Itâs a while since I discussed the topic of subsidies
. Itâs a difficult topic to understand, and usually provokes defensive reactions from solar energy supporters.
This recent interview
with Shyam Mehta,
a GTM PV researcher provides good current information and perspective on the PV business.
As can be seen from the chart, there were dramatic changes in the composition of PV demand from 2012 to 2013 but no overall growth in volume or revenue. Basically the PV demand went to markets where there were new or growing subsidies and left markets where subsidies declined. Overall, China probably adjusted its subsidies upward mostly to ensure their PV industry survived the drop in European demand driven by the drop in European subsidies.
This is not a well behaved or predictable market. The predictions are totally dependant on predicting subsidies. The GTM forecast is predicting that Europe will regain an appetite for increased subsidies in 2015 and beyond. Its hard to know what the basis for this is. The predicted growth in the US is based on the subsidies that are in place remaining until they diminish in 2016, when US demand is predicted to drop about 50%.
The biggest unknown is Asia. Japanâs commitment to expanding PV seems pretty solid at least for a few years. Chinaâs demand is hard to predict. If it mostly depends on propping up the local PV business they donât have much need to increase demand substantially going forward. Overall it seems a bit optimistic to be predicting an average 20% PV market growth over each of the next two years.
Long term, subsidies would be required to grow substantially to maintain a 20% growth rate, which could see prices halve by about 2025, and the cost of subsidies leveling off.
A rough estimate of the PV market in 2013 is 30GW, worth about $90B of which $50B is subsidies. If PV prices have stabilized, growth of 20%/y implies growth in subsidies to around $100B in 2017.
For the US the 2013 PV numbers are about 4GW installed, worth about $12B, of which about $7B is subsidies. The projected growth implies about $14B in PV subsidies by 2016. Thatâs about the entire alternative energy subsidies in 2013, so it will be noticed.
What is the appetite for subsidies? The US spent about $150B from 2008 to 2013, or $30B/y. A lot of that was ARRA one time expenditures. 2014 subsidies are projected to total about $12B. Solar is taking more of the pie. The current US congress would not be predicted to increase alternative energy subsidies, and could easily cut them.
This is all rather long winded, but the bottom line is the PV market size is completely defined by subsidies and projecting PV growth means realistically projecting increased subsidies. Given the pain level associated with todayâs subsidy levels, (witness Germanys's pullback) its difficult to see significant increases in world total subsidies to the level necessary to sustain substantial PV growth.
By Edmund Kelly
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%..âDuring 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,â explained Michael Barker, Senior Analyst at NPD Solarbuzz..âEstimates 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.â
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.
By Edmund Kelly