ROTH Capital raises 2014 global solar market demand outlook

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US-based investment bank, ROTH Capital Partners cleantech analysts have raised their 2014 market forecast for the PV industry.

In a new report, ROTH Capital’s senior analyst, Philip Shen highlighted that key markets such as China have upside demand potential, compared to previous analysis as well as emerging markets such as Chile and Mexico.

According to the new report global PV demand in 2014 could reach 47GW, up from ROTH Capital’s previous forecast of 42GW.

China chimes

Although the investment bank had been bullish in demand in China potentially installing 10GW in 2014, Shen noted in the report that China had the potential to install between 12GW – 14GW this year, a key factor behind the raised forecast.

Industry checks suggested that despite concerns over China’s distributed generation (DG) targets and de-emphasis on ground-mounted utility-scale projects by government plans, Shen noted that there were sufficient active buyers of PV projects to support continued expansion of installations in the country.

China is therefore expected to be the largest market by a significant margin and inline with China’s National Energy Administration’s target of 14GW of PV installations for 2014.

US remains strong

ROTH Capital expects the US market to remain strong in 2014 with installations increasing to 6.5GW. Residential and commercial installations are expected to increase, comprising more than 45% of the total demand.

However, Shen cautioned that net metering (NEM) battles could create headwinds for growth in certain regions such as Arizona and Colorado.

Risks emerge in Japan

Although the investment bank reiterated its forecast for Japan installing around 6.5GW in 2014, the anticipated FIT reductions in April coupled to the possibility that Japan’s Ministry of Economy, Trade and Industry (METI) may consider measures to cancel PV projects already sanctioned as many have yet to start construction could dampen demand expectations.

However, reviewing a range of projections, Shen noted that demand in Japan remains in the range of 6GW – 8GW for the year, potentially being larger than the US market.

Major players ASP increase

ROTH Capital noted that with ‘effective’ PV module capacity standing at around 45GW its demand target of 47GW meant that major manufacturers are expected to experience higher ASPs in 2014 as supply exceeds demand.

Overcapacity was said to not be a key concern as many suppliers were “constrained by high debt levels and limited access to capital, especially for lower-tier players.”

PV module ASPs were said to have already increased by 8% in 2013 because of these factors and therefore with higher demand ASPs would continue to trend upwards in 2014.

Next capacity buy-cycle

As the return to profitability and restore balance-sheets remains a priority for many tier 1 suppliers, ROTH Capital expects companies to be planning the next major wave of capacity expansions in late 2014 through early 2015.

Importantly, however the investment bank believes the next capacity-buy cycle to be more rational than the last due to both lessons learnt as well as the need for companies to retain good gross margins during the up-cycle.

Indeed, ROTH Capital noted that around 70% of capacity additions at Tier 1 manufacturers are expected to come from consolidation of lower-tier producers. The remaining 30% of expansions are expected to be from pure new capacity expansion.

Overall, the investment bank remained bullish about the growth opportunities for the industry, citing market estimates for the global project pipeline standing a more than 150GW currently.

Overall market analyst forecast trends

The upwardly revised forecast by ROTH Capital comes after recent bullish projections by Yingli Green, NPD Solarbuzz and Deutsche Bank, compared to more reserved growth projections from IHS, Mercom Capital and EnergyTrend.

The bullish group would seem to be highlighting strong growth in key markets such as China, US and Japan with China growth forecasted to be significantly higher than the more reserved camp.

Although there is increased variability to demand growth patterns in emerging markets from the individual forecasts, emerging market analysis from the bullish camp has also contributed to the wide disparity in demand growth projections for the industry this year.

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