German market booming: Inverter and module supplies running out at Phoenix Solar

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Business is back and booming at major PV systems integrator Phoenix Solar. The German residential market is overheating as the race to complete installations by year-end intensifies. According to Phoenix Solar, there will not be enough inverters and solar modules available through to the end of the year to achieve its original revenue guidance.

The company noted while delivering its third-quarter financial results that the German domestic market had been characterized by customers waiting for further module price declines in the first half the year. With prices stabilizing in the third quarter, Phoenix Solar saw a surge in orders and has even intensified in October as the race to install systems before FiT changes kick in at the beginning of 2010. With the higher profitability of systems due to the price declines, both the domestic and commercial sectors are booming.

Phoenix Solar noted that it was expecting this year to be the most seasonally extreme it has ever encountered in Germany and, although slow to start, the year will end with significant growth in installations over 2008.

The systems integrator now expects the German market to reach 2.5GW of new installations this year, a 60% increase over 2008. Indeed as recently noted by PV-Tech, the highest levels of installations are expected in the fourth quarter.

Phoenix Solar said that it expected 400MW installed in November, the highest figure ever and 300MW in December.

The only dampener in the German market this year has been the utility-scale solar project business, according to the company. The lack or difficultly in obtaining finance has limited the number of projects. Importantly, even projects that obtain finance the processes are taking longer as strict criteria by lending banks have been applied. This has contributed to project delays with many not expected to be completed until 2010.

The impact this had on Phoenix Solar can be seen with its current order backlog, which has grown to €164 million on 30 September 2009. A €105 million is attributed to its Components & Systems segment (Domestic & Commercial), while only €59 million of backlog is attributed to Power Plants segment.

Also of interest was Phoenix Solar’s take on other markets it operates in. The company noted that the financing issues in the Spanish market have played a part in restricting installations to the extent that only 130MW is likely to be installed in the country, despite the 500MW cap. In 2008, 2.6GW was installed when the FiT system was uncapped and more lucrative.

However, the Spanish market could be improving since delays in projects could finally ease as plants approved in the first quarter of the year need to be built by the end of the first quarter of 2010 to be accepted into the current FiT.

The Italian market has also been wise to the rapid module price declines through the first half of the year as installations actually slowed. With better price stability and a tightening of supply, demand has come back which could result in 250MW installed this year.

The French market is also improving but faces long approval processes, hampering installations. Even so, the French market is expected to reach 150MW this year.

Module and inverter shortages

Looking at Phoenix Solar’s suppliers list it quickly becomes apparent why the systems integrator is struggling to get the supplies it needs. 

Having made a conscious decision to boost its reliance on thin-film module technology when large-scale commercial and utility-scale projects dominated the German market in 2008, its c-Si supply base is limited. However its thin-film suppliers are also limited in meeting demand.

Phoenix Solar has major supply agreements with First Solar, which highlighted that it was at full capacity in the previous quarter and had shipped all product produced in the quarter and has no more new capacity coming onstream in the short term. Another thin film supplier is start-up Solyndra, which has a claimed US$2 billion order backlog and limited production capacity until a second plant is built.

The story is similar with other thin-film suppliers such as Signet Solar, Schott Solar and Sharp. All have limited capacity. Sharp also has the challenge of meeting renewed demand from the Japanese domestic market, limiting overseas supply as margins are better in selling into Japan. Sharp will not have its new thin-film plant operational until early next year.

As for c-Si module suppliers, listed suppliers are Sharp, Schott Solar, Suntech and Yingli Green. Major suppliers are predominantly Asian-based and shipment times extended. Phoenix Solar noted that orders placed in September with these suppliers would be used for projects in the fourth quarter and were already allocated.

However, suppliers such as Yingli noted in their most recent quarterly results that it had raised its annual PV module shipment target to an estimated range of 490MW to 500MW, which suggests that with a current nameplate capacity of 600MW, the supply of modules is constrained.

Indeed, Yingli executives said in its third-quarter financial conference call that the factories were  running at 100% utilization in the quarter and due to forward bookings would remain at that level through first-quarter 2010. Currently, Yingli has not yet announced any further capacity expansions plans for 2010.

In the first quarter of next year, Yingli is expecting the yields and operational efficiency gains to boost MW capacity.

Inverter supplier SMA also noted record quarterly results last week and is also capacity constrained as inverter output sold went from 200MW in Q1 to 1.2GW in Q3.

Phoenix Solar assumes that revenues will settle within a corridor of between €430 and €480 million in 2009, up from revenue of €402.5 million in 2008 but down from previous guidance of €520 million.

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