Supported by cost-cutting and efficiency improvements, the photovoltaics (PV) industry has managed to achieve a growth rate of 87% of newly installed capacity in 2010. The average global growth rate for the period up to 2015 is estimated at 33% per year.
The sharp fall in PV module prices has left its mark on the profit & loss account and the negative stock market performance of solar energy companies. The profitability of the PV industry has dropped off significantly in the past few years. Furthermore, the industry’s rapid expansion has put pressure on feed-in tariffs. Germany and Italy are still two of the most attractive PV markets.
Global solar energy capacity has now passed the 30 GW mark. This is enough to supply 10 million households with clean electricity. The amount of newly installed capacity this year in many markets comes as a positive surprise: a total of 13.8 GW.
In its new report, Bank Sarasin forecasts average annual growth of 33% worldwide up to 2015, albeit with significant variations in the rates achieved by different countries from one year to the next. Over the next two years a number of markets will drive the industry’s expansion, with newly installed PV capacity exceeding 500MW p.a. These include France, Italy, Spain, the USA, Canada, China, India and Japan. In general, the non-European markets with plenty of sunshine will tend to grow more rapidly up to 2020, as they have more ground to make up in the area of solar energy.
Sustainability study “Solar industry: entering new dimensions” now available
Bank Sarasin’s new study “Solar industry: entering new dimensions” (author: Matthias Fawer) compares and assesses the prospects for technologies, markets and industries in the field of solar energy, and specifically in the three main application areas: photovoltaics (PV), solar thermal energy and concentrating solar power (CSP).
Module prices and margins still under pressure
Price pressure will continue to rise significantly in response to the announcement of further reductions in feed-in tariffs for 2011. PV module prices are therefore expected to drop by between 10 and 20% p.a. Falling prices have put pressure on companies’ margins, but not to the same extent for all cell and module manufacturers. Figure 1 shows the development of the EBIT margin of six leading solar players for the period 2006 to 2012. The reasons for this development are to be found in the rapid increase in the number of providers and the associated expansion of production capacities. The solar industry is therefore rapidly developing into a mature industry with competitively priced mass production. This is reflected in the current stock market valuation of solar companies, which have slipped back to the same level as mature industries such as semiconductors and electronics.
Italy and Germany attractive markets
Italy and Germany are still two of the most attractive markets – both for rooftop PV systems and larger ground mounted systems. Italy rose to become Europe’s second largest PV market in 2009, with 720 MW of new capacity. This year total new capacity will be in the region of 1.35 GW. Germany is experiencing another boom phase this year.
By the end of 2010, newly installed PV capacity is set to reach around 6.9 GW. In 2009, new installations amounted to 3.8 GW. Alongside the established markets, there are other promising PV markets such as Brazil, Indonesia, South Africa, Thailand, Turkey and other developing and emerging economies which offer enormous potential for solar power. These countries are seeing strong demand for low-cost compact systems for generating electricity and light. These off-grid PV systems (solar home systems, or SHS) will soon become affordable for the rural population.
Brief description of the three main solar energy technologies
Photovoltaics (PV): Electricity generated from sunshine. In solar cells, made mainly from silicon, sunlight releases a charge (photoelectric effect) to create electricity which can be stored in batteries or fed into the public mains grid.
Solar collectors: In a solar thermal system, absorbers coated in black and located within collectors are heated up by the sun’s rays. This heat is then collected in solar storage media and used to provide hot water for domestic use.
Concentrating Solar Power (CSP): these systems use sunlight converted into heat to generate electricity. The sun’s rays are concentrated by a system of mirrors and the collected heat is used to generate steam. This steam is fed through a turbine to produce electricity, similar to a conventional power station.
Adjustments to feed-in tariffs
There is growing criticism from political circles and consumer pressure groups about the size and rising costs of feed-in tariffs for solar power. By making steeper reductions in tariffs for ground mounted systems or providing additional incentives for roof-integrated systems, policymakers are setting clear signals. In the current year many governments have already adjusted and implemented reductions in their state subsidy programmes for photovoltaics, as well as announcing further cuts for 2011. These changes affect important markets such as the Czech Republic, Germany, France, Italy and Spain.
Sustainable solar initiative
Bank Sarasin has always assessed PV companies using extensive sustainability criteria. There are now a handful of PV companies that provide comprehensive corporate social responsibility (CSR) reporting. To improve this transparency and depth of information in other solar companies, Bank Sarasin supports the “Sustainable Solar Initiative” of Henderson Global Investors. With invested assets of USD1500billion, this initiative has sufficient weight to exert suitable pressure on solar companies.
Positive outlook for thin-film PV
In 2010 thin-film PV (TFPV) modules will account for 18% of total PV production volumes. This quota will increase to 30% by 2012, a much faster rate of growth than the market as a whole. Within the TFPV technologies, copper-indium-gallium-diselenide (CIGS) technology is set to enjoy superior growth of around 100% p.a.
CSP plants: a promising future
Newly installed capacity in concentrated solar power (CSP) plants has reached a level of 1.35GW both in 2009 and this year. Last year eight power plants with a total capacity of 350MW came on stream. Algeria, Italy and Mexico each had one new plant, while the rest were built in Spain. This year should see around 18 plants come into service with a total capacity of around 1000MW.
CSP plants are capital-intensive projects and the supply chain also requires an expensive infrastructure. This is why financially strong companies such as Chevron, Alstom, Areva and Siemens are increasingly entering the market. The CSP industry has an ambitious cost-cutting programme. Furthermore, solar thermal electricity (STE) can provide a better quality of electricity for utilities because it is easier to store and dispatch, and is also suitable for use in hybrid power plants.
Solar market in Switzerland
Newly installed PV capacity in Switzerland came to 25.7MW in 2009, an increase of 120% on 2008. This is still 15 times less than in Germany in per capita terms. The cumulative solar power capacity amounted to 73.6MW at the end of last year. By contrast, the installed solar thermal capacity in Switzerland stands at 462MWth, equivalent to a growth rate of 48% on last year.
This represents an increase in capacity for the fifth consecutive year. The signs are still favourable for a further expansion of the Swiss solar market. Next year the production costs for photovoltaics will drop below CHF 0.50/kWh, thereby attracting a bigger quota from the cost-covering feed-in remuneration (CRF) scheme. All cantons now offer subsidies for solar thermal systems.