Lux Research: limited solar subsidies will not hinder global growth

In a bid to curb the uncertainty currently plaguing the solar industry, Lux Research has released a report stating that although solar installations will stall this year, businesses have nothing to fear. The report Market Size Update 2012: The Push to a Post-Subsidy Solar Industry states manufacturers will still be able to make rapid strides if they take advantage of emerging markets and will be able to find sustained growth even without government subsidies.

This year Lux does not expect more than 0.4GW to be added, totalling 26.9GW of new installations. Industry revenues are expected to drop from US$110 billion in 2011 to US$92 billion in 2012 due to crashing prices. However, new installations will rebound to 38.3GW in 2017 if the industry can learn to navigate a global market fast losing its subsidies.

This is in contrast to the sharp growth in installations last year, due to a supply continuously attributed to Chinese manufacturers, incentive cuts in Europe and the end of the 1603 Cash Grant in the US.

“The solar industry’s storied history has created a massive misperception of technology maturity and commodity status,” said Matthew Feinstein, Lux Research Analyst and lead author of the report.

“Opportunities remain and extended success is possible for stakeholders, but the market’s shifting geographic profile – combined with a forced withdrawal from subsidy addiction – means strategic, surgical moves are needed,” he added.

Lux Research analysts ran a levelized cost of energy (LCOE) analysis in 156 separate geographies, accounting for 82% of the world’s population, calculating internal rates of return, to determine the viability and competitiveness of solar in each market.

The report concluded the following:

  • Emerging markets will more than quadruple in size. South Asia will account for the majority of growth, rising from 1GW in 2011 to 4.5GW in 2017. However, ASEAN, Africa and South America will take the reins from 2017 to 2022, hurtling toward gigawatt status.
  • Utility-scale application segment will grow. In large emerging markets like China, utility-scale solar will gain as conditions favor fewer, larger-scale projects that allow more control over financing and regulatory factors. This segment will grow from 6.3GW globally in 2011 to 13.8GW in 2017.
  • Oversupply could still be a possibility. Even the boom of 2011 was not sufficient to utilize all of the world’s module capacity, which reached 50GW and pushed prices down to US$1/W. With China’s 12th Five-Year plan calling for major expansions in solar capacity, global markets will still see strong downward price pressure.
  • Securitization boosts smaller installations. Asset-backed securities are spurring growth of the small-scale segment in the US residential and commercial markets. Securitization and “renewable bonds,” which have been tested in the past by SunPower (in Italy), and Wells Fargo (in New Jersey), are likely to see widespread growth in 2012 or 2013. Expect major commercial banks like Citigroup to lead this effort.
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