Feed-in tariff cuts in Germany and other European countries could lead to a decline in the global PV market in 2012, according to the annual PV market report, 2012 ‘Marketbuzz,’ produced by NPD Solarbuzz. As a result, average crystalline silicon module factory-gate prices in 2012 could decline a further 29%, compared to last year. The market research firm also noted that global PV installations reached a record 27.4GW in 2011, a 40% increase year-on-year. Though emerging markets are expected to grow strongly in 2012, the reduction in European demand could cause the first market decline in over a decade.
“Aggressive cuts in incentives in Germany and other European countries have set up the potential for a global market decline in 2012, but ahead of these the rush to install is on, especially in Germany,” said Craig Stevens, President of NPD Solarbuzz. “These cuts in tariffs will force companies to embrace self-sustaining marketing models earlier than they expected. Meanwhile, Chinese policy makers will face a decision whether to stimulate their domestic market even more than planned to support their globally dominant manufacturing base.”
Across the PV supply chain in 2011 was strong evidence of significant overcapacity, which impacted prices.
The report highlights that the major top 10 polysilicon producers had expanded annual capacity to 204,000MT by the end of 2011 while the top 10 wafer manufacturers accounted for 20.7% of global capacity.
Solar cell production overcapacity that started to impact the market in the first-half of 2011, caused market-weighted average crystalline silicon factory-gate module prices to drop 28% in 2011, significantly higher than the 14% drop the previous year –leading to prices down 46% in the fourth quarter of 2011, compared to the same period a year before.
“Cutbacks in polysilicon, wafer, and cell production plans before mid-year will be required to avoid further damaging margin declines. Meanwhile, it is significant that polysilicon manufacturing capacity long the most constrained and profitable part of the PV chain now has the highest capacity in the PV chain,” added Steven.
Pricing pressure continues
The possibility of the supply chain regaining balance would seem to be in question and hopes that pricing would stabilize later this year would seem in jeopardy. According to the market research firm, factory-gate module prices over the next five-years are projected to decline in the range of 43% - 53% from 2011 levels.
In 2012, average c-Si factory-gate prices are expected to be 29% lower than the 2011 average. Such price declines are currently at odds with many module manufacturer’s cost reduction strategies this year, which suggests prolonged margin pressure for the sector.
On a regional basis, the report noted that the top five PV markets in 2011 were Germany, Italy, China, the United States, and France, combined accounting for 74% of global demand.
The fastest growing market was China, which experienced installation growth of 470%, climbing seventh largest market to third.
European countries were said to have accounted for 18.7GW, or 68% of world demand in 2011, down from 82% in 2010. NPD Solarbuzz said that growth in France and Italy has been strong, while a year-end surge in German demand collectively accounted for 82% of the European market.
However, European demand is expected to decline in 2012, its share is expected to fall to 53% of global installs. By 2016, European market share is projected to decline to 42% as North America and several Asian markets gain. China is forecast to reach 17% of the world market by 2016.
The report expects the Rest of World markets to continue to expand in 2012, making up 32% of global demand, compared to 20% in 2011.