The hardest and most ‘controversial’ aspect of analysing capacity expansion announcements is converting them to actual or ‘effective’ new nameplate capacity.
In an ‘ideal’ world the tracked announcements should all convert to effective nameplate capacity over a given period of time, providing a clear understanding of the global PV manufacturing landscape. However, that simply isn’t happening.
In the period, 2014 through to mid-2016, total capacity expansion announcements (thin-film, solar cell, module assembly, integrated facilities) have reached over 120GW, which includes over 6GW of thin-film, almost 48GW of dedicated solar cell and over 52GW of module assembly expansions. Integrated manufacturing plans almost reached 14GW.
A new bottom-up analysis was undertaken line by line to establish which of these announcements actually went ahead and whether the nameplate capacity could be categorised as effective capacity by the end of 2016.
2014 conversion rates
In 2014 a total of 26.8GW of total capacity expansion announcements were made. By the end of 2016 the effective capacity from these announcements is expected to have reached 12.9GW. This equates to a total conversion rate of around 52%.
In 2014 a total of just over 2GW of thin-film expansion announcements were made, however only 678MW was converted to effective capacity. This equates to a conversion rate of only around 33%.
Dedicated solar cell announcements in 2014 reached 5.6GW, while effective capacity at the end of 2016 is expected to have reached 3.3GW, a conversion rate of nearly 59%.
Total module assembly announcements reached 19.2GW in 2014, while the effective capacity from these plans topped 7.4GW. This equates to a conversion rate of around 38%.
In 2014 a total of just over 2.3GW of integrated cell and module plans were announced, which has led to 1.5GW turned into effective capacity by the end of 2016. This equates to a conversion rate of around 65%.
Clearly thin-film module conversion rates from announcements in 2014 to effective production are significantly below both dedicated solar cell and integrated cell and module conversion rates.
Companies such as First Solar and Solar Frontier were primarily responsible for executing on plans. First Solar carried out production line upgrades and re-commissioned idled lines throughout the year and into 2015, while Solar Frontier announced the building of a completely new, next-generation CIS plant in Japan that officially started volume production in June 2016.
Solar Frontier’s 150MW Tohoku plant in Miyagi Prefecture, Japan also highlights the long lead-times some projects, notably thin-film and high-efficiency (PERC, N-type mono, Heterojunction) etc… can take from groundbreaking to production.
However, the major conversion rate disparity rests with Hanergy and its a-Si and CIGS thin-film announcements. Indeed, Hanergy is primarily responsible for the low conversion rates from 2014 through 2016.
Also seen was a nuance, though not isolated to the thin-film sector. The nuance was a small capacity increase (80MW) announced by TSMC Solar in early 2014, however the company went on to exit the sector altogether in 2015.
Despite the failures with thin-film, the low conversion rate (38%) of dedicated module assembly plans is more surprising, especially considering the low capital expenditure requirements for both facilities and production equipment.
This is partially explained by a number of start-up companies in new emerging markets such as Latin America failing to secure capital or change in business focus.
The nuance of bankruptcies also played a role after some European companies announced small expansion plans but 12-months later had creased operations.
However, a number of module assembly expansion plans in India did not materialise, often due to a perennial problem of obtaining financing for manufacturing in the country. Although less common, not all module assembly expansion plans in China materialised or met claimed nameplate capacities.
2015 conversion rates
In 2015 a total of over 48.7GW of capacity expansion announcements were made. By the end of 2016 the effective capacity from these announcements is expected to have reached 25.3GW. This equates to a total conversion rate of around 48%.
Thin-film announced expansions in 2015 reached nearly 3.2GW but effective capacity by the end of 2016 is expected to have only reached less than 470MW. This would equate to a total conversion rate of only around 14% and significantly lower than the 38% conversion rate from the prior year.
Not surprisingly much of this conversion failure was down to Hanergy, although lead times in respect to the initial 300MW, AVANCIS CIGS fab in China also play a part. Having announced the new plant in October, 2015 a number of key production equipment orders only started being placed in May, 2016. The plant is not expected to start production in 2016, though clearly the project is real and moving forward.
Dedicated solar cell expansions plans reached over 21.4GW in 2015. Effective capacity from these announcements is expected to reach just over 9GW by the end of 2016. This would equate to a conversion rate of around 42%.
The relatively low conversion rate can partially be attributed to several gigawatts of new high-performance solar cell plants announced that have longer lead times on planning, financing and production equipment.
However, several gigawatts of new solar cell plans in India, via various joint ventures ‘pledges’ and MOU’s were also responsible for low conversion rate.
In 2015 a total of over 17.7GW of module assembly expansion plans were announced, while effective capacity of around 12.6GW would have been achieved by the end of 2016. This would equate to a total conversion rate of around 71%.
Baring India, the high conversion rate was due to significant capacity expansions by the ‘Silicon Module Super League’ (SMSL) members and other key manufacturers acting on announcements.
Integrated capacity plans reached over 6.3GW in 2015. A total of over 3.2GW is expected to have been converted to effective capacity by the end of 2016, a conversion rate of nearly 51%. Slow but meaningful momentum from several JV projects in India actually should help the conversion rate surpass the 50% mark by the end of 2016.
2016 conversion rates
Capacity expansion announcements in the first half of 2016 reached around 47.53GW. Not surprisingly, a lower conversion rate to effective capacity would be expected by the end of the year, compared to the previous two years, due to capacity expansion start dates and ramp rates.
However, we expect around 20GW of these announcements to convert to effective capacity by the end of the 2016, giving a conversion rate of around 43%.
None of the 900MW of thin-film expansions announced in the first-half of 2016 should be expected to convert to effective capacity by the end of the year. These plans are 2017 and beyond.
Dedicated solar cell expansion plans expected to convert to effective nameplate capacity could reach 9.6GW by year-end, nearly a 52% conversion rate from the 18.5GW of announcements.
Once again plans by the majority of SMSL’s are contributing to this relatively high conversion rate, given the shorter time lines in play.
However, major (2GW) announcements by LG for high-efficiency cell production expansions in January, 2016 are multi-year post 2016 events.
The module assembly conversion rate is expected to reach around 42%, from over 23.4GW of announcements, providing an effective module capacity figure of around 10.2GW by the end of 2016.
The relatively low conversion rate to effective capacity is due to many of the reasons already highlighted, simply all of these are at play in 2016, whether its plans in India and China, start-ups in emerging regions and technology-based factors.
Effective capacity summary
As a result of analysing announced capacity expansions to effective nameplate capacity since January, 2014 we can reveal that effective capacity of thin-film modules through the end of 2016 is expected to have reached just over 1GW.
Effective dedicated solar cell capacity would reach around 22GW and effective module assembly capacity would reach around 30GW. Integrated cell and module expansion plans that are expected to convert to effective nameplate capacity by the end of 2016 is around 5GW.
This equates to around 58.6GW of effective capacity from around 120GW of announcements since the beginning of 2014, through to the end of 2016, a conversion rate of nearly 49%.
Cumulative global effective module capacity
Effective new thin-film module capacity, c-Si module assembly capacity and integrated capacity is expected to stand at around a combined 36.7GW at the end of 2016.
Although figures for effective capacity at the end of 2013 vary significantly, due primarily to the number of bankruptcies, exits and zombie companies as a result of the chronic overcapacity then in existence, between 43GW and 53GW of nameplate module capacity was thought to be available.
With around a combined 36.7GW of new module capacity on stream since 2014, total effective module capacity is estimated to be in the range of 79.7GW to 89.7GW at the end of 2016.
This figure has become increasing important to decipher in recent months given the growing concerns of module overcapacity.
In conclusion, we have demonstrated that there has been significant increase in capacity expansion announcements in the fourth quarter of 2015 through the first half of 2016. However, average conversion rates to effective capacity since the beginning of 2014 are just below 50%.
Recent downward capacity expansion revisions by SMSL member, Canadian Solar have been factored into this analysis of expected effective capacity figures at the end of 2016.
However, Canadian Solar may not be alone in initiating curtailments as we head into the fourth quarter of 2016. We may also witness previously announced plans throughout the period covered being mothballed or outright cancelled, adding to the complexities of measuring the PV manufacturing landscape potentially going into only this industry’s second overcapacity phase.