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A new research note from Deutsche Bank analyst, Vishal Shah, remains bullish on the solar industry’s prospects for 2014, after meeting with key industry players at Solar Power International.

The Deutsche Bank analyst noted that companies appeared to be even more bullish on 2014 demand expectations than just a few months ago, driven by improving visibility into demand for 2014.

Significant growth is expected in China and Japan, while the US and emerging markets are creating a global market that is not centred on Europe.

Shah had previously forecast global demand reaching 45GW in 2014, with an upside potential of 50GW. However, Shah noted that Yingli Green was seeking forecasts to be revised upwards to as much as 50GW of installations next year, especially due to the massive momentum being generated in China. 

Other companies were said to have echoed the demand surge in China, with consensus on at least 12GW and up to 15GW of demand in China in 2014.

The bullish stance was also connected to demand in China approaching 8-9GW in 2013, compared to previous estimates of between 5GW-6GW of demand. A rush was said to be on, especially in Western China, where incentives are set to decline from RMB1.0/kWh to 90c/kWh, when the regional feed-in tariff system is introduced.

Supply constraints

According to recent reports form NPD Solarbuzz, effective PV manufacturing capacity stands at around 45GW, so any end market demand exceeding this level could generate supply bottlenecks until new capacity is added.

The market research firm recently revised 2014 global demand forecast to 45GW with upside potential of reaching 55GW, which is in contrast to its normrally conservative approach.

According to Deutsche Bank, companies expect supply shortages to occur in 2014, notably with polysilicon, where prices are expected to increase to US$20/kg from US$18-19/kg currently.

However, shortages are expected to develop in c-Si solar cells as well as for c-Si wafers in the first-half of 2014.

This could result in dampening companies ability to add meaningful production capacity at the module end of the supply chain in 2014.

Indeed, Shah noted that many companies were still planning to limit capital expenditure next year, primarily towards adding limited module capacity, with some taking advantage of used equipment available after many small players exited the sector over the last 12 months. 

The Deutsche Bank analyst also said that access to capital in China for many tier 2/3 manufacturers remained almost impossible, while tier 1 companies suggested to him that not all of the short-term debt agreements that were due by year end would be rolled over by the banks, something that had been typically done in the past.