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FEATURE MARKET OVERVIEW CHALLENGE THE OPPORTUNITY


Strong double-digit growth in end-market demand continues, but identifying customers and technologies for equipment suppliers remains a challenge, says Finlay Colville, vice president, NPD Solarbuzz


The fundamental drivers for end-market growth in demand for solar photovoltaic (PV) panels remain robust, with PV project developers and residential users typically choosing to invest in PV installations that provide attractive and secure return-on-investments over a 20-25 year period. Demand for PV modules has increased


from 19.6GW in 2010, to 27.8GW in 2011 and is forecast to exceed 30GW during 2012. Most-likely market forecast scenarios highlight demand in excess of 60GW by 2016, with strong globalisation in demand across many new and emerging regions.


While the PV industry was historically driven


by government policies and incentives (in particular from European countries), demand is increasingly being driven by end-market elasticity (low panel prices create demand in the absence of incentives). This situation – often misleadingly referred to as grid-parity – has arisen because investments into PV deployment make sound financial sense compared to traditional sources or localised energy supply.


Pricing as the catalyst


During the past 18 months, the price of PV modules (and to a lesser extent balance-of-


4 PHOTOVOLTAICS 2012


systems prices) has declined considerably to levels that many had not expected to be reached until 2015 or beyond. Indeed, installations across some emerging regions are now seeing volume module prices at the US$0.6-0.7/W level, some three to four times lower than module pricing just a few years ago. At this price point, the case for investment can be made almost regardless of whether there is a local incentive policy in place. However, thoughts that these pricing


declines are the result of supply-driven economies-of-scale or technological breakthroughs should be discarded at an instant. The low pricing environment today is a result of competitive and strategic pricing, arising from chronic overcapacity and oversupply within the industry during 2011 and so far in 2012. Hundreds of manufacturers entered the PV industry during 2009 to 2011, many of which were funded based upon high-risk technologies or simply added capacity based upon standard silicon-based PV processes.


While low module pricing is helping to drive new market demand (in particular as governments rush to pull back taxpayer- burdened PV policy commitments), this environment is having a profound and potentially catastrophic effect on manufacturers and many PV equipment suppliers.


Margins and cycles With the exception of some raw material (including polysilicon) suppliers, and balance- of-systems component suppliers (inverters, racking systems, etc.) every PV manufacturer today is confronted by single-digit gross margins and insolvency-threatening negative operating margins. Market-driven pricing levels across the value-chain are below the cash-costs of almost all PV manufacturers, with cost-reduction measures being the modus operandi ahead of


any technology-based innovations. Overspending during 2010 and 2011 has also had a detrimental effect on equipment suppliers to the PV industry. Even discounting 200-300 PV manufacturers that have shuttered fabs, idled lines, or gone back to their core industries, industry leaders have been running fabs anywhere in the 30-70 per cent range through 2012. Therefore, the prospects of additional capacity or equipment investment are well and truly off the agenda today. The consequence of this is that new order intake levels for capital equipment are at rock-bottom, with book-to-bill ratios currently below 0.2 and for many closer to zero.


Technology roadmap


Between 2006 and 2011, PV equipment suppliers for PV fab expansions were blessed with a myriad of different PV technologies being pursued. This included c-Si processes (standard and pilot-line advanced cell types) and various thin-film technologies. Indeed,


Only two thin-film


manufacturers are currently running thin-film capacity levels in excess of 500 MW: First Solar and Solar Frontier


the thin-film segment was considered by many equipment suppliers (including leading laser source/tool and instrumentation manufacturers) to be the best long-term option to pursue. Based purely on investment levels, much of this driven by VCs in the US


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