IMSPV Market Research

Written by Sam Wilkinson, Senior Research Analyst

For me, Intersolar Europe has been the solar industry’s annual celebration, pulling thousands from every corner of the industry under one roof for three days. 2011 was in many ways the same as every other year; Enormous exhibition booths attracted thousands of visitors with novelties such as rodeo bulls, cocktails and live music. However, in many ways 2011 was very different.

I remember 2010’s show for the unusually hot weather; with hardly a single cloud crossing the sky and temperatures soaring, which was somewhat representative of the market at that time. The halls were filled with a few thousand exhibitors, all celebrating as the market boomed, and everyone I spoke to had only one concern – how to double the size of their businesses in less than a year.

Last week’s Intersolar was a very different show. Storms postponed many flights to the show (including mine!) and the sun barely broke the clouds and heavy rain at all during the week. Similarly the topics for discussion had changed.  This year, the main topic I found myself discussing was how will companies survive diving prices, declining shipments and evaporating margins. Many are looking to the future and asking when the next recovery will come. Personally, I see volumes recovering in the second half of 2011, but prices and revenues will be sacrificed to achieve this throughout the supply chain.

Currently, many are also drawing similarities between 2011 and 2009, when the year began very slowly as a result of declining prices and stalling major markets (Spain at that time). For me, there is a clear difference between these two years though; 2011 will not be followed by another 2010.

In fact, beyond 2011, the horizon is certainly cloudy but we remain positive about the longer term prospects for the PV industry.

Tags :  
Posted in :  Uncategorized

Written by Ash Sharma, Research Director

Solarpraxis’ UK PV Summit was a somewhat more sombre affair than the last UK PV conference I attended which was full of optimism (instead of a general sense of depression). What a difference 6 months makes. The main reason Friday’s conference was so depressing was of course the Government’s recent decision to review FiT payments and fast track ‘large-systems’ (seemingly a 51kW installation is viewed as large to the coalition government).

Whilst 6 months ago, the industry was full of high hopes, with a generous tariff system in place, the industry is now in a very different position with the plug being pulled on virtually everything bar residential installations.  Some are dealing with this by suing the Government (I don’t fancy their chances), whilst others are trying to find their way around the new rules likely to be imposed.

PV markets have a habit of continuing to live and even grow, despite major set-backs like this and I don’t expect the UK’s market to be any different. And although the Government seems set on restricting PV deployment to just residential systems this won’t stop developers coming into the market to capitalise on the fairly generous returns. Rather than building a single 5MW plant (which would be financially impossible under the new proposed FiTs), they’re instead building 5MW plants by distributing them across thousands of social housing roof-tops. A simple way to get around the Government’s desire to prevent single developers from eating up to much of the FiT budget.

The most worrying thing I saw from the conference was the simple acceptance that the UK’s market was almost dead and buried come August 1^st and all we would see would be a handful of residential systems being added. As I pointed out in my panel discussion, the real key to the UK’s market is developing real distributed PV generation at the point of consumption – the biggest of which is industry and businesses. I just hope the new FiT doesn’t ignore this completely.

Tags :  
Posted in :  Uncategorized

I’ve just returned from another trip to Italy’s largest PV tradeshow in Verona – a trip that I’ve made for some years now. This show is always a favourite of mine, mostly due to the buzz of optimism, cheer and glamour that seems to surround the Italians and their booming (perhaps no more) PV industry. Every single discussion throughout my two days at the show confirmed that production had slowed to a crawl, shipments were frozen and modules prices were plummeting towards €1/W (although is this actually a “price” if no one is buying them?). The only topic that anyone was interested in was the new decree and feed-in tariff, and most importantly when will it be announced?

As if timed to perfection, the answer to that question came as I made my final walk back through the packed halls to leave for the airport.

Finally, the drafts, proposals and rumours are over and the Italian market has a subsidy scheme which will (hopefully) restore investor confidence and reignite one of the world’s most important markets, though judging by the new decree’s limits, the market will be massively smaller than it could have been. I wish I had visited the show today to witness day 1 of the new Italian market.

Tags :  
Posted in :  Uncategorized

Solar Industry Mag recently published an article by PV Market Analyst, Sam Wilkinson. Please click here to read the article.

Tags :  
Posted in :  Uncategorized

By Tom Haddon, PV Research Analyst, IMS Research

IMS Research’s analysis of the PV inverter market during 2010 allowed a unique perspective of an industry that although characterised by record shipments and revenues, also displayed some fundamental weaknesses of an industry that is still maturing and learning.

As an industry which relies so intrinsically on the sun, it is safe to assume that seasonal variations in demand will be present. Specifically for PV inverter suppliers, generally the first quarter of the year is the quietest as the core markets in Europe remain restricted by the winter snow. However the first quarter of 2010 was very different and IMS Research’s quarterly PV inverter tracker showed that inverter shipments in the first quarter of 2010 were almost 200% up on the same period in 2009. In contrast, suppliers are reporting that so far in 2011 the seasonal lull of Q1 has well and truly returned, showing just how remarkable the beginning of 2010 was.

The surge in demand at the start of 2010, driven by impending cuts to incentives in several of the major European markets created a race amongst PV inverter suppliers to secure components and expand production capacities. Many suppliers were not able to source a steady supply and a shortage of inverters hit the PV industry. Some suppliers were more affected than others and major shifts in market share occurred. SMA Solar Technology lost market share throughout 2010, whilst other such as Power-One were able to ramp up production and make major share gains.

2010’s turbulent summer was characterised by inverter suppliers struggling to meet demand while aggressively expanding production capacity and customers placing the same order with several different suppliers amidst a panic to complete installations before major incentive cuts. Lead times remained painfully long for customers through the first half of the year with “at least 25 weeks” a common response to enquiries for delivery times. Inverter production hit 8 GW in the third quarter of the year, causing the inverter shortage to ease and the true scale of the double ordering to emerge. By the fourth quarter the inverter shortage had quickly transformed into a vast oversupply of inverters with inventory building throughout the supply chain.

A slowdown in the German market in November and December and a complete stoppage of the French market compounded the problems with Italy remaining one of the few buoyant markets in Europe. Although 2010 was an outstanding year for PV inverter suppliers, the huge demand exposed an industry that was ill-prepared for the surge, with component supply problems and capacity limitations. The industry now faces a very bleak first quarter in 2011 as excess inventory fulfils much of the early demand and suppliers now need to deal with the consequences of them over-supplying the market last year.

One market that has largely by-passed the oversupply problem experience in Europe is the US. Two of the largest suppliers, Advanced Energy and Satcon, enjoyed a very successful 2010 and their outlook continues to be positive with massive growth predicted for the North American market in 2011. These suppliers were less exposed to the German market and so have not been so afflicted by the huge inventory problems being experienced in Europe.

The key question facing the industry now is when the excess inventory in the European market will be depleted. With only the Italian market providing major demand so far in 2011 this point seems to be a little way off. The answer is largely dependent again on Germany and if demand will begin to surge again with the pending cuts to the feed in tariff scheduled for July.

Tags :  
Posted in :  Uncategorized

By Ash Sharma, PV Research Director, IMS Research

Whilst in the first three quarters of 2010 inverter suppliers enjoyed tremendously high demand, tight supply and stable prices, a drastic reversal in their fortunes may quickly be seen as demand wanes, supply massively grows and inventory builds.

According to a new report from IMS Research, planned inverter production may exceed actual demand by more than 2 GW in Q4’10 leading inevitably to large inventory build (both in the supply chain and in inverter suppliers’ warehouses), but also many orders being cancelled.

Looking past Q4, the picture for inverter companies remains bleak in the short term. Production capacity has been massively increased, with all leading suppliers expanding facilities and many new entrants to the market. This increasing supply, however, is likely to meet falling, or at best, stable demand in 2011. Although most major PV markets are still predicted to grow in 2011 and new markets will emerge, a cloud still hangs over the future of the huge German market. Demand is weakening and it is very possible that market will fall next year from the 7-8 GW level seen in 2010.

Supply Constraints Easing

Whilst some issues in securing component supply remain (with capacitors noted as the main bottleneck currently), the severity of these shortages has eased, allowing many suppliers to increase production in the second half of 2010. Despite this, quoted inverter delivery times to new customers still averaged at 18 weeks in Q3, dropping to 12 weeks in Q4 due to the huge order backlog.

Double Ordering

Inventory levels of inverters are now reported to be steadily building at major distributors driven by three coinciding factors:

1.       The slowdown in demand from Germany due to two FiT cuts (which had the effect of pulling forward demand).

2.       Double and triple ordering of inverters in the first half of 2010 as buyers panicked to secure inverters for the booming Germany market.

3.       The improvement in component supply has allowed major suppliers to quickly increase their production, massively increasing supply.

As such it seems very likely that inverter suppliers will begin to see major order cancellations and large price drops in early 2011. The first quarter of 2011 is expected to be very slow for installations, and this weak demand, combined with the overhang of excess supply from the end of 2010, may lead to intense pricing pressure.

Capacity Exceeds 30 GW in 2010

Inverter production capacity has more than doubled in 2010 and by the end of the year will exceed 30 GW. Based on the expansion plans of more than 30 top suppliers, capacity is set to grow another 40% in 2011. It appears that suppliers do not want to get caught short again, as they did this year, and not be able to satisfy customers if the market surges again.  However latest demand estimates predict a flattish market in 2011 and as such capacity may outstrip demand even further next year.

Although many new entrants have emerged, it is very clear that the market remains dominated by the top 15 suppliers, both in shipment terms and also in terms of available capacity.

Shift in Demand

Another major hurdle inverter suppliers may need to overcome is a dramatic shift in demand that is predicted to occur in 2011. In 2010 one of the largest drivers of industry growth was the small commercial sector in Germany which will install around 4 GW. Next year however, high growth is predicted for much larger installations in other regions such as the USA, Canada and China. In addition new markets, like the UK and India, will provide further substantial opportunities and inverter suppliers may have some real challenges shifting away from stagnating markets to capitalize on these.

Falling Margins

Inverter industry margins remained very healthy in 2010, buoyed by strong demand and almost zero pricing pressure. Inverter gross margins are even higher than for solar modules, but as the inverter industry is a factor of six smaller, industry profits will total less than $2 billion this year.

Inverter suppliers will need to brace themselves for a sharp fall in profits in Q1’11, with IMS Research predicting the lowest level in seven quarters. A major fall in demand, coupled with intense pricing pressure and additional costs of expanding capacity will undoubtedly see a slide in gross margins amongst suppliers.

It’s clear that 2010 was definitely a good year to be an inverter supplier, but 2011 may be a very different story.

Tags :  
Posted in :  Uncategorized

By Tom Haddon, PV Group Research Analyst, IMS Research

Following on from the strong first quarter of 2010, it is forecast that the PV inverter market will grow substantially building on 2009’s success. MW shipments are predicted to be over 60% greater than in the previous year with installations reaching close to 15 GW. With such high levels of demand, several suppliers are targeting aggressive capacity expansion strategies with SMA bringing its global production capacity to the 11 GW per annum mark and several suppliers are following suit…

The full blog from Tom can be read at FuturePV

Tags :  
Posted in :  Uncategorized

By Sam Wilkinson, PV Group Research Analyst, IMS Research

It is earnings call season once again for solar PV module suppliers and looking at the results of a number of the major suppliers Q2’10 looks set to continue the market’s recent record setting trend. A few things immediately stand out from the first few calls this quarter:

PV Module Costs are Down

Given that feed-in tariffs (FiT) and incentive schemes in major PV markets such as Germany are set to continue decreasing, perhaps faster than some might have expected a year ago, it is not a surprise that suppliers are maintaining a strong focus on reducing costs. This is of course essential in order to remain competitively priced and profitable in an industry driven by a desire to gain independence from the subsidy schemes on which it currently relies.

First Solar has become well known for its low-cost manufacturing and did not disappoint in Q2’10, by driving its costs down 8% to $0.74 per watt, citing improved throughput, increased efficiencies and reduced material costs as helping it achieve this.

As a result of the increased volumes and high utilizations predicted in the third quarter, IMS Research forecasts that module production costs will fall once again in Q3’10. However, as the supply of wafers remains short, crystalline cell manufacturers (particularly those that are not vertically integrated) are predicted to see increases in raw material costs, handing some advantage back to thin film suppliers such as First Solar and making it more difficult to reduce costs further – in the short-term at least.

Are PV Module Prices Really Falling?

Another unlikely trend throughout the data that IMS Research has collected from Asian and US suppliers is the decline of factory-gate selling prices – certainly unusual, given the current sky-high levels of demand and tight supply. However, although in Q2 these suppliers are reporting a decrease in the revenue generated by each PV module sold, due to exchange rate issues this has not translated into any decrease in prices to wholesalers, distributers or end-customers. So some caution needs to be taken when analyzing these companies’ Q2 results – lower reported ASPs does not necessarily mean ASPs have gotten any lower!

Although Europe accounted for some 82% of PV installations in Q2’10, the vast majority of modules were supplied by companies recognizing their revenues in currencies other than the Euro. As such, currency fluctuations over the last quarter have resulted in great differences between the amount that suppliers supply their modules for, and the amount of revenues that they realise from that sale.

For example, Chinese crystalline cell and module manufacturer, Solarfun, announced last week that its PV module average selling price (ASP) had declined by 6.8% in the second quarter to RMB 11.19/W. However, converted to Euros (at the appropriate quarterly exchange rates), where the majority of its revenues are generated (Germany, Italy, Belgium and France combined accounted for over 80% of its module shipments during Q2), the truth is its prices actually rose by 3.1%!

Whilst the depreciation of the Euro (against the US Dollar and the Renminbi) has negatively impacted on the margins of many module manufacturers, European suppliers will appreciate, at least temporarily, the aid in their battle to remain price competitive on their home ground against the aggressive pricing of their Asian competition.

The Second Half of 2010 and What Happens Next?

There is almost no uncertainty surrounding demand for PV in the second half of this year and 2010 will certainly prove to be another remarkable year for the industry. PV module shipments are forecast to increase by an incredible 60% over 2009 to reach 15.6 GW.

System integrators and project developers continue to rush to realise installations right through to the end of the year, particularly in Germany – despite the recent reductions in the EEG – driven by further cuts which will take place on October 1^st and January 1^st 2011. As a result, module shipments are forecast to increase to more than 4 GW in Q3’10 in order to complete and connect systems to the grid by the end of the year. Crystalline module prices are predicted to remain relatively unaffected by additional FiT reductions in Germany and are forecast to increase slightly (in Euros) in Q3, due to this strong demand.

Beyond 2010 the situation is less clear and questions remain over how the industry will respond to multiple FiT reductions in the largest European markets heading into 2011. A strong consensus is apparent in the market today that we will see another unhealthy drop in demand (similar to that experienced early in 2009 following the demise of the Spanish market) and the return of seasonality.

IMS Research forecasts that installations in EMEA will decline by 80% Q-o-Q in Q1’10. This, coupled with capacities that have been ramped to their maximum in order to serve the strong demand of H2’10, is forecast to quickly reverse the current imbalance between supply and demand and average PV module prices are forecast to commence their downward trend once again.

One supplier with a more optimistic outlook for the New Year is First Solar. The thin film supplier recently announced that it planned to construct 500-700 MW of systems in 2011 and boasted a ‘captive pipeline’ of utility-scale business that would buffer any fluctuations in demand. Following its acquisition of project developer NextLight, First Solar plans to begin the construction of a massive 290 MW power plant before the end of 2010 and install modules there throughout 2011.

One thing is for certain: most agree that 2011 demand cannot remain as strong as 2010, and if this is the case, not all suppliers can afford to be as optimistic as First Solar.

Ongoing analysis of the PV cell and module market is available each quarter from IMS Research’s ‘PV Cells & Modules – Quarterly Shipment, Revenue, Pricing, Margin, Capacity, Utilization and Market Share Report.’

Tags :  
Posted in :  Uncategorized

By Sam Wilkinson, PV Group Research Analyst, IMS Research

The PV market continued to perform strongly in Q1’10 and PV module shipments increased for the fourth consecutive quarter according to IMS Research’s latest quarterly report on the PV cell & module market. PV module shipments reached a record of 3.6 GW in the first quarter of 2010 fuelled by high demand from major PV markets, particular Germany where speculation over its proposed feed-in-tariff cuts has driven demand to new levels.  Module shipments are forecast to continue increasing for the next two quarters and predicted to reach 4.3 GW in Q3’10.

Module Prices

After declining by an average of 10% each quarter in 2009, high demand resulted in relatively small price decreases from Q4’09 to Q1’10. Average factory-gate prices of crystalline modules fell just 2% in Euros to €1.41 between the two quarters, despite the German FIT reducing by 9 to 11% as planned at the end of the year. In Q2’10, average crystalline module prices are estimated to have increased by 1% in Euros over the previous quarter. However, the weakening of the Euro in the first half of 2010 has meant that although module prices are forecast to remain relatively stable (in Euro terms) throughout the rest of 2010, revenues per Watt realised by suppliers outside of the Eurozone in local currencies will in fact decrease. By the end of the year, prices are forecast to have fallen just 1% from their levels in the final quarter of 2009.

Installations

New PV installation growth in 2010 will be capped by limited inverter supply. Total global installations are forecast to reach 14.6 GW this year. Q1’11 is predicted to be very different to the first quarter of 2010 when speculation of additional cuts to incentive schemes drove unusually high demand in Europe, where installations are normally slowed by cold weather. As such, classic seasonal installation patterns are predicted to return and completed installations are forecast to decrease by nearly 40% in Q1’11. IMS Research predicts that this stall in demand for installations after 31^st December 2010 will to initiate a slowdown in module shipments from Q4’10.

Increased Capacity Meets With Decreased Demand

PV cell and production capacity is forecast to continue increasing each quarter throughout 2010.  Production capacity for PV cells is predicted to exceed 33 GW at the start of 2011, with 78% of this capacity located in Asia.

Increasing capacity being met with slowing installations and shipments is likely to result in supply exceeding demand once again and utilization falling sharply. The resulting tougher competition, further annual reductions to European FITs indicates that price declines are likely again from Q1’11 and IMS Research forecasts that average PV module prices will decline 8% in the first quarter of 2011.

Consequently, module capacity utilization is forecast to decrease from its peak in Q4’09 to just over 50% in the first quarter of 2011. As a result of weakened demand and softening prices, gross margins are forecast to fall to 27% having remained over 30% throughout the second half of 2010.

First Solar Hang On To First Place But Chinese Crystalline Rivals Catching

First Solar remained the largest supplier of PV modules in Q1’10, although its share of module shipments decreased for the fifth consecutive quarter and the gap between it and it’s crystalline competitors closed further.  Although total PV module shipments are forecast to grow by 60% in 2010, shipments of Cadmium Telluride (CdTe) modules (dominated by First Solar) are forecast to increase by just 20% due to limited capacity increases for the technology until 2011.

Although Western suppliers still accounted for a larger share in Q1’10, Chinese Tier 1 suppliers (Suntech, Trina, Yingli, Canadian Solar and Solarfun) increased their share of PV module shipments every quarter throughout the last year and these five suppliers’ shipments accounted for 28% of the PV modules shipped in Q1’10. In total, 47% of modules shipped in Q1’10 were from Chinese suppliers.

Ongoing analysis of the PV cell and module market is available each quarter from IMS Research’s ‘PV Cells & Modules – Quarterly Shipment, Revenue, Pricing, Margin, Capacity, Utilization and Market Share Report.’

Tags :  
Posted in :  Uncategorized

By Ash Sharma, PV Group Research Director, IMS Research

Q1’10 was an outstanding and unique quarter for PV inverter suppliers for two very different reasons. All suppliers reported incredible performance making Q1’10 the largest first quarter on record in terms of inverter shipments. Despite this strong result, demand for inverters still outstripped supply; and the component shortage and inverter production problems that began in Q4’09 in fact worsened in Q1’10 with quarter-to-quarter supply falling.

Global inverter shipments reached 3.1 GW in Q1’10 – the largest first quarter total for the industry, and the second highest quarterly result on record. 57% of global shipments were to Germany, with Italy and France also providing strong demand.

This 1.8 GW of shipments to Germany does however contradict initial indications from the Bundesnetzagentur, which announced that installations were just 390 MW in the first two months of 2010. However, the Bundesnetzagentur only shows installations which have been registered and is not necessarily a good indicator of total demand in a quarter. IMS Research predicts that demand for inverters in Q2 will be as high as the previous quarter; and that total installations in Germany for the whole of 2010 will exceed 5 GW.Although Q1’10 presented some incredible results for inverter suppliers, with shipments up more than 300% year-on-year, sequentially shipments fell in all regions, including Germany. Total global inverter shipments were 3.7 GW in Q4’09, some 16% higher than Q1’10. In a “normal” year this kind of seasonality would be expected; however, as strong demand has continued into early 2010 with the impending cut to Germany’s feed-in tariff (FIT), this sequential decline of inverter shipments contrasts the increasing shipments of PV modules and highlights that the supply of inverters may still be restraining growth of the PV industry.

Production constraints still blight the PV inverter industry, with even market leader SMA having to issue a formal apology to its customers; it recently indicated its production capacity would be limited to around 1.3 GW in the second quarter and supply constraints would not ease until July at the earliest. Despite the supply of components strongly affecting SMA’s abilities to raise its production output, it did in fact gain market share in Q1’10, illustrating that this shortage is also impacting its competitors’ business and the issue is affecting the entire inverter industry.

During recent meetings with inverter suppliers, almost all indicated to IMS Research that they were suffering problems of component supply; some were worse affected than others. Many indicated delivery times of more than 30 weeks; a large proportion also suggested they were not accepting any new orders and were already sold out for the year. With four countries predicted to become GW markets this year, this is not at all surprising, and the lack of inverters is likely to leave lots of customers disappointed. Despite this continuing problem of supply, IMS Research still forecasts inverter shipments will grow massively this year, leading new installations to grow to more than 11 GW.

Tags :  
Posted in :  Uncategorized