Archive for the ‘Solar Supply & Demand’ Category
PV Advocate synopsis:
- Cost of installing a PV system continues its rapid YOY decline, 5% – 15% over the last year
- Utility scale solar has declined quicker than commercial rooftop and residential sectors
- For the first time ever, price decline came from reduction non-module hardware and lower soft costs as module prices held consistent throughout year
- Capacity factors have increased as a result of more tracker use, better system design and advances in module technology.
- Full access to the original LBNL 2016 report
The fate of the world depends on driving down the cost of solar power.
Yes, that’s a melodramatic way of putting it. But it’s not wrong. Any scenario that has humanity avoiding the worst ravages of climate change involves explosive global growth in solar power.
So how’s that going?
Happily, Lawrence Berkeley National Laboratory (LBNL) releases a set of reports each year devoted to tracking solar prices; they’ve just released the latest editions. Long story short: Prices are steadily falling, more or less on schedule
There are two reports, one for each type of solar power. One is on “utility-scale solar,” which means solar systems larger than 5 MW. The other report is on solar photovoltaic (PV) systems under 5 MW.
Those are two very different markets, but I’m going to squish them together in this post, with the help of a bazillion charts.
Solar is growing, growing, growing
Here’s a good scene-setter. It shows historic and projected solar power capacity additions, by technology. (We’ll get into the difference between CSP and varieties of PV below — ignore for now.)
A few things to notice about this chart. First, there’s about 29 GW of solar installed in the US now; LBNL expects that to clear 100 GW sometime around 2020. That’s crazy-fast growth (from almost nothing in 2007!), but it will still only put solar at around 3 percent of the US electricity mix in 2020.
Third, the giant spike in utility-scale PV happening this year is an artifact that reveals how much solar still depends on policy. Everyone thought the 30 percent federal investment tax credit (ITC) for solar was going to expire this year. Contracts signed in 2016 would have been the last to qualify. So there was a huge rush to get projects on the books.
As it happens, the ITC was unexpectedly extended late last year (it will phase out over the next five years), or else the spike would have been even bigger. As it is,more than twice as much utility-scale PV capacity will be added in 2016 than in any previous year.
Prices for utility-scale solar are falling
Prices are falling for both big and small solar, though at different rates and for different reasons. Read the rest of this entry »Share this:
Great piece from Tom Friedman this past Sunday on why a natural gas embargo on Ukraine and by extension Europe by Russia would be good thing for renewable energy and energy efficiency growth. Some excerpts:
“Because such an oil & gas shock, though disruptive in the short run, could have the same long-term impact as the 1973 Arab oil embargo — only more so. That 1973 embargo led to the first auto mileage standards in America and propelled the solar, wind and energy efficiency industries. A Putin embargo today would be even more valuable because it would happen at a time when the solar, wind, natural gas and energy efficiency industries are all poised to take off and scale.”
” . . . . Solar cells, for example, have dropped in cost by more than 80 percent in the last five years. This trend is underway, if a bit less dramatically, for wind, batteries, solid state lighting, new window technologies, vehicle drive trains, grid management, and more. What this means is that clean energy is moving from boutique to mainstream, and that opens up a wealth of opportunities.”
A gas embargo by Putin would also reinforce the message of the United Nations’ latest climate report by the Intergovernmental Panel on Climate Change, which warned with greater confidence than ever that human-created carbon emissions are steadily melting more ice, creating more dangerous sea level rise, stressing ecosystems around the globe and creating more ocean acidification, from oceans absorbing more C02 . . .”
“We are closer to both irreversible dangers on climate and scale solutions on clean tech than people realize. Just a little leadership now by America — or a little scare by Putin — would make a big difference.”Share this:
Continued weekly monitoring of various entities throughout the supply chain shows the average selling price (ASP) on the spot market continues to decline in all categories except the inverter.
Of particular note is the sharp drop in poly silicon ASP from the previous week. Its widely believed that the efficient silicon refiners cost basis is approximately $25 – $28/kg and we may well see further substantial reductions if the demand situation remains week.
While the data above is sampled broadly from Tier1, 2, and 3 providers, the weaker entities with little or no bankability status will be feeling the pressure, soon, to idle further production and in some instances find an acquirer. Over the last 5 years, there has been speculation about consolidation of the many industry manufacturers when demand has temporarily weakened. This current market demand bust may be the one that results in bankruptcies and acquisitions of the lower tier players. The large Tier 1 players with weak cost structures are looking for strategic partners or majority acquirers such as the deal we saw between Sunpower and Total last month. This may also be the opportunity for the mega sized electronic manufacturing services companies like Flextronics, Foxconn and others substantially grow their PV industry presence with acquisitions.Share this:
The weekly update shows average sales price on the spot market still declining in all categories with the exception of inverters.
With inventory likely backing up at manufacturers, distributors, integrators and installers, many PV manufacturing companies have announced idling of production capacity. An example is REC’s recent announcement here.
It’s likely that the price bottom is near. With the corresponding drop at the installed cost level, many projects on hold that had borderline financing attributes in Germany, Italy and the U.S. will now go ahead as retail grid parity will become the norm in high utility cost regions. In addition, the race is on in Germany, again, before the next ratchet down in subsidy program. Q4 and Q1 2012 may see a return to manufacturing capacity utilization growth and normal 3 month inventory work through.Share this:
Following up on my 4/22 and 4/29 solar energy supply chain posts, the average selling price (ASP) of the main PV system components is still in decline across all categories as demand weakens further and manufacturing capacity continues to build.
Many industry observers believe that pricing will stabilize in 2H 2011 as inventory is worked through now that the Italian subsidy program has finally been announced giving markets some certainty. In addition, other markets (U.S., China & India) should continue to ramp up. Whether these markets can ramp quickly is the main question. With global 2011 demand figures ranging from 16GW to 22GW (Tier 1 Asian manufactures can supply 15GW) and manufacturing capacity heading toward 30GW, the picture is not good for module manufactures with high operating leverage and weak balance sheets. Overall, this is difficult market to forecast demand and supply chain pricing will continue to slide with this lack of demand clarity.Share this:
Average selling prices (ASP) were down for just about every component in the PV industry supply chain at the end of this week. Continuing a 10 week long slide, an informal survey of entities throughout the supply chain suggest that the lower global demand signal, as a result of government subsidy reductions in EU countries, continues to have an impact. A sampling of spot market ASP’s from the first week of this month to today shows :
- 7% reduction in polysilicon (polysi) to $76.98/kg
- 6% reduction in crystalline solar cells to $1.11/W
- 6.5% reduction in crystalline modules to $1.51/W
- 4% reduction in thin-film modules to $1.23/W
- 12% drop in inverters to $0.25/W
Of particular significance is that many of the mid-tier wafer and cell suppliers are running very narrow margins at these prices. Pressure to sideline production capacity should mount if the downward trend continues.
Another interesting crystalline supply chain development is the downward margin pressure on polysi refiners who have the ability to set price as result of their top of the supply chain position. The majority of solar polysi supply comes from 10 large providers who dominate the market. As polysi companies are enjoying margins in excess of 40%, downstream wafer and cell companies with razor thin margins are pushing for lower polysi prices. This should prove to be an interesting situation should demand continue to weaken.
Solar Thin-film has been declining, but stabilized in the last few weeks. Declining crystalline module price puts pressure on thin-film module suppliers as the technology’s lower efficiency, additional array space requirements and higher balance of systems cost requires at least a 25% differential in the module price between the two categories for thin-film to remain attractive to project developers.
The big question is when do these prices stabilize given the myriad of offsetting variables in the market, which are changing every few weeks. Examples include rumors of new or enlargement of solar programs in Japan, China, India and the Middle East countries continue. Replacing nuclear with renewable energy in many countries as a result of the Japan nuclear crisis. Continuing PV system wide price reductions along with rapid increases in fossil fuel provided energy which is leading to grid parity quicker in many locales than was anticipated a mere 2 years ago. Major PV manufacturers are ramping productions capacities to 2GW and greater. Transmission capacity is a major PV industry bottleneck in many developed and developing countries. An on and on.
Global electricity demand (the peak hourly rate at which energy is delivered to loads and scheduling points by generation, transmission, and distribution facilities) continues to outstrip capacity by 20X according to the EIA. Perhaps this is the best lens to view the future of the PV industry.Share this:
The U.S. PV industry continues to show strength throughout the deep recession with 2010 coming in with exceptionally strong numbers. A recent report from SEIA/GTM tilted, “Solar Market Insight: Year in Review 2010” shows that the U.S. PV solar energy market doubled in volume, growing 67% from $3.6 billion in 2009 to $6.0 billion in 2010.
As strong as the U.S. PV market growth was in 2010, the global markets grew at 130% with over 17 GW installed, mostly in EU countries. The report points out that U.S. market share on a global basis fell slightly to 5%, but since 2005 this market has consistently been 5% to 6.5% of the global total.
Compared to many countries where subsidies and location variables drive a certain segment more than others, activity in PV solar energy market segments in the U.S. is spread out evenly which leads to market growth stability. Utility, Residential and Commercial (non-residential) segments account for approximately 1/3 each broadly speaking. As we have seen in Germany, Italy and France, countries with large solar energy subsidy programs tend to have emphasis on particular market segments and have provisions which can overheat installation activity leading to boom and bust cycles and sometimes a complete market collapse.
Combined with steady federal and state subsidies, strong incoming solar radiation, large number of roofs and available land, rising cost of fossil fuel generation and strong electricity demand, most industry observers believe the U.S. solar energy market will double again in 2011.
When viewing the rising cost of coal and natural gas prices as a result of increasing economic activity combined with growing cooperation on Capitol Hill regarding energy policy and rapidly decreasing PV system cost, this author believes that 2011 and 2012 will see a U.S. PV market that may well triple in volume. More on this prediction in a future post.Share this:
This is clearly the topic of the day for many of my readers who follow publicly traded solar energy stocks.
The basic facts:
- The recent government subsidy scheme reduction announcement in Germany and a likely reduction for the overheated Italian market by mid-summer, combined with reductions and subsidy caps in France and other smaller EU programs, have created a rush to initiate and complete projects in 2011—before the new solar subsidy schemes kick in later this year. Consequently, the PV supply chain is currently in hyper-drive, and there has been a temporary increase in c-Si wafer and cell selling price.
- Recent manufacturing capacity addition announcements from the top 20 c-Si and thin-film solar energy producers will add another 6GW – 10GW of production capacity in 2011.
- With global demand seemingly dropping by as much as 50% due to the EU country’s government subsidy reductions, and rapid increases in manufacturing capacity, oversupply is a looming problem in Q4 2011 and into 2012.
- Demand in 2011 may reach approximately 22 GW, and manufacturing capacity is climbing to approximately 32GW (all module providers). For any industry, this is not a good supply/demand picture.
As I wrote in a previous piece, this situation has many unknowns, is highly fluid and can change rapidly. The three main unknowns are 1) when and how fast does that new PV solar energy manufacturing capacity come on line, 2) how quickly will the overcapacity drive down prices to the point that solar grid parity is achieved in many markets (creating a true market demand signal) and 3) whether countries such as the US, China and India can increase demand sufficiently to reduce the severity of the oversupply.
There is also much talk about developing nations in Africa and Asia increasing demand. But my recent experience consulting to a few companies targeting these regions doesn’t instill confidence. Aside from the ever-present finance barrier (especially in under-performing economies), the utility grid in most of these locations is incredibly weak or non-existent. It’s well understood that transmission grids are the PV industry growth limitation in the US but developing nations have an even direr situation with energy infrastructure.
While it is likely that 2012 will see significant industry realignment in price, demand and competitors at the module manufacturing level, this is an industry that has defied doom and gloom predictions many times over the last 10 years. A change in any one of the many PV market variables can have significant positive impact on the supply/demand picture.
For instance, one nation with a significant new subsidy program can change the global supply situation in one quarter or a spike in fossil fuel energy cost can lead to a massive uptake of solar energy in a given locale.
Stay tuned, it should be an interesting 18 months.Share this:
The U.S. PV industry was breathing again after a likely last minute extension of the highly successful Solar ITC as grant legislation (contained in the original ARRA bill) via inclusion in the tax extenders bill currently being debated on Capitol Hill. Known as the Solar Treasury Grant Program (STGP), it was due to expire at the end of December 2010. While the tax extenders bill still needs to be passed by Congress, the outcome looks positive.
Some history: the solar investment tax credit allowed entities with tax burdens to finance solar installations and receive a 30% tax deduction. This program was successful with banks and other entities with tax appetites until the recession and banking crisis set in during late 2008. With no tax burdens, all financing of solar projects came to a grinding halt. The ARRA bill’s STGP allowed solar project developers and their finance partners to receive the 30% as a cash grant – an enormous benefit – especially for loosening up hard to find construction financing from local bank providers.
The benefits to solar industry and the nation are substantial as noted by Rhone Resch, Executive Director of SEIA:
“The 1603 tax credit has created flexibility for funding renewable energy projects and is fundamental for keeping the solar industry growing in America. To date, the program has facilitated the construction of more than 1,100 solar projects in 42 states. At a minimal cost to the tax payer, the 1603 program has supported $18 billion in investment in new renewable energy projects throughout the country and has created tens of thousands of jobs. Plain and simple, this program provides the greatest return on taxpayer dollars. The program has allowed the solar industry to grow by over 100 percent in 2010, create enough new solar capacity to power 200,000 homes and double domestic solar employment to more than 93,000 Americans. This program has created new opportunity for electricians, plumbers, and construction workers during the worst economic climate since the great depression.”
Of course, anytime we have talk of government subsidies for renewable energy, the free-market fundamentalists weigh in with their standard “clean energy should be able to compete on its economic merits without subsidies”. When governments end exorbitant fossil fuel subsidies, I am all for ending clean energy subsidies.Share this:
Or maybe not. In the many years I have been in the PV industry, I have seen numerous supply and demand forecasts for the same year with disaster and euphoria always just around the corner, depending on the analyst. Take 2009 for example.
After the Lehman Brothers debacle and resulting recession, the global PV industry was forecast to have flat or negative growth, experience large M&A activity and many bankruptcies. Actual was about 30% growth, minor M&A and very few bankruptcies. 2010 has been a banner year with over 80% growth which many pundits were forecasting at 10% – 40% growth.
The little industry with large adversaries and many naysayers keeps chugging along.
But forecasting the PV industry is not for the faint of heart. There is a number of highly unstable, rapidly changing variables including government subsidies and mandates, government trade barriers, cost of fossil fuel energy, cost of solar modules and BOS, land costs, permitting costs, financing costs, supply chain tracking issues (actual capacity vs announced, tolling, product reselling etc.) raw material bottlenecks and many others.
As it is an immature industry, clarity on any of theses issues is difficult and there are no tracking mechanisms as with old established industries. As an example, I recently had a global Fortune 50 client company with a new solar PV division ask me where to find the trading exchange for modules so they could have understand spot pricing and long term contract trends both historical and futures. My response that there isn’t one was met with exasperation and disbelief.
2011 may be difficult. The graph above is ominous especially when you consider that nearly 6.4GW’s of module production is being added this year (2010) and demand may be flattening do to the well-publicized subsidies being reduced in many EU countries. But the doomsday forecasts may be way off.
With the steep declines in the installed cost of large PV systems and the increasing cost of fossil fuel energy in locales
whereeconomies are recovering, true market demand signals are being felt in regions with already high cost energy. Consider these 2 facts: the installed cost of solar in favorable locations is delivering energy at $0.15kWh, and the cost of coal is up sharply in therecent weeks. In Germany, the cost of coal and natural and gas is soaring. Consequently, the PV industry will need less generous subsidies to compete with highly subsidized fossil fuel energy, but the overall result may be more installation activity in regions that many analysts have written off.
Forecasting the tipping point (see graphic above) where increasing fossil fuel energy costs cross a downward PV installed cost line is highly fluid and difficult at best. But writing off 2011 as a disaster may be a bit premature.Share this: