- Smart Solar Growing Faster than Market
- In the rush to build manufacturing capacity for smarter solar power technologies, overcapacity is now predicted to drive prices down and pressure vendors toward mergers as market growth cools to sustainable rates.As the recession faded in 2010, pent up demand conspired with a rush to use about-to-expire tax incentives, temporarily ballooning the solar panel market and prompting a dozen Asian, European and U.S. competitors to expand capacity in 2011. In the current quarter of 2011, photovoltaic equipment spending is predicted to peak, followed by a sharp decline over the rest of the year as the industry abandons expansion plans in anticipation of a pending market downturn in 2012.
Photovoltaic equipment spending reaches a quarterly high of $3.7 billion in the current quarter, but will sharply decline as the industry resets its expansion plans to meet the expected market downturn. (Source: SolarBuzz)
The good news is that the slower growth rates for photovoltaic manufacturing capacity expansion will be sustainable, allowing vendors to plan with a cooler head. The bad news is that overcapacity woes in 2012 will like lead to price-cutting and perhaps even consolidation as the weaker vendors merge.
The total spending for photovoltaic equipment in 2011 will likely top $15 billion, according to the Solarbuzz PV Equipment Quarterly report. As in many markets, growth in 2010 was astounding--139 percent for photovoltaic equipment that manufacturers are using for plant expansions in anticipation of shipment growth rates of 55 percent in 2011.
Unfortunately, expiring tax incentives and other contributing factors will slow market growth as 2011 proceeds. The current quarter is predicted to mark the highest photovoltaic equipment spending to date, reaching a quarterly high of more than $3.7 billion (see figure), but will be followed by a sharp decline as the industry slows expansion plans in anticipation of slower growth in 2012.
New capacity build up in 2011 is split between silicon solar cells and the cheaper plastic thin-film varieties such as CIGS (copper indium gallium selenide). New Chinese and Taiwan silicon solar cell producers are the main contributors to the 2011 build-up in capacity, trumpeting their manufacturing expansion, measured in gigaWatts (GW), including JA Solar (3 GW), Trina Solar (1.9 GW), Neo Solar Power (1.8 GW), and Jinko Solar (1.5 GW), according to SolarBuzz, which claims that 82 percent of the $3.6 billion spent on capacity expansion this quarter was for new silicon solar cell manufacturing equipment.
Plastic thin-film solar cell capacity, however, is growing at an even faster rate, more than 70 percent in 2011 at 65 separate facilities worldwide for a grand total of 4.8 GW, according to SolarBuzz. The super low manufacturing costs of plastic solar cells, compared to silicon, will likely continue that capacity expansion for the foreseeable future.
The growth rates for photovoltaic equipment overall may top 44 percent for 2011, according to SolarBuzz, but by year's end the quarterly rate is forecast to be down to around 12 percent--a rate that is sustainable, but nevertheless portends an equipment spending downturn that will hit hardest in 2012.