Analysis of the PV market in 2012 have continued to roll in. They vary considerably in their estimates of PV capacity installed, several estimating capacity installed exceeded 30GWp.  A recent report from NPD Solarbuzz was less optimistic.

According to the market research firm, PV demand in 2012 reached 29GW, up only 5% from 27.7 GW in 2011. Notably, the growth figure is the lowest and the first time in a decade that year-over-year market growth was below 10%..“During most of 2012, and also at the start of 2013, many in the PV industry were hoping that final PV demand figures for 2012 would exceed the 30GW level,” explained Michael Barker, Senior Analyst at NPD Solarbuzz..“Estimates during 2012 often exceeded 35GW as PV companies looked for positive signs that the supply/demand imbalance was being corrected and profit levels would be restored quickly. Ultimately, PV demand during 2012 fell well short of the 30GW mark.”

As usual, the industry and analyst projections going forward are for things to improve dramatically.  A more sober analysis would say that the market will continue its painful restructuring with slow to modest growth.  The analyses tend to focus on GW installed but a look at the dollar numbers is more revealing of the state of the industry and its likely future.

This graph shows a simple analysis of relevant dollar numbers rather than GW installed numbers for 2010, 2011,2012 and an estimate for 2013 based on a forecast of an increase of 20% in GW installed, which may be optimistic.

 The Total line shows the total world dollars spent on PV systems, which includes PV panels and Bulk of Systems (BOS).  This line has been relatively constant at between $50B and $60B.  Over this timeframe the combined reduction in panel and BOS costs has offset the decline in subsidy.

The panel line shows that revenue to PV panel makers has been declining significantly. The increase in GW has not offset the fall in PV panel prices, and the revenue decline will continue in 2013.

As is known the PV panel business has a capacity to produce about 60GW/year, but demand is about 30GW/year. This has led to severe industry restructuring and  low panel prices that in many cases are below the cost of production.  There is no new investment in capacity, so the current panel prices are unlikely to fall significantly if most manufacturers are already losing money. 

The subsidy line shows an estimate of the amount of total world subsidy.  This, as is well known has been declining, but the decline has been dramatic.  Germany alone pumped in over $100B over 2009-2011, but is now well below $10B/year.  China has stepped in energetically, and there is support in Japan and the US, but it still only adds up to half of what Europe used to support, and the overall subsidy amount continues to decline.

The PV business is still driven by subsidies. They have declined from about 60% to about 40% of the business, but are still necessary, as current PV systems do not make electricity at competitive costs despite the dramatic PV panel price decline.  The overall net effect of panel price declines and subsidy declines has been a market with fairly constant overall revenue.

If worldwide subsidies increased that would drive growth which would use up the excess panel manufacturing capacity which would lead to profit and investment in new more efficient capacity and panel price declines that would reduce the need for subsidy.   If subsidies continue to decrease, there is little room for PV-panel prices to decline further, and so the overall business will shrink.  None of this is coordinated at a world level, so it could go either way.  The prospects for increased subsidies overall worldwide seems low, given the current economic focus on austerity in Europe and the US.

This has been a long article to get to the simple conclusion that the PV business is unlikely to grow dramatically in the near future and current PV panel prices are likely to prevail for at least several years.  Also, optimistic projections for PV panel price reductions based on projecting the recent dramatic drop forward are not realistic, and estimates based on the historical long term trend are likely to prove more accurate.

PV at around 30GW/year installation  is a tiny  fraction of world electricity generation (5000TW), never mind world total energy.  The only way to get a dramatic growth in PV is to either get PV to produce electricity at a cost that generates sufficient profit to attract private investment, or massively increase world subsidies.  StratoSolar offers the profitable investment path.  Our current design if deployed today with current PV cells would generate electricity for $0.06/kWh with very conservative platform cost estimating.  This is profitable without subsidy in almost all markets.  

I realized that the last two posts centering on the Bill Gates TED2010 talk and the “Beyond boom and bust” paper from The Brookings Institution et al. have the same major theme.  They both agree that the current energy subsidy policy has failed and needs to change to a focus on R&D of system level solutions rather than on deployment of technologies that are inadequate.  

The current science community and green advocates have not yet gotten to this point of understanding and are still pushing wind and solar as viable solutions.  They believe we just have to re engineer the grid, invent cost effective storage and be willing to pay a lot more for energy.  This is political suicide as the costs and limits become apparent. 

 Bill Gates vision is more complete in that it recognizes the need to attempt many unorthodox “miracle” solutions in order to find one that succeeds.  Intuitively his investment and promotion of Terrapower also show that investment needs to target companies that are attempting a complete solution, not science, basic technologies or government R&D. 

This New York Times article outlines the decline and credits the Brookings Institution, The World resources foundation, and The Breakthrough Institute. They jointly authored the following report “Beyond Boom and Bust” that details the decline and policy changes that they argue would make for a more sustainable subsidy regime.  Unfortunately the current political situation does not bode well for reform, particularly if it costs money. 

The current subsidy regime is boom and bust and not focused on technology improvement.  It is classic government subsidies that encourage the status quo and create a class of companies that live on the subsidies without incentive to improve and who lobby to maintain the subsidies regardless of the benefit or lack thereof.  It also funnels money to favored constituencies like government contractors and peer reviewed scientists.  

The main focus should be on technologies that have a realistic chance of economic viability with an honest accounting of costs associated with intermittency and geographic isolation.  Too much of alternative energy is over optimism and pass the buck accounting.