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Rapidly changing photovoltaic market dynamics: an interview with IMS Research Lead Analyst Sam Wilkinson

Sam Wilkinson
Sam Wilkinson

Sam Wilkinson is an analyst within the PV group at IMS Research, and the lead author of several recent reports on various aspects of the global PV industry. During his time working within the group, Sam has become a lead analyst in the PV inverter and PV cell and module markets, working closely with leading global suppliers to develop detailed research on these markets.

More recently, Sam has been responsible for establishing primary research reports and benchmarking services for global system integrators and EPCs, expanding IMS Research's extensive coverage of the supply chain further.

Solar Server: In a recent report, IMS Research stated that it expects the utility-scale PV market to boom in 2011, with First Solar to primarily benefit. With crystalline silicon PV costs continually falling, do you think that First Solar will be able to compete with low-cost crystalline silicon PV for the utility-scale PV market over the long run?

Sam Wilkinson: There are a couple of things that I need to mention here, first of all. The current outlook is changing pretty quickly at the moment, due to a number of key markets changing their demand dynamics and a lot of uncertainty in those key markets, namely Germany, Italy and France, where the current incentive schemes are under fire.

We are going to see some pretty major alterations in those markets, some concerns and some rumored, some will definitely happen, whilst we have now have a clear view on tariffs in Germany and France, we don’t yet have a finalized account on what will happen to Italy’s scheme. Furthermore, it is still very unclear how the market will react to the cuts in tariffs in Germany schedule for July 1st and whether this will drive increase demand before then.

More recently, the tragic events in Japan have led many countries to review their nuclear power programs and even now Germany has announced plans to speed the shutdown of plants. These events are putting weight behind the case of renewable energy generation and may help to provide better support for increased subsidies for PV.

So we're not sure how it will look, it is a little bit uncertain at the moment, but one key thing to note is that a couple of the most promising markets long-term are the U.S. and China. We think those markets are going to be the largest ones in a few years time, and those markets are where the utility-scale systems are really favored.


Solar Server: Why the U.S.? The nation doesn't have feed-in tariffs.

Sam Wilkinson: There is a very big utility-scale drive in the U.S. So, we're going to get a look at two of the key players there, namely First Solar and SunPower. And you can see that just their pipelines alone for utility-scale systems are pretty significant for the next few years.

And that is just looking at two companies. We see the utility-scale market in the U.S. being a pretty significant driver for the global market in the next few years.

In answer to your question about First Solar, we've only got to compare their gross margins to some of their crystalline competitors to realize that they have got plenty of room to maneuver on their pricing whenever possible, or whenever required, should I say.


Solar Server: Can you talk a little bit about other leading nations, including China?

Sam Wilkinson: So China again, the government has made it very clear that they will be supporting solar power. They've also driven the price of systems down so low, I don't think we have too much danger of a sudden withdrawal, or an amendment, or uncontrollable response to a feed-in tariff that we are seeing in some of the European markets that have led the global market until now.


Solar Server: There has been a lot of talk about the potential for falling PV module prices in the first quarter of 2011 to leading to an industry shakeout.

Now that we are in the first quarter of 2011, how do you see this playing out? Is this quarter turning out to be as difficult as some feared?

Sam Wilkinson: Well, IMS Research for one did forecast that we would have something along these lines, of what we are currently seeing in Italy, happen. But I don't think anyone foresaw exactly what is happening it Italy at the moment. And that has been a key driver in keeping demand a lot higher than once thought in the early stages of 2011.

We're seeing a huge rush to connect systems in order to benefit from an extremely over-generous feed-in tariff system in Italy at the moment. And you are well aware of the news there.

The question is really, once the Italian feed-in tariff is changed, and the same will happen in France, facing a strong possibility of it happening in Germany, the Czech Republic has disappeared pretty much off the map altogether. We're going to see some emerging markets taking up some of that, but I don't see how they can make up for the level of demand that those markets have provided up until now.

So I think we will perhaps see what happened briefly in Q1 2011 happen later on this year.


Solar Server: As to the predictions of a shakeout, it appears that, without naming specific companies, some companies continue to linger despite losses quarter after quarter. Can you comment on that?

Sam Wilkinson: I always remember, in an interview with a supplier a few years ago, that he described the PV market as the land of the living dead. This was during 2009 where there was a complete crash in the market and many suppliers were in extremely bad financial condition.

And he commented that "how are all these companies still alive?" They are wasting away every quarter and have been for many consecutive quarters.

Obviously different companies have different ways of coping with that. The PV market is a very optimistic market. There are lots of people who really look to the future as something very positive, and they continue to invest with this sort of optimism that the future is going to bring something better.

Now obviously we are starting to see some movement, and some sort of ultimate failure to some of these failing companies. I think we will start to see some consolidation over the next year. As you've mentioned, you don't want to name names, but some of these companies have basically coped with this by taking a kind of, "if you can't beat them join them" approach, and have taken their production to Asia.


Solar Server: I note that you recently returned from the SNEC trade show in Shanghai. Any observations you care to share with about new developments in Asian PV manufacturing and markets?

Sam Wilkinson: The key thing that really hit anyone that traveled over to China for that show that I spoke to, was just the sheer volume of Chinese module suppliers and cell suppliers. There are some pretty big question marks over total industry demand over the next year or so when feed-in tariff changes have taken effect in Europe.

And really, you have to question whether there is room for that many module suppliers to be active in the market, with an increasing part of that market being accounted for by the larger players.


Solar Server: Anything that we haven't talked about regarding the future of the global PV industry that you'd like to share with our readers?

Sam Wilkinson: No, I think that from what I've just said about Chinese module suppliers, and how the smaller Chinese module suppliers are competing for a share of the market, which is gradually being eaten away by the larger tier 1 suppliers, is that we're seeing some pretty impressive entries into the market from companies - Taiwanese, and Korean large corporations, in electronics already  - Samsung, LG, Taiwan Semiconductor, AUO, arriving on the market with a huge amount of capital, and they are going to pretty quickly reach high volume, low cost production.

And they are going to be a pretty significant challenge for the current players to deal with, I would suggest.



Interview conducted by Solar Server International Correspondent Christian Roselund