Looking at the market being a bit over 8 GW in 2010, you can see the load towards the first half of the year. This is driven by the assumption that Germany – at about 4 GW for
2010 – will change its incentives and lower the feed-in-tariff. This requires another PV module price change in order to meet the project profitability requirements, and leading
firms to explore the Italian, French, Czech and U.S. markets.
Yet none of those markets is big enough to replace demand in Germany. And if German installations go to a high scenario of 5 or 6 GW – there will definitely be no equivalent
market to take up the slack.
So what is the point here?
PV vendors are smart. Just because they are all drinking from the same cool aid and trying to sell as much into each market, does not mean that all of them have missed the market
warnings. Expect to see the winners in the market to exhibit some of the following characteristics:
Inventory – clear control of their supply chain – preferably in partnership with an EMS firm who can minimize the impact on plant and assets to the PV
Costs – we are about to go into a mid-year price reduction cycle. Leaders are taking apart their supply chain to extract any and all costs. This of course
starts with silicon.
Technology – this goes hand in hand with costs. Expect to see more announcements of improved efficiency panels ready for high volume manufacturing.
We’ll also start to see rumbles of improved test conditions.
Quality – A huge number of systems have been and are being put up too quickly. I expect we will start to see similar quality issues as we saw in Spain in 2008
– with systems that underperform due to design or hardware problems. We can also expect bankability to get restricted again.
EPC arms – The smart vendors will have increased their consulting support in this market or have their own EPC arms working on the showcase projects due to the
above quality concerns.
Cash – the time to stock pile it is now. This is particularly so for the firms with EPC arms – since those consume huge amounts of working capital.
Diversification – expect the winners to be playing in Germany – but to have teams and sales infrastructures in the other core markets.
I want the solar firms to succeed while not committing the same mistakes of over-ramped markets that we saw before – but of course that is not going to happen. These PV companies
and individuals are making individually rational moves that will collectively damage the PV market. So I cringe when I think about the PV market right now.
Yet we can all benefit from this. After all, we will have higher capacity and lower prices in the market. But be prepared for higher bankability concerns in the second half of the year
as projects start to underperform. And finally, start looking now at the vendors in the market for those who have retooled all parts of their business – to be more competitive in
a leaner environment.
In the meantime, I will just wait for the music to stop and see who ends up with the good seats.
Alfonso Velosa is a Research Director at Gartner Inc. focused on the photovoltaic solar market