IHS at odds with collective view on major solar installation growth ahead

“Despite several recent viewpoints claiming that the PV installations could reach up to 55GW in 2014 and will be coupled with supply constraints and major price increases, the latest quarterly update on solar demand from IHS disagrees significantly with these views and expects installations to be in the range of 40-42GW next year,” noted Sharma.

Sharma may also be at odds with other PV analysts within IHS, as Henning Wicht was reported by PV Magazine to have forecasted installations could reach around 50GW next-year. Wicht was speaking at the 14th Solarpraxis Forum being held in Berlin, according to the report.

(Update: According to Dr. Henning Wicht, senior director principal analyst photovoltaics at IHS, PV Magazine incorrectly reported that he had said the global PV market could reach 50GW in 2014. The online website as subsequently changed the figure to as high as 45GW. Dr. Wicht told PV Tech that the IHS forecast was “40GW to 45GW for 2014.”)

However, IHS’ senior director of Solar Research believes there are major risks lurking in the background in key booming markets such as China and Japan that are expected to result in more muted growth than has been projected by others.

In respect to China, Sharma said that IHS is forecasting installations to reach approximately 9.5GW, dampened by the heavy reliance on government targets of 8GW of distributed PV being installed which IHS does not believe is feasible.

IHS highlights that the lack of installers with roof-top expertise, lack of appropriate and available roof-tops and uncertainties in grid-connections caused by local grid companies place government (NDRC) targets at risk. While the higher installation costs compared to utility-scale projects would also cause limitations to overall installation levels.

However, this view is also at odds with Chinese tier 1 supplier’s such as Yingli Green Energy. Management were extremely up-beat in the latest quarterly conference call about its prospects in the growing Chinese market with expectations that between 400MW to 500MW of its own project pipeline to be developed in 2014.

Module shipments in China in 2014 where said to account for 33% to 35% of its projected 4GW plus of global shipments, equating to as much as 1.4GW alone.

“I think at this moment we see a very strong demand in Q4 in China. We estimated and expect roughly 47% of our Q4 revenue from China,” said Wang Yiyu, CFO of Yingli Green, during its recent conference call. “We believe next year the China market will be keeping, getting robust and has a very strong demand. We are expecting next year, the China markets, the sales to China may roughly represent about 33% to 35% of our total output of 2014.”

At Yingli Green’s analyst day event, held during SPI in October, management highlighted that global installations in 2014 could reach over 50GW and that cumulative installations in China could reach 35GW at the end of 2015, up from 2.5GW in 2011.

Downplaying growth expectations in Japan was another factor in IHS’ downbeat forecast for 2014.

The market research firm believes Japan is heading in a boom to bust direction due to a number of key factors. IHS cites news that Japan’s METI is officially reviewing ground-mount project delays in the country, and extrapolating that this will result in many of the sanctioned projects never being built, dampening overall installations growth levels for 2014.

Other negative factors such as the expectation that the residential FIT program would end and due to lack of perceived government support would generate market uncertainty, a well known dampener to installations. Coupled to the Japanese government’s recent U-turn on greenhouse gas emissions due to the closure of all its nuclear power plants and increased imports of fossil fuels, IHS believes that this is further indication of weakening in support in government for renewable energy in the country.

Again, this is at odds with other forecast for the Japanese market in 2014 and views from leading suppliers in the industry.

In respect to emerging markets, IHS is no less concerned about market growth. IHS estimates that emerging PV markets have added 5.4GW of capacity and will grow to 7.7GW in 2014.

Key challenges were said to be that many are unsubsidised and therefore financing and establishing revenue streams such as direct PPA’s tend to take several years, resulting in many emerging markets taking much longer to build momentum than is generally believed.

However, IHS used both Chile and South Africa as examples of this, noting that despite huge project pipelines, in 2013 just 100MW and 200MW had been installed respectively.

Yet, as noted by SunEdison, it expects to complete two projects in Chile in the first quarter of 2014 that combined account for 150MW alone. The majority of the phase 1 South African REIPPP program projects and some in phase 2 are expected to be completed in 2014, accounting for over 1GW on new installations, suggesting that after a few years of planning and administrative procedures, rapid installation levels can be achieved.

According to IHS, the tempered growth expected in 2014 would not lead to a shortage of PV components nor major price increases, counter to other recent forecasts from the likes of EnergyTrend.

Indeed, IHS expects a moderate decline in component prices in 2014. Yet, many suppliers have already noted that overall pricing is expected to remain stable with 2013 pricing levels.

“Globally, the pricing is very stabilised through the Q3, Q4 which increased roughly a few percentage [points] compared to early this year,” noted Yingli Green's CFO in the latest conference call. “In China the module price even increased more than 10% at Q4 compared to the level in the last Q4 and early this year.”

“And we expect that this kind of a trend will continue and a stabilise a pricing trend we’ll be continuing in 2014. And we don’t expect a strong or un-rational competition in next year including China market and other markets, when the market grows,” added Yiyu.

Others such as Trina Solar and JinkoSolar have echoed Yingli’s view on ASPs in 2014, strengthened by the fact that many tier 1 suppliers have almost full allocation of production through the first-half of the year.

IHS concluded that it remained positive about the solar industry with double-digit growth forecast for 2014, when installations would top 40GW, but questioned the possibility of demand reaching 55GW.

However, a separate forecast by IHS this month projected CapEx spending would increase 42% over 2013 spending levels due to higher utilisation rates and increasing sales.

With tier 1 suppliers controlling around 45GW of module capacity, according to NPD Solarbuzz, the need for such an increase in spending for capacity expansions would hardly be needed and overcapacity remains an issue for the industry, based on IHS’ expected 15% installation growth expectation for next year. 

As noted by industry observers over many years, market forecasts have notoriously underestimated actual annual installation levels, though typically variances in different forecasts tend to merge closer as fourth quarter data becomes available.

With IHS reiterating its 2013 forecast published in March, 2013 while others have raised installation figures, divergence could lead to a rush by others to reiterated and reinforce both 2013 and 2014 forecasts.