One of the key issues that is still puzzling the PV industry is: what is the real – or effective – capacity today?
Not the nameplate capacity, not the ineffective capacity. Take out the retired and permanently shuttered PV capacity and what is actually left?
There is a growing acceptance now that the term ‘effective capacity’ should be used. It is perhaps a long time coming, but surely the PV industry needs to move away from academic MW additions, and look at what is really out there in fabs and what the real capability of this capacity is.
About three years ago, one of the leading PV equipment suppliers suggested offline that the PV industry had to adopt a better terminology for capacity, and effective capacity was the answer to this.
Having almost completed a global tour of PV manufacturers and conferences, I would probably conclude that this request has been fulfilled.
What is effective capacity?
Let’s start with nameplate capacity and then work out ramped and annual capacity levels. Then we will incorporate scaling factors based on historical activity: what are the realistic yields, uptimes, shift operations that form the maximum operations of each PV manufacturer?
And don’t forget to remove capacity that is not market ready, technology ready, or downstream supply chain ready.
The output from this analysis is effective capacity. It means starting from meaningless 70-80GW figures, and ending up with useful supply levels.
Another way of looking at effective capacity is: if all the operational fabs were run to the optimum performance of the respective companies, what could the industry provide in output that could meet current end-market requirements.
About 12 months ago, the Taiwan cell makers started using effective capacity as a metric that could be referenced when looking at global supply/demand balance. But just last week, when hearing some of the leading Chinese c-Si makers at the NPD Solarbuzz China conference, they were talking about effective capacity in the industry.
The attached figure (see left) is the latest effective capacity graphic from the recent NPD Solarbuzz PV Equipment Quarterly report. It is in good alignment with the tier 1 Chinese makers’ figures mentioned at our conference there last week – at least to within 10%.
In fact, several tier 1 Chinese C-Level executives that were speaking at the event mentioned that they see effective capacity decreasing slightly over the next 12-18 months as more legacy capacity gets permanently retired (presumably not upgraded as has been the norm by many until now).
Tuesday 23 July is the next Solarbuzz conference in Taiwan and all the key Taiwan manufacturers will be present at the meeting in Taipei. It will be very interesting to see how their data compares with this!
When forecasted 12 month end-market demand matches trailing 12 month effective capacity levels, it essentially creates the pull on new CapEx (capital expenditure), and this will be one of the key indicators needed before anyone can truly say that the industry has gone through its downturn. It is certainly a much better metric than citing end-market revenues.
This balance of effective capacity and 12-month demand will also signal the point where technology adoption can be answered properly. It is the point where market leaders can no longer fall back upon existing capacity at lower tier manufacturers as a low-cost/low-risk route to increasing module shipment levels.
Based on our conference tour analysis that now includes updates from Chinese manufacturers the effective capacity stands at approximately 45GW.
The balance point therefore currently appears to be 12 months away, so let’s see tomorrow what the Taiwan makers say about this.