The photovoltaic market is set to rise from the ashes and grow at 11 percent annually to $155 billion by 2018, as record low prices boost demand and double the market to 61.7 gigawatts, says a Lux Research report.
The Market Size Update 2013: Return to Equilibrium report says the PV market will reach a modest 35 GW this year before it ramps up rapidly, as supply and demand balance out by 2015 and ease price pressure on manufacturers. Over supply of modules led to unprecedentedly low prices that erased margins and pushed prices below cost for some manufacturers, but this has made solar competitive in more markets, says report author Ed Cahill.
Top predictions from the report –
- US, China, Japan and India will take over where Germany and Italy left off and the US will become the second largest solar market with 10.8 GW and an 18 percent growth rate by 2018, but China will overtake it and reach 12.4 GW at a 15 percent growth rate, the report says.
- While the utility-scale solar market is the smallest segment with 8.6 GW, it will witness rapid growth and reach 19.9 GW as developing markets resort to solar.
- Commercial installations will become larger as US and Japan increase rooftop solar.
- Struggling start-ups will offer opportunities to acquire intellectual property at record low prices.
Cahill gives the example of how Hanergy acquired Miasolé for only $30 million, after Miasole announced last year that it’s leading CIGS module efficiency was at 15.5 percent and investors had pumped $500 million into the firm.
The PV market enjoyed a growth rate of 77 percent in 2011 until incentives expired, when it dropped to 15 percent last year. Slow growth combined with manufacturer capacity expansion created a 104 percent oversupply situation, which forced manufacturers to slash prices and undercut each other.
The report points to how even tier-1 Chinese suppliers that enjoyed 24 percent margins in 2010 saw profits disappear, stalling expansions, creating fire sales and exits as the industry questioned where it was headed.
Cahill says over capacity has been a boon, since price pressure forced uncompetitive manufacturers out of the market and lead to industry consolidation. Overcapacity will drop to 12 percent in 2015, enabling manufacturers to raise margins and return to profitability.
His advice for companies that want a piece of the $155 billion pie in 2018 is to start planning now while intellectual property is cheap, so “the right technology can return big profits once the industry wakes up from its nightmare and returns to equilibrium.”
In the meantime, overcapacity and lower prices have benefited installers like SolarCity, which has expanded operations to Nevada.