The PV-Tech team weren’t the only ones that noticed the subdued atmosphere at EU PVSEC. Others with back-to-back meetings over the length and breadth of the show floors were some of the key financial analysts that cover the PV industry. In particular, Jesse Pichel at Jeffries raised important issues concerning the weak demand dynamics, despite continued pricing pressure.
In one of several investor notes, Pichel noted that: “despite demand improvement in September, prices are lower than expected. While demand is modestly improving, demand elasticity is not occurring and prices remain adrift.”
I for one was surprised at the number of lower-tier module manufacturers from China exhibiting at the show. Many were not the same as those in corners of halls at Intersolar Europe, held back in June.
My first thoughts were that this wave were simply taking advantage of EU PVSEC being located in Germany this year and the timing aspect, due to the widely expected strong pick-up in demand in the country in the second half of the year.
Though impossible to tell, the impression I got was these lower-tier suppliers had a slow show, often with few if any showgoers on their booths. However, they weren’t alone. Higher profile companies such as Phoenix Solar and Mage Solar (next to each other in one of the halls) were often seen to be in the same position, more noticeable perhaps because of their corporate attire.
According to Pichel, distributors and installers are surprised at how slow a recovery in demand has been in coming and that a ‘spike’ in demand has yet to be realised. His take is that financing conditions are a key aspect of the restrained recovery.
PV project construction finance rates were said to be substantially higher versus a year ago and extremely difficult to secure, leading to module manufacturers having to provide longer payment terms. Banks were said to be returning to ‘cherry picking’ projects that they support.
Buyers were also said to be still waiting for lower prices before securing product for projects, a situation that seems to have persisted from the first half of the year. In Germany, with an expected 15% FiT cut based on forecasted installs from a range of market research firms, installs could really take off in the fourth quarter, maximising the IRR as prices continue to fall. At some stage demand elasticity is expected to return.
Pichel said that installers have to convince consumers that PV is good for Germany, noting the “2012 FIT in Germany is below the retail plug rate, and thus is grid competitive, green, and anti-inflationary.”