Plunging module prices in the first half of the year are leading to a significant rally in PV installations, culminating in a projected 8GW plus of modules globally installed in the fourth quarter of 2011, according to new projections from IHS iSuppli Photovoltaic Service. Fuelled by significant recovery in demand in key European markets of Germany and Italy, global PV installs are forecasted to reach 21.2GW, an increase of 21%, compared to global installations of 17.6GW in 2010. The forecast, despite shifts in the timing of installations, is virtually the same outlook given earlier in the year.
“Following a sluggish first half, global solar installations are set to rebound during the final six months of 2011 because of a recovery in demand in the key German and Italian markets, resulting in robust 21% growth for the entire year,” noted Stefan de Haan, principal analyst, photovoltaics, for IHS. “However, the weak conditions in the first half resulted in severe price erosion for solar modules. Because of this, industry wide revenues for both crystalline and thin film modules will stay more or less flat in 2011 compared to 2010.”
According to IHS iSuppli, global PV installations in the first half of 2011 reached 6.6GW, down 4% when compared to the same period a year ago.
The small decline would seem in stark contrast to the constant pessimism and commentary of how weak the PV market had been in the first half of the year.
However, de Haan told PV-Tech that the small decline has to be taken in the context of over 100% growth rates for the industry in 2010 and the ‘sold-out’ situation of manufacturers up and down the supply chain for most of the year.
This was compounded by significant capacity expansions, which were seen as essential to meet expected demand into 2011. However, the stalling of market demand in Germany, due to the aggressive FiT cuts and module and system prices not declining sufficiently to retain consumer IRRs, meant the market almost stalled.
Worse was the complete stalling of the second biggest market, Italy, due to the wait and then implications of a new FiT system. The situation has stabilized now in both countries, de Haan noted.
Ironically, a module price collapse that occurred in May and June was said to have stimulated demand to some extent. However, the fact that the price drop was so dramatic meant many investors decided to withhold purchases, waiting for further reductions before they put any more money into the market.
According to the market research firm, modules prices are currently at €0.85 per watt, with residential systems offered at €2.2 per watt, which have prompted IHS iSuppli to suggest investment conditions are ‘better than ever,’ particularly in the small rooftop segment.
Importantly, IHS iSuppli does not expect any further delays in demand.
Installation race in 2H
The race is now on to complete as many installations in Germany and Italy before the end of the year. The market research firm said that many installers report that they are fully booked for the rest of the year.
As a result, IHS is forecasting that installations will amount to 6.9GW in Germany this year, but not enough to avert an actual installation decline of an estimated 7%, compared to 2010, which was a new record (7.4GW) for installations in Germany.
However, growth is expected in Italy despite all the problems seen earlier this year. The market research firm expects installations in Italy will amount to 5.0GW, up from 3.6GW in 2010.
Conditions in the second half of 2011 appear to be positive, and no major price declines are expected for the rest of the year, according to IHS.
However, the rapid price declines have already made their mark on suppliers for the rest of the year. Despite the 21% expected growth of installations this year, industrywide module revenues, which amounted to US$34.6 billion in 2010, will not change significantly in 2011.
Another round of price drops is being projected for the first quarter of 2012, not least the expected FiT cuts in Germany should be at the high-end of range, due to high installations, supporting projections that the PV environment will worsen next year.
According to the market research firm, capital-intensive expansions will meet decelerating end markets and declining revenues. As in 2011, industry observers will be highlighting changes to the PV competitive landscape in 2012.