Uncertainty Will Shadow the PV Market in 2010
By Al Velosa 
As you look at the PV market on a global basis, there is a general wave of optimism as we have seen the general pick-up in demand. Germany spearheaded this drive with a great recovery in the past quarter, and will remain the world’s largest market in 2010. We’ve seen large projects installed in the U.S. in Florida, with promising project pipelines across the U.S. The Feed in Tariff in Ontario has demonstrated strong demand up in Canada.
Yet as I peer into my crystal ball for 2010 for the PV market, I see two core trends that will create significant uncertainty in the market and make the CEO’s of PV firms walk a tightrope between business development and supply chain management.
The first issue I see is continued issues with government incentives. There has been extensive discussion in the media about potential changes in German incentives in the middle of the year. Yet they are not the only issue. In the U.S. market we are looking at a dual set of incentive concerns. The more important tactical issue is the renewal of the grant program in 2010. The second is the passage of a national renewable portfolio standard by the U.S. government. It is hard for anyone to predict political compromises. It is hard to see how these issues will evolve in the U.S., especially as the Cap and Trade legislation appears stalled in congress. Other countries have had delays translating their legislation into implemented projects.
The second issue is the excess of capacity we see in the market. Despite Q4 demand, the current installed PV manufacturing capacity is significantly under-utilized. Especially if we look down into the Tier 2 and Tier 3 vendor plants. And this picture is further complicated by expansion plans that have been either ongoing or announced in the past quarter. Tier one vendors are in the process of adding well over a gigawatt of capacity through 2010. All this translates to an enhancement of the oversupply conditions we are in right now.
These two trends lead to a couple of key implications:
- Price weakness: We expect to see price degradation of at least 20% over 2009 levels.
- Bankability: This remains an issue for both new as well as established firms. Established firms are rolling out new products (thin film or modular solar systems) that will require further investment from them both in terms of warranties and sales personnel.
- Relationships: The key growth markets will require a more intensive time investment in relationship building than some PV firms expect. These markets have immature infrastructures, so PV vendors will need to work with utilities and permitting authorities to develop processes for PV projects.
- Given these factors for the market, we expect that the top 2 priorities for PV vendor CEOs will be extracting flexibility and low costs from their supply chain while ramping up their business development efforts on a global basis. In fact, supply chain management may end up being the most critical factor. Given how fast changes in government policy may change our supply-demand balance, PV vendors will be managing their supply chains very carefully in a just-in-time fashion.
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Therefore, look for continued investment in 2010 in operations management at the leading PV vendors, with a focus on increasing partnerships with leading EMS firms and on obtaining key talent.
Al Velosa is a Research Director at Gartner Inc. focused on the photovoltaic solar market
November 9, 2009
Mercom Capital Group Speaks About Global Market Trends for Utility Scale Solar at the TREIA Texas Renewables 2009 Conference
AUSTIN, Texas – Mercom Capital Group, LLC, an Austin-based public relations, public affairs and market intelligence firm, is pleased to announce that Raj Prabhu, Mercom’s managing partner, has been invited to speak at the 2009 Texas Renewable Energy Industry Associate (TREIA) conference held in Austin Texas at November 8 -10, 2009.
Raj will be speaking at the November 10 breakout session covering utility-scale solar. His presentation will specifically cover global market trends for utility-scale solar. The breakout session will begin at 2:20pm CST. The conference is being held at the OMNI Austin Hotel Southpark.
To get a copy of this report, please email us at info@mercomcapital.com.
