The Chinese solar pv industry is growing rapidly. In less than a decade, starting with a few small module manufacturers, China today turned into the leading upstream manufacturer of silicon, wafers, solar cells and modules. More than half of all solar cells and modules produced in the world are now from China. The share is likely to increase with huge investments and factory expansions coming up.
Factories are built where no markets are...
Where are most factories being built these days? Actually, not where the biggest markets are... First Solar modules come from Malaysia, REC produces in Singapore, Sunpower in The Philipines and China isn't a big market as well. The reason is simple: the factories are built where the incentives are the highest. Tax holidays, investment subsidies, cheap land and other incentives are offered to seduce companies to build a cell or module factory in their country. There seems almost a competition going on among countries. Someone has to pay for that and in the end that will be the tax payers.
The Chinese PV industry built with German tax money
The pv industry and market is considered to be small and still in its infancy. In the coming decade the global revenue pool for solar pv will increase to more than 200 million euro. More then once, it can be heard that government and industry people complain, that this huge Chinese solar pv industry complex has been built with European/German tax money.
With a very small domestic market, the majority of all Chinese solar modules are sold on the subsidized leading European markets, with Germany by far the most important. At the same time, the German solar industry is facing hard times with tougher competition from China. The German market is booming, meaning German rate payer will have to pay a higher premium on their electricity bill and at the same time Chinese brands are increasing their market share in Germany. Is it fair that a big part of the German rate payers money goes to China?
In other countries, like France, government people and advisors are questioning whether incentives like a Feed-in Tariff actually help to develop a domestic solar industry...Isn't it only helping the Chinese with the development of their PV industry?
German equipment in Chinese factories
A few thing can be said. First, it does not have to be bad if mass manufacturing of solar cells and modules will have its base in China. To start, let's not forget that in most factories in China, German equipment is installed to produce the cells and modules. Upstream, German companies have achieved a leading position in high-tech equipment manufacturing.
Germany is in the driver's seat
Secondly, the Chinese companies, in their aim to achieve a bigger market share, will have to bring down cost of cell and module production. Like in 2011, Germany will decrease its FiT in 2012 again. With the expected further market boom in 2011, Germany will cut back its FiT's with another 22%, as described by the latest regulation. The Chinese solar industry, being completely dependent on the German market, will have no other choice than to bring down cost accordingly in 2012. In other words, Germany is fully in control, and will steer and drive down the cost of (Chinese) solar modules faster and faster towards grid parity. Even sooner than expected, Germany will achieve a market situation where FiT incentives are no longer needed. Solar energy, based on very cheap Chinese solar modules, will then be able to compete with electricity from the grid. Solar cells and modules will become a mass and commodity product. Produced in huge factories, this mass production will result in tiny margins. For comparison, look at the current situation of flat screen production. Fully automated mass production, tiny margins and job cuts more than new job generation. Only interesting for a few big industrial multinationals. With the high-tech jobs related to the installed manufacturing equipment. In this scenario, it makes more sense for European countries to be positioned more upstream in high-tech equipment manufacturing.
Jobs, jobs, jobs: the future will be downstream
Secondly, talking about job creation. As mentioned above, the most jobs will not come from automated mass cell and module production. Besides high value and high-tech jobs in equipment manufacturing, the large numbers of jobs will be created down stream. Like the design and installation of solar pv systems based on Chinese modules. Global leader and front running Germany is the example for other markets: most of the thousands of new jobs are created downstream. Development of projects, sales, engineering, roof and electrical installation and financing and insurance of PV systems. Market development is the real job generator, not industrial mass production.
Downstream business is the real job generator
And let's not forget the expected industrial opportunities for local product development. As mentioned in one of my previous Blog postings, every market will offer new business opportunities for new solar (roof) products. Based on imported cheap standard solar cells from Asia, products can and will be invented to fulfill local market needs. Hence, this will offer new high value jobs, which require creative, smart and well skilled local people.
Europe: help yourself and start more FiT's!
My conclusion for now is and advise would be to the French and other governments: don't be afraid for the Chinese module invasion based on a generous FiT program. Don't bother that you don't see a solar cell and module industry emerge in your country. Let China have this piece of the cake. You will only help yourself more. Then, even sooner French and other European companies will be able to import the best and cheapest cells and modules to create new and more profitable local downstream solar business. That will create a bigger revenue pool and the most jobs! Let China produce the fireworks and let's do the party in Europe!
zondag 26 september 2010
maandag 20 september 2010
The solar future: looking ahead 10 years
Ten years ago...
Ten years ago the global PV market was around 200 MW. Currently, that is what is being installed in Germany alone in less than 2 weeks….For the year 2010, the newly installed volume is forecasted to be around 12,000 MW. That is a multiple of 60 times in 10 years. Big companies, and none of them were Chinese, were producing like 20 MW per year in 2000. Ten years ago it was predicted that with an average of 30% market growth per year, in 2010 the installed volume would be around 4,000 MW per year. Instead, in reality, we are now facing 3 times that amount….
Ten years from now
Now, let’s take a snapshot of how the solar pv market and industry will look like in 2020…
For households, solar electricity generated from your own roof is cheaper than electricity from the grid in the USA and all Southern European countries. And even in the ‘rainy’ Northern European Belgium and The Netherlands. Of course, without any subsidy or Feed-in Tariff. FiT programs do not exist anymore. ‘Grid parity’ is an old fashioned word. Now the trend is ‘cheap solar’. The market showed a CAGR of 30% since 2010. The global annual market volume is around 140 Gigawatt, which is more than 10 times the figure of 2010. But that was long time ago, when pv was still a tiny energy source. The revenue pool is now over 200 billion euro per year and millions of people are working in solar.
India and China doing 8 to 10 GWp per year
In ‘history’, PV was still heavily subsidized and completely reliant of Germany. Things are different these days. The German market is not yet saturated, but the best roofs in the country are full with panels. All new buildings have PV integrated. Architects start their design with a optimal roof for solar pv generation. Currently, the biggest growth markets however are USA, Southern Europe, the Middle East and Northern African countries. And of course Asia. India and China are huge and booming markets. Each around 8,000 to 10,000 MegaWatt per year. Hundreds of multi MegaWatt power plants and several plants each hundreds of MegaWatt in size are built this year. All countries without fossil fuel resources are switching to solar. No other energy source is so predictable in terms of cost per kWh in the sunny regions. Investors do not trust coal and other fossil energy sources. The cost of ‘ old fashioned’ polluting fossil kWh’s is unpredictable and high due to carbon taxation.
The leading manufacturers produce 15 GWp per year
The sunny North African countries are building GigaWatt scale PV power plants, preparing for supply of cheap energy to Southern Europe via High Voltage connection lines through the Mediterranean Sea. Standard crystalline solar cells and modules are so cheap, that the solar industry, besides producing large volumes for utility scale pv power plants, is working on high profile products for optimal building integration. Nowadays, leading manufacturers, all from China, are producing 15,000 MegaWatt per year.
Europe is focusing on building integrated products
Residential customers and the building industry are now only interested in good looking products, which, by culture and tradition, vary per country. Cells are shipped around the world in huge quantities and assembled into building products and solutions in each market. A new industry in Europe has emerged around building products based on solar cells. Red and pink modules are doing very well in Italy, Spain and Portugal these days, fitting perfectly on traditional terracotta roofs. Black modules are a hit in Northern Europe. Booming is the market of energy storage systems and smart grids. And of course all technology combining electric car charging systems and solar energy production.
GW scale power plants are built in 2 years...
Nowadays, GW scale pv plants can be built within 2 years. That is the reason that Energy utilities like them so much. And of course because the production cost per kWh are so predictable and the O&M cost are so low. The global industry is positive about its future for the next decade and is predicting further growth of at least 25% per year. The forecasts are that around 2030, the annual market volume will reach 1,000 GigaWatt. Impressive, but still tiny compared to the potential addressable market volume as the global electricity demand is still increasing. And, let's face it: even at this impressive growth rate, solar PV is not even able to cover only the growth of the global electricity demand...
Let's get back to 2010 and agree to talk again on 20 sep 2020 to evaluate if I was too pessimistic.
zondag 12 september 2010
Is the UK the next gold rush solar pv market?
Last week in Valencia, many experts and friends shared their market knowledge, insights and views at the Fourth Global Demand Conference.
At the first day, the emerging PV markets were discussed. At the second day the demand dynamics in top-10 markets in the world.
At the conference and at the PVSEC exhibition floor, it was the general opinion that the UK is one of the most promising PV markets.
Facts and rumours suggest that hundreds of MegaWatt's are under development. Some market players expect a GigaWatt market in 2011. Not only many residential and commercial pv roof projects. It was said that big financial institutions are preparing ground mounted projects for hundred or more MW's. Financing seems not the biggest problem. For equity funds, the opportunities to make a decent return on investment, are limited these days. The interest rates are very low. The feed-in tariff for solar energy provides an attractive investment alternative. And many investors and funds from the UK have built up experience with pv power plant investments in Spain. They understand the pv technology, worked with a FiT mechanism and know the UK market.
How fast will the UK PV market grow? As stated in my previous blog, it normally takes new markets at least 3 years to develop to a level of one or more hundred MW of new installations per year. Can and will it go faster in the UK? There are more international players, there is more experience and more money available.
On the other hand, the UK market is relatively unexperienced, is lacking a well developed supply chain and most potential customers do know nothing about solar pv and feed-in tariff mechanisms.
In it's second year, the pipeline of (ground mounted) pv projects under development in Spain was endless, but at least many thousands of MW's in volume. Most of them were never built. Permits were not in place, the project financing could not be arranged, modules were lacking, etc. At the time more than thousand solar PV parcs were actually built in 2007/2008, the government paniced and killed the market with a revised incentive scheme. More than 10 billion euro's were invested, with a substantial share by foreign big investors. Those investors, making a very good return on investment, will have to be paid for 25 years.
Although the UK is a big country, with enough room for ground mounted projects, it does not seem like the natural fit. Does it make sense to fill the beautiful Cornwall landscape with large solar PV fields? It seems more logic to use the free commercial and residential roof space. After all, PV is the ideal distributed energy source to produce energy at the point of energy use. In extremely sunny area's (here is meant sunbelt countries and deserts and not Cornwall), it makes sense to built large scale PV power plants.
The UK FiT is so attractive, that several companies are even offering solar pv systems free of charge to roof owners. The roof owner receives the solar energy free of charge and saves money on its energy bill. The pv system owner, using the roof owner's roof, receives the FiT and maintains the system. Both benefit and make money and apparently the system owner makes a very good return on investment. The model is so attractive, that more and more companies start offering it.
In a similar situation some years ago in The Netherlands, the offering of free-of charge PV systems lead to questions in the parliament and not much later the whole incentive program was killed, completely. 'Over subsidized' and not the intention of the pv stimulus program, was the conclusion. Although more was at hand and the arguments were incorrect, the sentiment was so negatively influenced that it took another 4 years before a new complicated and unsuccessful incentive program was introduced again in 2008.
A similar thing is about to happen in the Czech Republik. The market boom, or better explosion, will lead to a possibly disastrous reduction of the current over attractive FiT. Most PV projects are ground mounted and although better than the UK, the irradiation is still considerably less than in Southern Spain. The experts at the conference expect the Czech market will shrink in 2011.
Except for sunshine itself, for anything that is offered for free, someone has to pay for it. When a pv market is extremely hot and PV systems are even offered for free, rather sooner than later, some will raise their voice. Electricity rate payers will question their premium payments flowing in the pockets of big investment firms. Opposing politicians will question the generousity of the incentives and debate even more the effectivenes and efficiency to generously stimulate solar as RE source over alternatives like wind or biomass.
Why has the German market been sustainable? What definitely helped was its stable economy and well designed incentive regulation. But what makes a difference is the realistic return on investment. The government always aimed at around 7-8%. High enough to convince investors and low enough to prevent the boom-to-burst scenario.
Booming markets burst sooner (Spain, Czech Republic). Gradually growing markets (Germany) are more sustainable.
There is a risk that a gold-rush in the UK market will lead to serious adjustments sooner than 2012 as announced in April.
What the solar industry needs, are sustainable markets, the more the better.
What the industry does not need, are hit and run markets, booming one year and bursting the next year. Where adjustments to the incentive system come suddenly and are uncertain. Investors will back off, because in the end, they do not like uncertainty at all.
Let's hope the UK market will be able to grow steadily to become a sustainable market that will help the solar industry grow. That will help to bring cost and system prices down. And in the end that will help to create markets where incentives are no longer necessary.
At the first day, the emerging PV markets were discussed. At the second day the demand dynamics in top-10 markets in the world.
At the conference and at the PVSEC exhibition floor, it was the general opinion that the UK is one of the most promising PV markets.
Facts and rumours suggest that hundreds of MegaWatt's are under development. Some market players expect a GigaWatt market in 2011. Not only many residential and commercial pv roof projects. It was said that big financial institutions are preparing ground mounted projects for hundred or more MW's. Financing seems not the biggest problem. For equity funds, the opportunities to make a decent return on investment, are limited these days. The interest rates are very low. The feed-in tariff for solar energy provides an attractive investment alternative. And many investors and funds from the UK have built up experience with pv power plant investments in Spain. They understand the pv technology, worked with a FiT mechanism and know the UK market.
How fast will the UK PV market grow? As stated in my previous blog, it normally takes new markets at least 3 years to develop to a level of one or more hundred MW of new installations per year. Can and will it go faster in the UK? There are more international players, there is more experience and more money available.
On the other hand, the UK market is relatively unexperienced, is lacking a well developed supply chain and most potential customers do know nothing about solar pv and feed-in tariff mechanisms.
In it's second year, the pipeline of (ground mounted) pv projects under development in Spain was endless, but at least many thousands of MW's in volume. Most of them were never built. Permits were not in place, the project financing could not be arranged, modules were lacking, etc. At the time more than thousand solar PV parcs were actually built in 2007/2008, the government paniced and killed the market with a revised incentive scheme. More than 10 billion euro's were invested, with a substantial share by foreign big investors. Those investors, making a very good return on investment, will have to be paid for 25 years.
Although the UK is a big country, with enough room for ground mounted projects, it does not seem like the natural fit. Does it make sense to fill the beautiful Cornwall landscape with large solar PV fields? It seems more logic to use the free commercial and residential roof space. After all, PV is the ideal distributed energy source to produce energy at the point of energy use. In extremely sunny area's (here is meant sunbelt countries and deserts and not Cornwall), it makes sense to built large scale PV power plants.
The UK FiT is so attractive, that several companies are even offering solar pv systems free of charge to roof owners. The roof owner receives the solar energy free of charge and saves money on its energy bill. The pv system owner, using the roof owner's roof, receives the FiT and maintains the system. Both benefit and make money and apparently the system owner makes a very good return on investment. The model is so attractive, that more and more companies start offering it.
In a similar situation some years ago in The Netherlands, the offering of free-of charge PV systems lead to questions in the parliament and not much later the whole incentive program was killed, completely. 'Over subsidized' and not the intention of the pv stimulus program, was the conclusion. Although more was at hand and the arguments were incorrect, the sentiment was so negatively influenced that it took another 4 years before a new complicated and unsuccessful incentive program was introduced again in 2008.
A similar thing is about to happen in the Czech Republik. The market boom, or better explosion, will lead to a possibly disastrous reduction of the current over attractive FiT. Most PV projects are ground mounted and although better than the UK, the irradiation is still considerably less than in Southern Spain. The experts at the conference expect the Czech market will shrink in 2011.
Except for sunshine itself, for anything that is offered for free, someone has to pay for it. When a pv market is extremely hot and PV systems are even offered for free, rather sooner than later, some will raise their voice. Electricity rate payers will question their premium payments flowing in the pockets of big investment firms. Opposing politicians will question the generousity of the incentives and debate even more the effectivenes and efficiency to generously stimulate solar as RE source over alternatives like wind or biomass.
Why has the German market been sustainable? What definitely helped was its stable economy and well designed incentive regulation. But what makes a difference is the realistic return on investment. The government always aimed at around 7-8%. High enough to convince investors and low enough to prevent the boom-to-burst scenario.
Booming markets burst sooner (Spain, Czech Republic). Gradually growing markets (Germany) are more sustainable.
There is a risk that a gold-rush in the UK market will lead to serious adjustments sooner than 2012 as announced in April.
What the solar industry needs, are sustainable markets, the more the better.
What the industry does not need, are hit and run markets, booming one year and bursting the next year. Where adjustments to the incentive system come suddenly and are uncertain. Investors will back off, because in the end, they do not like uncertainty at all.
Let's hope the UK market will be able to grow steadily to become a sustainable market that will help the solar industry grow. That will help to bring cost and system prices down. And in the end that will help to create markets where incentives are no longer necessary.
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