While the plethora of free beer available at the booths of the exhibitors at the Intersolar PV show in Munich this week may have simply been an attempt to convey optimism to the outside word, the reality was a cocktail of anxieties, uncertainties and cautious-optimism across all segments of the PV industry. So – is the Intersolar Munich PV beer glass half-full or half-empty?
The range and scope of concerns clearly dominates proceedings. And there is not a segment of the value or supply chains that is sheltered from such malaise. While a generic uncertainty clearly dominates forecasting, order intake, and profitability across all parts of the industry, the type of issues being voiced by the various industry participants offers a clearer picture of the specific challenges to be overcome.
Upstream poly suppliers remain highly pressured on ASPs by their downstream customer base. Indeed, several module manufacturers highlighted that downstream distributors were enforcing retroactive module ASP adjustments post factory-gate shipment, based on module ASP declines during the time period between arrival at the system integrators and final deployment in the field. These module ASP adjustments were then being fed back by some c-Si wafer-to-module manufacturers to their polysilicon feedstock suppliers, regardless of the contract pricing originally negotiated.
Further, the constant debate over cash-cost being used as a metric to predict the point at which poly ASPs will finally bottom-out remains an area of concern to polysilicon suppliers. Whether such a simplistic and short-term rationale will be adhered to is another matter altogether. Strategic pricing and integrated downstream market-share aspirations may indeed offer a further wildcard in this area, and a decline in poly pricing during 2013 to below $20/kg should not be discounted.
Technology roadmap questions continue to dominate concerns across the c-Si midstream manufacturing supply chain. Can mono-casting really shift efficiencies out of the (p-type) multi-constrained boundaries? Or is it simply a short-term fix until low-cost mono pulling gains market approval after all the value chain cost reduction program are achieved? Discussions with the various participants across the value chain still suggest widespread uncertainty relating to cast-mono adoption, with limited evidence of any strong confidence-building factors on view.
Roadmap inflection points and surplus capacity usage appear to still haunt any guidance on new order rebound for all PV equipment suppliers. The year-end 2011 backlog deluge is now firmly under the spotlight. Most at risk are still those tool suppliers whose ‘nominal’ backlog of revenues are with customers whose expansion plans remain on hold, or whose orders have been kept on the books in the hope of a delivery requirement upturn. The question for these suppliers now seems centered around how long operations can be sustained in the absence of new order intake. Timelines of 6-to-12-months seem to be general consensus here. As such, optimism emanating from the equipment companies in hall A6 was in rather short supply during the week.
However, it is the downstream demand discussions that appear to offer the most optimism. And this is indicative of outlooks that are factoring in real PV deployment in the absence of policy mechanisms. But before any champagne bottles can be uncorked, the short-term demand pull for the second half of 2012 is clearly a topic that appears to be more of an uncertainty than a genuine concern.
The general consensus for 2012 is for a 30GW market, with the second half of the year being led by year-end demand from China, US, Japan, India and Canada. Indeed, many tier 1 module suppliers were confident that the industry would again outstrip the mid-year analyst estimates by anything from 5% to 20%. On the surface, industry (over) performance over the past few years is appearing to guide such optimism. However, the exact reason may well be based upon a demand profile that now comprises a far wider range of countries and regions than in the past – with many of them in an ‘emerging’, high-growth phase. Such optimism today can be contrasted with similar market ‘consensus’ only 6 months ago, when Y/Y flat-to-negative growth for full-year 2012 was being flagged as a real possibility.
However, it is discussions on new emerging markets that suggest an overall prognosis of ‘half-full’ should be assigned to the Intersolar Munich beer-glass. And such positivity is largely based upon the system ASP environment that has evolved following 18 months of steep price declines. While previous analyses of ‘grid-parity’ were largely derived from worksheet-based economic models, the talk now is on specific PV project financing and grid connection requirements in emerging regions that simply provide a positive ROI when factoring in local energy price points. And the fact that major players in the industry are talking about enacting near-term route-to-market sales strategies to enable these opportunities is direct confirmation that elasticity in demand may soon form the next strong growth phase, post FIT-based market uncertainty.