During the past three years, the PV industry has been through many highs and lows. At the beginning of this period very strong investments in upstream capacity caused PV component prices to fall, causing PV incentive policies to be pulled back. In turn, this increased pricing pressure on manufacturers who had excess capacity available to meet industry demand. The subsequent period of shakeout continues to provide strong challenges for all industry participants. However, there are new signs that a recovery could be fast approaching.
Contributing to this recovery are two key factors: supply and demand. The rapid decline in PV material and component pricing has been painful for manufacturers, but this has led to a drop in installed system prices (ISPs). Many markets – previously closed to PV development due to cost – have now been opened up and have the potential to offer long-term growth opportunities. Global PV end-market demand in 2013 is now estimated to exceed 35 GW with a potential upside of 10 GW, almost half of which would be driven by China and Japan.
A wide range of countries in the emerging regions of Latin America, the Middle East, and Africa are anticipating PV deployment at the gigawatt-level over the next decade. However, the initial shift from European to Asian markets is being led by China and Japan, which will dominate the top rankings for PV demand during 2013. PV installations in China and Japan are being stimulated by aggressive PV incentive programs, as well as a need to increase power from renewable energy sources. While European market demand is no longer dominating the PV industry, this region still maintains demand levels above 10 GW on an annual basis.
In terms of supply, the shakeout over the last two years has led to overall capacity levels remaining almost constant along with many earlier expansion plans having been scaled back or delayed. The shakeout phase is expected to continue over the next few years, thereby minimizing any oversupply situation and potentially reducing pressure on the rate of module and system price declines. By 2014, annual PV module revenues will surpass 2012 levels; by 2017, they will reach approximately $35 billion.
The pain of the last few years is now set to be replaced by a period of recovery, with the industry entering a period of slower, but steadier, growth where companies in both the upstream and downstream can participate profitably.
Does this surprise you? Sound too optimistic given what the industry has been through over the past year? We will be going into our market outlook throughout the supply chain in great detail in our global PV conferences this month. Please plan to join us in Korea, China, Taiwan, or the U.S. to explore further!
