Market Watch

This is the second and concluding part of a study on the solar photovoltaic market. In the first part, photovoltaic energy was contrasted with other energy sources used to generate electricity, and cost points necessary to produce a sustainable photovoltaic market were identified. In this second part, learning rates required to attain those cost points are provided. The paper concludes by examining a scenario in which 15% of the world’s electricity in 2035 is generated using photovoltaic energy, and frames the challenge from both global investment and profitability perspectives.

This paper provides an overview of reducing the ‘soft costs’ of solar, with a focus on driving down the cost of balance of system (BOS) and operations, primarily in commercial-scale installations. Attention is drawn to the internal data and information on specific case studies/best practices that can be replicated by other companies. Mainstream Energy (which supports three business units – REC Solar, AEE Solar and SnapNRack) aims to simplify system design and configuration by utilizing new technologies and streamlining internal processes to reduce total system cost – and take solar to the mainstream.

There has been rapid development of renewables in Europe in the last decade thanks to various support schemes. These are now part of the electricity reality in Europe and will continue driving the energy revolution in the coming years. In the PV sector in particular, feed-in tariffs (FiTs) have proved quite successful: at the beginning of 2010 more than 51GW of PV systems were connected to the grid in the EU, compared to less than 5GW five years earlier. This translates to 2% of the electricity demand being fulfilled by PV systems in the EU27. But all coins are double-sided: FiTs have proved to be too successful in several countries, inducing uncontrolled market development. The time has come to identify how these mechanisms – and in particular support schemes based on pure electricity injection – should evolve in order to manage a sustainable transition to competitiveness.

In this paper an assessment is made of the impact of causal peer effects found in a recent paper by Bollinger and Gillingham, simulating solar adoption over many markets in the presence of a causal peer effect. Heterogeneity in both the peer effect and the baseline adoption rate is introduced and their interaction assessed. The nature of the heterogeneity and the size of the peer effect both have implications for the resulting diffusion process. Causal peer effects have implications for firms and policymakers, who have the ability to utilize social spillover effects in their marketing activities in order to increase and expedite solar adoption.

Solar photovoltaic (PV) electricity continued its remarkable growth trend in 2011, even in the midst of a financial and economic crisis and despite the PV industry going through a difficult period. Once again PV markets grew faster than anyone had expected, just as they have done for the past decade, especially in Europe but also around the world. While such a rapid growth rate cannot be expected to last forever in Europe, prospects for growth around the world remain high. The results of 2011 – and indeed the outlook for the next several years – show that under the right policy conditions, PV can continue its progress towards competitiveness in key electricity markets and be a mainstream energy source. The major system-price decrease that was experienced in 2011, combined with measures taken in Germany and Italy after the Fukushima nuclear disaster, allowed the market to further develop in 2011, particularly in these two countries. However, the price decrease also helped weaken the policy support in many countries, with policymakers facing growing discontent with regard to the perceived cost of PV and the ailing PV industry in Europe.

Recently, PV demand forecasting has seen greater contributions from countries that had previously been lumped together in the rest-of-world (RoW) bucket – a category previously reserved for the collective PV demand from countries or regions outside of major (FiT-stimulated) European PV markets. Research has shown that PV adoption outside Europe will not simply increase overall PV demand levels, but will assist in smoothing out erratic demand cyclicality. At first glance, the increased gigawattage of demand being added from the RoW grouping provides an essential component in driving long-term industry growth scenarios. Non-European PV demand is forecast to increase from approximately 30% to 60% of global PV demand between 2011 and 2016. However, more tangible benefits of having an increased number of countries feeding into the global demand mix extend beyond just the significant ‘growth’ potential this situation offers to the PV supply chain. Of these various benefits, perhaps the one that will provide the greatest level of comfort to the PV supply chain will be a collective ‘smoothing’ effect in quarterly demand swings. This should have a positive effect on factory shipment schedules and hopefully provide an end to some of the boom-and-bust cycles that have negatively impacted the fortunes of the PV supply chain during 2010 and 2011.

The solar photovoltaics market in the United Kingdom was virtually non-existent until April 2010, when the long-awaited feed-in tariff scheme was implemented. Yet, despite coming late to the game, the UK’s solar industry took off immediately, installing more than 80MW in the first 12 months alone. Now, just two years down the line, the market is placed as the world’s eighth largest. This paper will take a look back at how the UK got to this point as well as considering just how bright the future of this fast-paced market will realistically be.

Predicting what will happen to the global PV market is very nearly an impossible task. Its underlying principles are very similar to the dozens of other electronics markets that IMS Research studies, but the key difference in the PV industry is the very close link to, and ultimate dependence on, government policy. In a few years’ time, the introduction, halting or change (or rumoured change) of a single government’s PV policy will have little effect on the global industry, and the huge swings in demand will be less common and less severe. The reasons for this are clear. First, because of geographic diversification in the industry, a single country will account for a smaller portion of the global total (unlike in 2011, when Germany and Italy accounted for more than half of global demand) and thus individual governments’ policy changes will have a smaller impact. Second, if system prices continue to drop rapidly (and IMS Research believes they will), a growing number of regions will achieve the ‘holy grail’ of grid parity and will thus no longer depend solely on government policy to drive their markets.

The benefits of solar photovoltaic (PV) power are well known, and, as this awareness rises and the cost of generating PV electricity declines, the technology is becoming more competitive with conventional electricity sources in market segments all across Europe. But bureaucratic hurdles remain a persistent threat to the widespread installation and integration of PV, often making it difficult to take advantage of the technology. In many countries, administrative processes and permitting procedures still require significant improvement. As a result, planning and connecting a solar photovoltaic system to the grid can still take several years in Europe.

The PV industry stands on the verge of an enormous achievement – an installed base of PV plants with 100GW of energy generation capability. This milestone has come about because of the contributions of a fully global industry that has blossomed in the past decade. Yet even though the PV industry traces its heritage to before the space programme, as with any dynamically growing industry most industry members have joined in the past five years. And each generation often makes the same mistakes that a previous generation made. Sometimes the same people move from one industry to another and repeat the same mistakes there. The PV industry is rediscovering ultra-competitive market dynamics that have previously been seen in other high-technology commodity markets. This paper begins with a discussion of one such market – the dynamic random access memory (DRAM) industry – and then looks at the current PV market and the industry outlook.