Dissecting ‘meaningful’ global PV manufacturing expansion plans

Meaningful capacity additions

In tracking capacity expansion announcements one of the perennial topics for discussion is the conversion rate to actual production. 

Several levels of assessment are made. Firstly, we use the term ‘meaningful capacity additions’ when assessing announcements from the likes of tier-1 manufacturers, which typically have a higher chance of conversion. 

However, this is not a guarantee and several major announcements made by such manufacturers in 2014 have been cancelled or remain pending. 

Secondly, assessments are made on key metrics surrounding the details provided in initial announcements. Lack of information on expansion schedules and location as well as ability to finance such expansions are all taken into account. 

An assessment of 2014 capacity expansion announcements categorised as ‘meaningful’ indicates around 85% of the plans have carried through to being under construction, tool installing or ramping. 

The high-rate of conversion of meaningful capacity additions from announcements in 2014 was simply due to a key number of tier-1 manufacturers executing plans. 

Those expansions executed by tier-1 manufacturers then pass from being meaningful additions to ‘effective’ capacity additions. Effective capacity relates to capacity that not only exists but in the real world the products produced would be sold on the market. 

At the beginning of 2014, effective global PV module capacity stood at around 45GW, compared to nameplate capacity above 60GW. 

A disconnect also exists between capacity announcements, meaningful additions and effective capacity from the massive expansions made through 2011. 

With the new wave of expansions that started again in 2014, are following the same disconnects.

Tracking manufacturing equipment orders, backlogs and delivery schedules from leading suppliers is also used to assess meaningful capacity additions. 

Again, it is clear that order intake at equipment suppliers tracks meaningful capacity additions. However, in 2014 that was not as straight forward as could have been expected in the period through 2011. 

There was a sizeable disconnect that existed between meaningful capacity additions and order intake. One of the key reasons was the emphasis on PV module assembly expansions and the regional dominance of China in those announcements. 

Lower capital expenditure requirements for back-end assembly equipment, coupled to a shift in using domestic equipment suppliers for expansions compared to the last expansion phase when western suppliers were dominant, were behind the disconnect. 

Lead times for solar cell equipment, from order to tool install to qualification for example have been taking between 6 to 9 months since 2014 and relatively unchanged since the prior expansion phase. 

This had led again to a typical lapse in revenue generated by suppliers and when customers announce meaningful capacity additions as the next phase in capacity expansions gets underway.

A detailed appraisal of meaningful capacity additions announced over the first seven months of 2015, indicates that a total of 9.3GW could come on stream in the next four to 18 months, this from a grand total of capacity announcements in this period of around 19.4GW. 

With around 10GW failing the meaningful capacity test, this does not mean that many of the plans would not meet the test in the future. 

However, eliminating the possibility of Hanergy’s plans ever happening is treated as prudent in the current circumstances the company finds itself in, which accounts for 3.6GW since 2014. 

Yet it should be noted that Hanergy’s plans to build 600MW of CIGS capacity using technology from its acquisitions of Solibro and MiaSole, recently met our meaningful capacity addition test as some equipment suppliers, one in particular publically confirmed advanced payment.

However, several potential gigawatts of capacity expansions announced in the first-half of 2015 include JV’s with tier-1 manufacturers, notably with plans to establish production in India. Many of these could indeed progress to meet meaningful capacity criteria metrics in the next 12 to 18 months, with potential for some to happen sooner than that. 

However, July still stands out as the weakest month in 2015 for meeting meaningful capacity criteria metrics, despite its top line 3.58GW figure. 

Taking that aspect into account the month of July in 2014 had less than 800MW of announcements, with around 200MW since, converted to actual production. 

In August 2014, all of 50MW was announced, the lowest amount of capacity expansion announcements in 2014. A single new module assembly plant in Latin America provided that figure, which has yet to see the light of day. 

Despite the disconnects highlighted, a new meaningful capacity expansion phase is clearly underway and gaining momentum, especially in the first half of 2015 as capacity announcements increase in ‘intensity,’ meaning capacity announcements are for larger nameplate figures than were announced in 2014. 

Update

As if on cue, Meyer Burger has announced it has secured a US$29.5 million order from Swiss/Hungarian technology firm Ecosolifer to supply a 90-100MW heterojunction (HJ) solar cell line at a facility in Csorna, Hungary. 

The order gives significant weight to reports that Ecosolifer was planning a HJ module assembly plant in Brazil, using HJ cells shipped from Hungary. 

As Meyer Burger would have secured a sizable deposit for the equipment order and the fact the delivery schedule was also detailed means the July, 2015 capacity expansion announcements total is around 3.68GW rather than the earlier cited figure. 

This would also mean that the plans by Ecosolifer would meet ‘meaningful’ status, bringing July’s meaningful capacity addition figure to around 390MW out of the 3.68GW announced in the month.