Industry report 2011 - Suppliers for Photovoltaics: The Market

The Market

: Wafer coating in a vacuum furnace

The nuclear reactor disaster in March 2011 in Fukushima had a profound effect on energy policy and may conceivably have an even bigger impact on changes in energy supply than the Chernobyl disaster did 25 years ago.

This disaster will not bring about an end to the use of nuclear power because too many countries have allowed their energy supply to become reliant on this form of energy. Nevertheless, the search for alternatives has become more pressing and renewable energies, especially wind energy and photovoltaics, will reap the benefit of this.

Photovoltaics did not play an important part in energy supply until just a few years ago. Only in Japan and Germany was it promoted heavily enough to stimulate significant market growth. In most countries there was little political support because the cost of using solar energy to generate electricity was still very high.

However, huge growth in demand, especially in Germany, boosted the mass production of solar modules to such an extent that costs dropped much more steeply than expected. As yet, there is no foreseeable end to this trend. In southern Europe, it will soon be possible to produce solar electricity that costs no more than mains electricity (grid parity).

Support for photovoltaics is constantly growing in more and more European countries as well as in North America and Asia, but so are the expectations placed on photovoltaics. This is especially true when it comes to reductions in cost which, as far as governments are concerned, cannot happen quickly enough. Not only that, in future, PV installations will be expected to do much more than simply feed energy into the grid, they will also be required to provide grid support and help prevent voltage dips. The extent to which manufacturing capacity has been expanded end to end throughout the manufacturing chain is a clear indication of the growing importance of photovoltaics.

Silicon production capacity

: An automated line for thin-film modules

Silicon continues to be the most important semiconductor that is used to generate electricity and solar-grade polysilicon is therefore still the photovoltaic industry’s most vital raw material. The purity requirements placed on polysilicon by the PV industry are not as exacting as those of the semiconductor industry but impurities in excess of 1 parts per million (ppm) are not tolerated. Polysilicon is available in the PV market in different grades with contamination levels between 0.1 and 0.01 ppm (equivalent to a purity of 99.99999 percent to 99.999999 percent). There is a continuing move towards increasingly higher purity. Manufacturers of high-power monocrystalline cells already insist on 99.9999999 percent purity.

: View of a thin rod drawing system

Manufacturing is relatively expensive and requires major investment. Because rapid growth of the fledgling PV market was not a sure thing, silicon manufacturers increased their manufacturing capacities only very tentatively to begin with. This led to significant shortages of basic materials from 2004 onwards and drove the price of silicon to giddy heights. Because the incipient expansion of production capacity from 2006 onwards was unable to keep pace with demand, these bottlenecks lasted several years and the spot price of silicon climbed as high as 500 USD a kilogram in the first quarter of 2008. For the first time ever, the PV industry’s silicon consumption outstripped that of the semiconductor industry. New plants sprang up everywhere like mushrooms, especially in China, and even established manufacturers invested heavily in growing their capacity.

By January 2009, the spot price of silicon was 150 USD/kg; by the end of 2009 it had fallen to 55 USD/kg. In June 2011, major manufacturers could supply silicon at 46 USD/kg and the spot price was 42 USD/kg. This change not only exemplifies how extremely dynamic the market is, it also reflects the fact that several years of silicon shortages are now at an end. The silicon industry has built up sufficiently large capacity to meet current demands.

Silicon demand of the PV industry

: Source: Solarbuzz, Bernreuter Research

: Quality control in wafer production

The Who’s Who of Solar Silicon Production (2010) Study, published by Bernreuter Research, analyses market trends by assessing production figures from around 100 manufacturers.

This study shows that, in the aftermath of the financial crisis, the construction of some polysilicon plants had to be postponed or even abandoned, especially in Europe, Russia, and India. The situation in China was completely different. After the onset of the financial crisis, massive state support (stimulus program) led to the banks relaxing their lending criteria and this encouraged investment in new factories. Production of solar silicon rose sharply in China and countries such as Taiwan also invested hugely in it.

Because of market fragmentation, it is extraordinarily difficult to establish precise production quantities. Analysts give widely varying estimates, ranging from 150,000 to 180,000 tonnes in 2010 and 190,000 to 300,000 tonnes in 2011. Bernreuter Research puts 2010 production figures at 175,500 tonnes (including roughly 30,000 tonnes for the semiconductor industry). Total silicon demand can be calculated from the production of crystalline cells and is significantly lower than supply.

Large-scale production costs have already dropped below 25 USD/kg. Market-leading companies will therefore remain unaffected, until further notice, by any oversupply that might trigger a drop in prices.

Development stages of a solar cell

: Monocrystal

: Pure silicon deposited onto thin rods

: Ingots

: Wafers

: Wafer coating

: Quality control of the cell

Wafer and cell production capacity

: Final cell inspection: light dome technology

Like silicon manufacturers, firms that produce wafers and cells have also boosted their capacity significantly. A look at the list of top 10 manufacturers confirms this clearly. Most leading wafer producers doubled or even tripled their capacity between 2009 and 2011. In total, their production capacity grew from 7 GW to around 19 GW and is thus considerably higher than actual production figures. This will become apparent in particular this year if the market growth stalls (as it is generally predicted to do) and production capacity amounts to around twice as much as market volumes.

Capacity utilization will barely exceed 50 percent in 2012 and 2013 and is quite likely to drop further. Firms that have specialized in the production of wafers will find it hard getting through this lean period.

Fully-integrated PV companies that handle every stage of manufacture under one roof, from silicon through to finished modules, may find it easier to make it through this trough and dislodge some specialized wafer manufacturers from the market.

Comparing both these tables shows that some manufacturers are both top ten wafer producers and top ten cell producers. We are well on the way towards integrated solar energy groups.

EPIA estimates the global c-Si cell production capacity to have been around 27 to 28 GW in 2010. Almost 50% of this capacity is located in China, over 15 percent is produced in Taiwan. Asian companies benefit from the expertise they had acquired from major production ventures in related areas such as LCDs and semiconductors.

Top ten wafer/cell producers

: * including external suppliers ** including Silicio Solar
Capacities reported at year-end, production calculated by iSuppli in MW (exceptions: REC Wafer, GCL-Poly, and ReneSola reported their 2009 production, it was therefore unnecessary calculate this)
Source: iSuppli Corporation, quoted in: Photovoltaik 02/2011

: Capacities reported at year-end, production calculated by iSuppli in MW (exceptions: Q-Cells reported production for 2009 and 2010)
Source: iSuppli Corporation, quoted in: Photovoltaik 04/2011

Thin-film production capacity

: Capacity of thin-film module producers (in MW)
Source: EuPD Research

Measured in terms of market growth and production capacity, thin-film technology is clearly lagging behind crystalline technologies. Worldwide market growth is moderate and supply far exceeds demand. The proportion of the total market accounted for by thin-film modules has been stagnating at around 15 percent. Crystalline modules account for the bulk of the remainder of the market.

This relatively small market volume is divided up between no fewer than 150 manufacturers. Fragmentation is made worse by the fact that there are three different competing thin-film technologies.

EuPD Research reports that 39 companies can be regarded as established players. Roughly half of these are based in Europe, one third are in the Far East and the rest are based in the USA. The vast majority of these companies produce thin-film modules based on amorphous and microcrystalline silicon (a-Si/mc-Si). This can be explained by the fact that this technology was the first to reach market maturity, around 20 years ago. In 2010, it accounted for roughly half of available manufacturing capacity.

Cadmium telluride modules (CdTe modules) are now becoming more important. EuPD Research expects manufacturing capacity this year to grow by around 40 percent whereas manufacturers of thin-film silicon modules will have to settle for growth of just seven percent. The world’s largest manufacturer of thin-film modules has decided to go with CdTe technology and is set to systematically increase its competitive lead.

Modules based on copper, indium, gallium, and selenium (CIS/CIGS) are also competing with thin-film silicon modules. This manufacturing capacity is growing the fastest and has doubled every year since 2008.

Plants will be capable of producing 7 GW in total this year. The fact that they are running well below full capacity is explained by the strength of crystalline technologies which are competing with each other fiercely and therefore have to slash costs significantly. The cost advantage which thin-film modules have in principle is not sufficient to win out over crystalline technologies.

As EuPD Research has shown, the entire PV market will only install 17 to 18 GW of new capacity in 2012. The EPIA forecasts growth of 15 to 23 GW that year, depending on underlying political conditions. If EuPD’s data is correct and the market share taken by thin-film modules stays at 15 percent, manufacturers can only expect demand of around 2 GW in 2012. Given the enormous excess capacity that will then exist, there will probably be a market adjustment.

Market volume

: Market volume in 2009 and 2010 as well as cumulative output in selected countries. There are six European countries among the top ten.

Top ten countries

: The Sarnia solar park (Ontario, Canada): currently the world’s largest PV installation with an output of 97 MW

Around one million PV installations have been installed worldwide over the last ten years and installed generating capacity grew almost 30-fold. During this time, photovoltaics has become an important power source. Its contribution to worldwide power generation is admittedly still small, but it has enormous potential – perhaps greater potential than any other known electricity generation technology.

By the end of 2008, 16 GW had been installed worldwide and one year later this figure was 23 GW. Installed capacity reached 40 GW in 2010 and the annual contribution made by photovoltaics to electricity generation was around 50 terrawatt hours (TWh).

Europe remains the leading market. Three quarters of capacity, i.e. around 30 GW, is installed there. Japan (3.6 GW) and the USA (2.5 GW) come next, but are far behind. China will reach the 1 GW threshold during 2011 but this figure is still relatively tiny compared with individual European countries, for instance Italy (3.5 GW), Spain (3.8 GW), let alone Germany (17.2 GW).

: 40 MW ground-mounted installation in Waldpolenz (Germany)

The European market derives its strength from its unique diversity and the relatively uniform way in which small and large installations are distributed over the respective available surface areas. There are small installations rated 1 to 5 kW on the roofs of single-family detached houses, larger installations (10 to 50 kW) on commercial or agricultural buildings, and largeSource: EPIA

installations on factories and warehouses that can generate up to 5 MW. Thanks to special subsidies, system installation on facades, i.e. building-integrated photovoltaics (BIPV) is now playing an increasingly important role. Ground-mounted PV systems are also making a considerable contribution to market growth. The largest systems in Europe are currently feeding around 80 MW into the public grid and there is still no sign of any limit to this growth.

The National Renewable Energy Action Plans (NREAPs) that were recently ratified as part of the European Renewable Energy Directive lay down the amount of photovoltaic capacity that must be installed by 2020 in every EU country. This gives an average annual market volume. Given current massive, ongoing cost reductions, the targets specified in the NREAPs appear relatively unambitious, some countries have already achieved or even exceeded them.

The targets set in the NREAPs are tantamount to a requirement to achieve a cumulative capacity of around 85 GW by 2020. This is equivalent to an annual electricity feed-in of around 80 TWh and roughly a two percent share of the total power that is likely to be generated in the EU in 2020. That only reflects the lower growth limit.

Market volumes and NREAPs
	2010 installed (MW)	2010 cumulative (MW)	NREAP target (MW)	Market until 2020* (MW)
Austria	50	103	322	22
Belgium	424	803	1,340	60
Bulgaria	11	18	303	29
Czech Republic	1,490	1,953	1,695	0
France	719	1,025	4,860	385
Germany	7,408	17,193	51,753	3,460
Greece	150	206	2,200	200
Italy	2,321	3,494	8,000	440
Portugal	16	130	1,000	84
Slovakia	145	145	300	16
Spain	369	3,784	8,367	460
United Kingdom	45	66	2,680	260
Rest of the EU	98	333	1,561	125
EU in total	13,246	29,253	84,381	5,541

Source: EPIA
* Market until 2020: average market growth necessary from 2011 to 2020 in order to reach NREAP target

Market outlook until 2015

Because the European market is relatively mature, it is possible to predict market trends up until 2015 with the aid of special scenarios. In 2009, the European Photovoltaic Industry Association (EPIA) presented three possible scenarios that go far beyond the objective defined in the NREAPs. Continuation of previous growth (business as usual) results in the baseline scenario which offers the prospect of a four percent share by 2020. The advanced scenario describes the maximum growth of photovoltaics that is achievable without any fundamental changes in the electrical infrastructure (i.e. without massively expanding the grid). According to this, photovoltaics could meet roughly six percent of annual electricity demand by 2020. The paradigm shift scenario is the most ambitious: If all obstacles to expansion were eliminated, the market share accounted for by photovoltaics in Europe could rise to twelve percent by 2020.

From these three relatively simple, statistical scenarios which all depict monotonic growth, the EPIA recently derived two scenarios based on current market trends; these scenarios describe possible market development until 2015 somewhat more accurately:

The moderate scenario describes a lower market growth path. It envisages a sharp market decline in 2011 with a slow recovery from 2012 onwards, resulting in a market volume of around 9 GW being achieved by 2015. If this continues until 2020, this would mean that at least the baseline scenario target would be achieved.
The policy-driven scenario anticipates a market decline in 2012 only, accompanied by subsequent faster growth. Until 2015, growth roughly tracks the monotonic growth of the paradigm shift scenario. Thereafter, more intensive political efforts are required in order to continue on this path – even if grid parity is achieved in many countries and individual market segments.

Projecting these scenarios onto worldwide development would, according to the EPIA’s calculations, make it possible to install 196 GW in 2015 if the policy-driven scenario is confirmed. The moderate scenario would result in a total worldwide capacity of 131 GW.

The EU currently dominates the world market and this situation is set to continue for a number of years yet. But it is outside Europe that the biggest untapped potential is to be found. Along the Earth’s “sunbelt” in particular, photovoltaics makes both economical and ecological sense – thanks to the large amount of solar radiation these receive, it could cover their demand. Systematic use of the potential of PV in the “sunbelt” could tap into around 60 to 250 GW of power by 2020 and 2060 to 1100 GW by 2030.