Is overcapacity over-hyped?

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on reddit
Reddit
Share on email
Email

Take any market research firm’s data on end-user demand for solar modules and compare that with manufacturing supply and there is a massive gap to the negative, pushing prices lower from bare wafers to modules. Last week, Q-Cells binned its forecast for revenue for 2009, citing continued lack of demand and falling prices due to the competitive landscape caused by overcapacity.

However, FiT’s, stimulus packages and growing global awareness of the need for PV suggests that in a few years, these current hard times will be a thing of the past.

The problem is, which year over the next few will demand catch up with supply? What should PV manufacturers do to survive until that time in the near future that enables companies to make a profit and build businesses for the future? Worse is the view that overcapacity is here to stay so PV manufacturers need to react now and fast, otherwise there will be no future?

The continued module price declines and extreme competitive environment will continue while the overcapacity scenario continues. The problem is that the market research firms and the industry at large do not have detailed and accurate data available as to how much nominal capacity actually exists and what the current factory utilization rates actually are.

This could result in a warped perspective of real supply overhang compared to educated probable overhang. Importantly, it often takes ‘nominal’ capacity as given (overinflated) and actual capacity (underestimated) but also leaves gaps caused by the fast paced dynamics of an industry growing and shrinking too fast to comprehensively characterise in ‘real-time.’ Lags in real-time data grow when the industry dynamics change so fast.

Then there is the role of the trade press and general media commentary on these issues that can perpetuate, overexaggerate or incorrectly report on the real situation at hand. The media in general will often be lambasted for doom and gloom industry perspectives and ridiculed (trade press) when a rosy picture is reported when darkness still surrounds many in the world of manufacturing reality.

Attending Intersolar North America last week, I had a few opportunities to discuss with senior PV manufacturing executives and industry analysts the issues surrounding overcapacity data and what happens to that overcapacity in a period of fast-changing dynamics.

My hypothesis was based on a view that there is a significant amount of nominal capacity in place that is fast becoming redundant due to the continuing rapid module price declines, making much of this capacity uncompetitive. This capacity, wherever it may be, has already been affected, forcing ‘much’ to be idled. However, when supply and demand reach a new balanced state that capacity will not come back on stream because it’s old technology, unable to compete at the significantly lower price levels that are then the norm.

This means that overcapacity figures are now and will continue to be overinflated until it can be verified such capacity should be removed from the nominal capacity models.

Only after the real return to supply/demand balance will it then be realised and covered and confirmed by the media. This would be too late for many and barely in time for others!

I am happy to report that my picture of supply and demand dynamics was not scorned by those I had time to discuss it with. Not surprisingly, the discussions led to when the balance would return, either later than I was projecting or sooner.

The challenge for all of us was the realization that without the real detailed capacity data we all were pontificating on, it was a position that wouldn’t hold up in a court of law.

My conclusion was that we obviously need better data but also better modelling and also a better understanding of what the true impact is on manufacturing when confronted with rapid and potentially long-periods of price declines whether gradual or fast paced. This of course should be taken in light of the real demand, another Pandora’s Box that needs to be opened and debated, not least modelled better than it currently is!

Is it a simple stupid moment?

It’s certainly a very difficult and incredibly complex situation for the industry to be in and now requires some smart minds to get to grips with the real problem. That’s not going to come from the media but I genuinely don’t believe it can just be left up to the market analyst either, over to you!

21 September 2021
C&I consumers currently source only about 7% of their power requirement directly from renewables. Indian corporate renewable market has grown rapidly and holds huge growth potential as companies look to reduce power purchase costs and cut carbon emissions. BRIDGE TO INDIA has built significant expertise in the corporate renewable business by working on over 30 consulting assignments and various research reports. We are organizing this conference to bring all stakeholders together and delve deeper into various market aspects. The conference will be held on a virtual platform with excellent networking opportunities for all participants.
22 September 2021
To commemorate the World Energy Storage Day(WESD) on 22 September, being recognized worldwide, Customized Energy Solutions (CES) and India Energy Storage Alliance (IESA) is organising the 5th global conference and virtual expo, which will be held virtually on 22 September 2021. WESD is a global movement initiated by various apex trade bodies working to promote and adopt energy storage, e-mobility & green hydrogen technologies for a sustainable future. The forthcoming edition of WESD is expected to attract global participation with an intent to facilitate bi-lateral trade, market development and new research and innovation, which will invite 100+ countries, 100+ regulators & policy makers, 100+ International speakers,1000+ organisations, 100+ partners & exhibitors and 20,000+ global delegates.
28 September 2021
Solar Solutions International is the largest trade show for solar energy in Northwest Europe. Now the solar market has grown up, it's time for the next step. Solar Solutions International displays more than 500 innovations and over 100 practical seminars concerning the latest in energy storage, smart products, and an ever evolving array of solar panels. As an exclusively B2B trade show, Solar Solutions International offers both exhibitors and visitors the chance to network at the highest level. Duurzaam Verwarmd, the largest trade show for sustainable HVAC technology in the Benelux, is held simultaneously. This way your one visit gets you up to date with all of the developments in both sustainable energy and heating.
6 October 2021
Intersolar Europe is the world’s leading exhibition for the solar industry. It takes place as part of The smarter E Europe – the continent’s largest platform for the energy industry. Under the motto “Connecting solar business,” manufacturers, suppliers, distributors, service providers and project planners and developers from around the world meet in Munich every year to discuss the latest developments and trends, explore innovations firsthand and meet potential new customers.
6 October 2021
The future is bright for a new era of US solar and storage, and the 8th annual Solar & Storage Finance Summit will provide opportunities to discuss solutions to the industry’s challenges and provide a networking platform designed to bring together the top minds in the industry to do business. With a mix of high-level, informative presentations and panels, a stellar cast of speakers and audience members with deal-making capacity, the 2021 edition of the event will be a sell-out success.
18 October 2021
Intersolar South America, South America’s largest exhibition and conference for the solar industry, takes place at the Expo Center Norte in São Paulo, Brazil on October 18–20, 2021, and has a focus on the areas of photovoltaics, PV production and solar thermal technologies. At the accompanying Intersolar South America Conference, renowned experts shed light on hot topics in the solar industry.

Read Next

September 20, 2021
A subsidiary of Indian utility Tata Power has received a letter of intent to set up a 250MW grid-connected solar project in the state of Maharashtra.
September 20, 2021
Vattenfall has increased its emissions reduction targets to be in line with the 1.5 degrees Celsius scenario set out in the Paris Climate Agreement in a move that has been approved by the Science Based Targets initiative (SBTi) and which involves increasing its renewable capacity four-fold.
September 20, 2021
Lightsource BP has increased its solar deployment target to 25GW by 2025 after securing a US$1.8 billion financing facility that will help fund its global expansion.
September 20, 2021
Australian companies plan to spend AUS$5.1 billion (US$3.7 billion) on offshore gas exploration over the next six years, which is enough to develop 2.5GW of renewables capacity and generate close to 5,000 jobs
September 20, 2021
Mining company Rio Tinto has revealed plans for a new solar project and battery energy storage system that will help to decarbonise an off-grid mine in the Australian state of Queensland.
September 20, 2021
The US solar policy landscape is shifting at breakneck speed, with new incentives and trade tariffs promising to alter the shape of the industry for the coming decade. Luckily Andy Colthorpe and Liam Stoker are here to decipher the changes in the September 2021 episode of the Solar Media Podcast.

Subscribe to Newsletter

Upcoming Events

Solar Media Events
October 6, 2021
Solar Media Events
October 19, 2021
BRISTOL, UK
Solar Media Events
December 1, 2021