Subsidies and PV market predictions.

It's a while since I discussed the topic of subsidies. It's 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. Japan's commitment to expanding PV seems pretty solid at least for a few years. China's demand is hard to predict. If it mostly depends on propping up the local PV business they don't 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. That's 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 today’s 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