Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Shakedown Or Sundown For The World Solar Industry 2014

Commodities / Solar Energy Jan 03, 2014 - 09:18 PM GMT

By: Andrew_McKillop

Commodities

Sooner or Later
The solar photovoltaic industry boom-bust sequence, or cycle, has a special role for many countries and especially China, Germany and Spain who are, or were all serial over-producers of PV modules, as well as big national installers and operators of solar energy. According to US market-tracker NPD Solarbuzz, world demand for solar PV systems rose to a record quarterly rate of 9 million kilowatts (9000 MW or 9 GW) of generating capacity in the July-September quarter of 2013. Major installation  programs were under way or continuing in China, Japan, the US, Germany, Italy and some other EU28 countries.


Solarbuzz forecasts that in 2014 global demand could jump 30% from 2013's probable total solar module installations of around 35 GW, and hit 45 GW annual.

This is the good news for solar power fans. It shows that despite wilting solar company fortunes, drastic overcapacity of production, dependence on high or extreme-high feed-in tariffs for market viability, and major siting and annual output fall-off problems, with module aging, there is still rapid growth in demand. Market analysts are however obliged to note that the future of solar PV is more than ever dependent on Big Government. Only governments can supply the financial and tariff back-up needed for continued fast growth, and governments have heard that message.

The Chinese government, facing the most drastic production overcapacity problem, or crisis for the country's solar industry is pushing a drastic shakeout of the wall-to-wall overcrowding in its solar cell industry. The State planning council has in 2013 already said that forced company mergers are coming, and the State will only support a quarter of the present players. The rest have been practically told to get out of the business before they are forced out. The epic dimensions of the Chinese solar shakeout can be understood by the previous massive growth in the industry, incited and fattened by a host of central and local government aids, which led to China's producers, alone, having around 40 GW-per-year production capacity. More than total world market sales of 2013!
Present official plans as set by China's MIIT ministry supervising the restructure, call for a total of no more than 134 survivors in the industry by or before 2016, compared with over 500 players today.

Shakeout and Shakedown for Solar
Shakeouts in other major producer countries have been market-led and equally drastic. In the US and Europe, company shutdowns have run at a regular clip since 2010, sometimes with scandal wraps attached such as the US Solyndra company collapse culminating in Aug 2011. In Germany, former world No 1 producer of solar modules, Q-Cells, went to bankruptcy and massive downsizing from early 2012, before South Korea's Hanwha purchased the leftovers.  Spain has seen a near-total wipeout of its national solar module industry, as all-green energy subsidies and support from the state were ripped away completely from early 2013.  For many economists a morality tale of too much state interference producing an inevitable industry collapse, Spain's solar market struggles along at close to 600 000 kW (0.6 GW) of new installations per year forecast for 2014, down from its heydays before 2010, when new installations were in some years running at nearly four times that rate http://www.renewableenergyworld.com/rea/news/article/2010/04/spanish-pv-after-the-crash.

Methods used for the solar shakeout and shakedown vary from country to country, but all have a leading role for the state. In China's case – the world's biggest producer of solar modules – the shakedown is a mix of direct state intervention, and state “tilting of the market playfield” to prevent a repeat of the previous rout.  In particular, among the indirect measures set in China, the state will be heavily reducing export credits and export financing aids for producers, a system which previously levered Chinese solar module producers into the status of significant players in China's “shadow banking system”.  The stated aim is to force the producers to adopt a home-based market policy.

China's solar firms which financialized themselves to extremes, will no longer get credit lines from state or private financial institutions and will have a tough time borrowing. They will also no longer be eligible for refunds of export tariffs, a huge blow to companies that depended on overseas business. On the home front also, financial restrictions will powerfully limit their ability to participate in state-run utility capacity auctions, sharply curtailing their opportunities to win speculative-based orders that in many cases were never executed.

Solar Bottom
Market forecasts, to be sure, have been whittled down since the go-go years for solar PV, of 2008-2011, but at some stage industry downsizing will fit market absorbtion capacities. The role of the “Big Solar” nations led by China, the US and Germany - and possibly Japan depending on Japanese energy policy shifts - will be critical, but a maximum of 50 GW-per-year looks like the market top on a sustained basis, possibly by 2015.

This is the opinion of many analysts, for example at IHS Energy and Bloomberg New Energy Finance who quickly add that tariff issues – both solar cell costs and local power market tariffs, subsidies, and other aids such as Europe's ETS carbon emissions market – are critical and will stay that way. For consumers and users, the price-cutting war in the solar industry, which drove cell prices well below $1000 per kilowatt was welcome, but was a suicide note for the producers. Through 2013, the rate of price decline for solar cells has drastically slowed since the 2010-2012 period of peak shrinkage running at double-digit annual rates, and is now estimated by Solarbuzz at a trifling 2%-5% decline per year.

As in China, big government is likely the only actor powerful enough to prevent further erosion. The counterparty opposite of the previous business model, with solar markets offering high or extreme high margins attracting scores of new entrants, is easy to forecast if governments in the Big Solar countries play a game of protecting their national players at any cost.  Politically, this could hold attractions given the “leading edge tech” image of solar cells, but the industry is high cost-per-job and heavily dependent on mature local and national electric power infrastructures for rapid integration in the power system.

The current shakedown and shakeout is unlikely to be sundown for solar PV, and only the sign of a maturing, previously protected industry. Not only in China, and sometimes even more brutally elsewhere, governments have had to declare excess capacity in the industry exactly like other industries – such as steel, cement, carmaking and shipbuilding. Industry restructuring and  consolidation is inevitable.

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2013 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

Andrew McKillop Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in