The Anatomy of a Shakeout II : 2009 Global PV Demand Analysis and Forecast

Daniel Englander, Shyam Mehta, Travis Bradford, The Prometheus Institute/March 02, 2009

Demand is the new name of the game in the PV market, and project developers are calling the shots. How project developers react to the economic forces impacting the PV industry will determine the market's near-term future. Understanding the constraints facing project developers is the only way for companies across the PV supply chain to weather the impending shakeout. Faced with limited access to costly capital and waning incentives in major markets, project developers are demanding higher returns from fewer projects. They are passing these pressures on to manufacturers, forcing them to bring down module prices by 25% in 2009. Fewer projects lead to slackening demand -- projected to increase by only 13% in 2009 -- and, ultimately, to an industry-wide 15% revenue collapse this year alone.

Drawing on nearly 30 years of experience analyzing PV market dynamics, GTM Research and the Prometheus Institute for Sustainable Development are releasing 2009 Global PV Demand Analysis and Forecast to help guide PV industry players through this challenging period. Building on the results of PV Technology, Production and Cost, 2009 Forecast, we have created the industry's first fully integrated model of supply and demand. This bottom-up analysis of the PV supply chain has produced critical insights about the near-term prospects and long-term potential for every region, market segment, company, and technology in the PV industry.

Key Insights:

• Access to projects and financing has replaced access to polysilicon and modules as the market's key gating factor. With this dynamic unfolding, we forecast module average selling prices to fall below $2.50 per Watt in 2009 and $2.00 per Watt in 2010 as demand-side financing pressures force manufacturers to cut prices.
• The industry's market size will contract 15% to $12 billion in 2009, and will remain relatively flat through 2012. Low cost and high performance module manufacturers able to retain margins and sell products generating high internal rates of return for project developers will gain an increasingly large share of this shrinking pool of capital.
• Even with rapidly falling prices, market problems in Germany and Spain and the global recession's impact on lending, project finance, and government budgets will grow demand by only 13% to 5 GW in 2009. This will be the industry's weakest growth year since 1994.
• The module oversupply is widely misunderstood. In 2009, we forecast a 65% overcapacity and a 55% surplus in producible supply. The actual number of modules shipped and installed will be far less, leading to sub-35% mid-year capacity utilization for many American, European, and Asian multicrystalline manufacturers.
• The true source of module pricing pressure is project developers seeking the minimum price that can be paid to maximize internal rate of return. Forcing manufacturers to compete on price and performance will lead to wholesale margin compression, precipitating a shakeout of high-cost, undifferentiated suppliers.
• An industry dominated by Asian multicrystalline and CIGS -- with solid market share for CdTe and Super monocrystalline -- will emerge in the near-term. Significantly, by 2012 we forecast thin film modules will comprise 50% of incremental demand.
• The emergence of grid parity in some price-sensitive markets as early as 2009 will place a new emphasis on levelized cost of energy and delivered $/kWh as the guiding metric of a manufacturer's competitiveness.

Featured In This Report:

• Quantitative analysis of project economics in Germany, Spain, the United States and Japan for c-Si and thin film-based residential, commercial, and utility scale systems.
• First-ever country-level and global PV demand curves from 2009 through 2012 and first-ever reconciliation of independently constructed global PV supply and demand curves, leading to an accurate forecast of market-clearing module average selling prices and equilibrium demand volumes.
• Quantitative analysis of the shakeout's impact on manufacturer profit margins, c-Si and thin film market share, grid parity, project economics, and module pricing.
• In-depth profiles of PV support policies and programs, electricity sector composition, and PV market development in the United States, Germany, Spain, Italy, France, Greece, Portugal, The Netherlands, Czech Republic, Japan, South Korea, Australia, India, China, and the United Arab Emirates.

Author Bio

Daniel Englander's research focuses on finance and investment in renewable energy technologies with a specific emphasis on the utility and power generation sector. Before joining Greentech Media, Daniel worked for the Supreme Court & Appellate Practice Group at Mayer Brown LLP in Washington, D.C. Daniel received his Bachelor's in International and Comparative Policy Studies from Reed College in 2005. He is currently writing his master's thesis in Environmental Management at Harvard University on the hedging value of renewable energy in the power sector. Daniel is also the Assistant Editor of PVNews.

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