been concentrated in the United States and Europe.

But as markets move east, this is also beginning to change. A number of Chinese polysilicon makers have upgraded their facilities to enable the production of ultra-high purity polysilicon. Inverter manufacturing is shifting east by and by. While SMA and Power-One are still the world's leading brands, the next three of the top five inverter makers by revenue are based in Japan and China – Omron, Tabuchi and Sungrow.

Inverter market leaders are feeling the impacts of this move, with SMA's decline in market share and revenues driving both staff reductions and the roll-out of new product lines, including products for the Japanese market.

 

Storage!

Aside from the move to Asia, another major shift in the global solar market in 2013 is the growth of a market for energy storage, both to accompany PV and to balance growing penetrations of wind and solar on the grid. This again is driven by policy. Notably, Germany rolled out its energy storage subsidy in May 2013, and in October 2013 California regulators approved a plan to require the state's large utilities to procure 1.325 GW of energy storage, either at the grid or distributed scale.

In addition to strong moves to support energy storage in Germany and California, Japan announced several ambitious storage projects (Sumitomo)
In addition to strong moves to support energy storage in Germany and California, Japan announced several ambitious storage projects (Sumitomo)

Additionally, a number of very large energy storage projects to assist with the integration of renewables have been announced in nations including Italy and Japan. These issues are treated in depth in Solar Server's November 2013 piece, Energy Transition 2.0: PV and Energy Storage.

 

CSP comeback in 2013

In previous reports, Solar Server anticipated more rapid market growth for concentrating photovoltaic (CPV) technology, and is still waiting on big projects which were announced in Southern California. However, where CPV has been slow, 2013 was a good year for concentrating solar power (CSP).

In 2013 large, groundbreaking CSP projects either began construction or were commissioned in three continents. This includes the Middle East's first large standalone CSP plant, the Shams 1 plant in Abu Dhabi, United Arab Emirates. At 100 MW, Shams was also the largest CSP plant in the world at the time of its commissioning.

This was not for long, as in September 2013 Abengoa commissioned the 280 MW Solana CSP plant in the U.S. state of Arizona, which includes six hours of solar thermal storage. Nearby in California, the first test power production has begun at BrightSource's 370 MW Ivanpah project.

The Solana CSP project, which Abengoa put online in late 2013, is the largest CSP plant in the world at 280 MW and incorporates six hours of thermal energy storage. (Abengoa)
The Solana CSP project, which Abengoa put online in late 2013, is the largest CSP plant in the world at 280 MW and incorporates six hours of thermal energy storage. (Abengoa)

Three large CSP projects are also under construction in South Africa, which will be the first utility-scale CSP projects in Sub-Saharan Africa.

CSP still struggles to compete with PV on cost. But with more and more variable renewable energy put online, the ability of CSP to integrate low-cost thermal storage will be more and more valuable. In California, CSP has already begun to meet evening demand after PV has ceased to generate electricity. It remains to be seen how policymakers will place a value on that service.

 

2014: Growing global PV markets

Coming into 2014, the outlook for the global PV industry is promising, driven by the continued growth of global solar markets. This is centered on expectations of stability from the Chinese and U.S. PV markets, backed by policy stability in China and large project pipelines in the United States. And as costs fall and prices stabilize, the return to profitability in the PV sector is expected to maintain throughout 2014.

However, there are still concerns. Prospects are less clear for the equipment sector. While IHS predicts recovery, Solarbuzz has warned that large manufacturers will follow a “fabless” strategy that allows them to utilize the capacity of their competitors without adding equipment.

Who is correct? Initial results are mixed. While Meyer Burger in particular has seen an up-tick in equipment orders at the end of 2013, a number of large PV makers are reporting either enhanced utilization of existing equipment or are focusing on OEM strategies.

Additionally, Japan, the world's second-largest PV market, does not look certain in 2014. With its Byzantine structure of regional utilities and lack of regional coordination, it is not clear how much longer the nation can continue to integrate the large volume of PV that it has been building without overhauling its utility structure.

SolarWorld has targeted not only China but Taiwan, a leading source of PV cells, in the trade petitions filed in late December 2013. (Arise Technologies)
SolarWorld has targeted not only China but Taiwan, a leading source of PV cells, in the trade petitions filed in late December 2013. (Arise Technologies)

Finally, just when we thought that the global trade war was over, on the last day of 2013 SolarWorld filed another trade case regarding PV products – this time including Taiwan, which has been a large exporter of PV cells, as well as China.

While this is a cause for concern for Chinese and Taiwanese companies, the state of individual national markets should become less important in coming years, as PV markets become increasingly distributed across the globe. Beyond markets in Europe, North America, China and Japan, the contributions of nations including Saudi Arabia, Thailand, Mexico, Brazil and host of others will be important as well.

Across the world, the ongoing growth of the PV industry continues to be driven by increasingly attractive economics. The declines in prices over the last few years have made PV cheaper than retail electricity in an increasing number of locations and market segments. This paves the way for the growth of PV without subsidies, whether this is large projects in regions like Latin America or self-consumption in Germany, Italy and other mature PV markets.

Ultimately, while it shifted dramatically to the east in 2013, the global solar market is really only beginning.