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Could PV installations really have reached 26GW in 2011?
We’re still finalising our data for 2011, but we now estimate up to 26.5GW could have been installed last year following the phenomenal year-end rally in Germany.
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(Ash Sharma, Ash is Renewable Energy Research Director at IMS Research. He has been actively commenting on the PV industry since 2004.)
The simple answer is yes. Certainly enough modules and inverters were sold, and if installations really did hit 7.5GW in Germany then this would undoubtedly mean that at least 26GW was installed globally last year, with Germany retaining its position as the largest market, followed closely by Italy. We’re still finalising our data for 2011, but we now estimate up to 26.5GW could have been installed last year following the phenomenal year-end rally in Germany. This would have meant an incredible 10 GW was installed in the last quarter of the year – the first time this has ever happened and more than the whole amount installed in all of 2009!
As well as raising our estimates for 2011 global PV installations we’ve also increased our forecast to 26-28 GW for 2012, following the largely unexpected news of December installations hitting 3GW in Germany, as well as better than expected performance in other key markets. Late last week, we released an extraordinary update to our clients providing updated installation data for 2011 and new projections for 2012 based on new information, which contained quite a few surprises.
Although we had been predicting 2011 installations of 6-8GW for Germany throughout the year, the result of 7.5GW was even higher than our most-likely scenario forecast, and much higher than every other analyst predicted. However it was also the slightly higher than expected installations in Italy, UK and China which proved important markets in determining the global outcome for 2011.
Most module and inverter suppliers will be extremely surprised at this huge market size for 2011, mainly because they didn’t see the year-end rally coming. As channel inventory was already extremely high going into Q4, there were already plenty of modules and inverters to serve the booming demand and most suppliers only saw a moderate increase (or even a decrease) in orders, as most of the action was happening further down the supply chain.
How big 2011 really was - is going to remain a contentious issue. In fact, there are not many industries that fail to agree on their market’s size by such a great margin, as there is so many different methods of figuring out the size of true demand (installations, registrations, connections, shipments, etc…). This isn’t helped by some of the largest markets’ official statistics giving confusing and contradictory accounts of how much was actually installed in the prior quarter or year. Italy’s GSE for example still shows a 2010 market of both 2.3GW and 5.8GW for the same year in their reports! Based on our analysis of what could have really been physically installed in Italy in 2010, leads us to installations in the country of 4.4GW in 2010 and a huge 7GW in 2011.
The UK was another market to take many by surprise. We were considered bullish when we said back at the start of 2010 that at least 250MW would be installed in 2011 due to the new tariff. Many were surprised by our prediction and disagreed the UK would grow this quickly. I even accepted a bet with the CEO of a major manufacturer who said this would never happen when he called me up on the prediction in late 2010 (you can’t not like a bet when involved in predicting the PV industry!). Now we’re finishing up our analysis of the UK market and we’re estimating around 800MW was in fact installed here last year – quite an incredible feat!
So what does 2012 hold for the PV industry? Well, we consider flat shipments of another 26GW as being probable, but we also see upside potential of up to 29GW of new installations this year. On the other hand, some downside potential also exists. How successful 2012 turns out largely depends on what the German and Italian governments do now – it is clear that way more PV capacity was added than they had budgeted for; and what the Chinese (both the suppliers and the Government) do in response.
It is also clear that 2011 was another record year for the industry with an almost unthinkable amount of new capacity added – it just shows what a big difference a mild winter in Europe makes to the PV industry – perhaps we will need to start forecasting the weather as well as the decision-making of politicians!
Steep learning curve
811MW of solar installed in the US in the 4th quarter of 2011. That is almost the equivalent of a nuclear reactor. While today's grid tied solar only has a 25% capacity factor; meaning it is producing peak electricity only 6hrs a day, this is a significant amount of power. 1MW powers approximately 200 US homes.
In the 4th quarter of 2011 South Carolina approved installs for approximately 130kw that's 1/1000th of the overall US market. California is still the US leader with 38% of the US market. NJ is 11% of the overall market leaving the 47 remaining mainland states to divide up 51%. Assuming the top 5 of those take 8% each that leaves 11% for the remaining 42 states. That is a 1/4% for each state. That gives SC a target of 2MW a quarter and 8MW a year goal to be considered even thinking of contributing to a domestic energy policy. That's a steep curve but one we could easily achieve if we worked together.
In Q3’11, the US PV market grew by 32% from Q2’11 and could reach 1.9 GW for the year, which would mean that the market has doubled in size for the second consecutive year. For large-scale non-residential and utility-scale projects in Q3’11 and Q4’11, the scheduled expiration of the US federal cash grant has encouraged progress to meet qualifying requirements; ongoing installation will continue throughout 2012, stimulated by the progress requirements for these cash grants.
Evergreen and Solyndra have filed for chapter 11. These once promising manufacturers of solar panels based in Mass. and CA, USA, could not lower prices fast enough or gain enough market share or distribution partners to stem the increasing onslaught from Chinese manufacturers who are building US based factories and undercutting prices across the board.
While bankruptcy is always sad there are still 100’s of US based companies surviving and thriving in the overly competitive world of solar. This is also an incredibly exciting time to be in the solar industry. I can remember dreaming of a time when residential solar would be under $6 a watt installed. Well that day has come. I can also remember being disappointed when a utility industry leader told me that they would pursue solar when the install price was under $4 a watt. At that time I thought it was years away; well, that day has come too!
Solar in the US is actually an export business; $1.9B in 2011. The combined exports to China are in the $250 million dollar range. Most of this is in high-tech electrical components and industrial process machinery; areas of the market other than panels. (SEIA industry report 2011)
The political and economic uncertainty in the past 6 months has made this a very challenging time for most businesses but especially small solar companies in SC who have a product that is not yet critical to day to day operations. I think that is about to change.
Poly silicon prices have dropped dramatically and continued competition should propel that trend. The US economy is on the road to recovery. For the national market 1.8GWh of solar is expected to come on-line this year.
Several states currently have private leases for solar at the residential and commercial level. This influx of private capital has alleviated the up-front cost of solar and allowed securitization of solar projects. When investors get involved the market matures. $400m from Google to Solar City, $280m invested in Sungevity, Sun Edison offering leases in 6 states. This influx of capital is still generated by tax credits at the state and federal level so we are not at true parity yet.
What we do have is a way for both utilities and private companies to generate returns from solar projects that will enable growth and sustainable levelized costs.
One thing I have heard consistently from people in the energy industry in SC is that they do not want a mandate. We have mandates in 29 states; they specify a certain amount of energy must come from energy efficiency and renewable energy.
One way to ensure a mandate doesn’t materialize at the state level is to pre-emptively institute a PPA structure across the state that pays a small premium for renewable sources of energy. SC has the Progress Energy Sun sense program that is a perfect example of this.
If utilities paid offset costs plus 6c a kWh over a 20 year contract then private equity can see returns, business owners can see the cost benefit and solar will grow in SC. 1% energy increases in NC has covered these costs. This creates jobs, encourages out of state investment equity and shows a real commitment to community.
We have concrete proof in other states that capital market participation is the key to unlocking true ingenuity and job creation. I believe you institute this program and parity with coal will come years sooner. Ultimately diversifying our energy portfolio even on a small scale is good for all of us.
How do you find an equitable solution to the solar question?
I try to understand the whole energy issue. I have studied the history of the electrification of America, from the Rochdale Principals to the first hydro plant purchased by James Buck Duke and his subsequent decades of philanthropy. I have studied The french physicist A. E. Becquerel who discovered the photovoltaic effect, Thomas Edison's pursuit of a DC electric grid and his loss of market and eventual dominance of John Westinghouse and Nikola Tesla's AC grid.
The reason I have done this is because I knew very little about electricity before getting involved in solar except that I like electricity and want to continue to have access to it.
I have been extremely lucky in that I have been invited to see a working hydro, coal and nuclear plant. For someone who grew up loving motors and horsepower this has been fantastic, a lifetime memory. I have seen the immense raw power that drives our way of life and keeps our economy running. The bone tingling hum of 125MW of hydro turbines is more impressive than an F15 fighter jet or a 1000cc motorcycle at 150mph. I like to think I get it, the grid is immense, powerful, complicated and difficult to maintain. All of the people who run and operate electrical distribution or generation should be proud of what they do and are greatly under-appreciated. I recently had a capacitor break on my condensing unit in July during a 99' day, I sincerely recognize that electricity is the life blood of South Carolina.
I am a solar guy, I always will be. What does that mean? It means that I have looked at all the energy generation methods available to us, including fusion and I have come to the conclusion that only one resource can eventually permanently satisfy our energy needs and that is solar power.
The earth is a closed system, the only thing entering our atmosphere is photons from the sun. We are told the earth is round so we have finite resources other than the sun. That being said I need to emphasize that I said eventually. Solar today cannot directly compete with the energy output of coal or nuclear. Both of these combined currently account for 70% of our total electrical power generation in the US. I believe we currently consume 374 Terawatts or 374 trillion watts annually. This is a lot of power!
Solar today accounts for less than 1% of that power. If we covered every roof in the state with today's solar we could get 25% of our daytime power from solar. So the technical challenges are huge. I recognize that SC is a nuclear state with heavy investments from the federal government in research and development. Does this make SC mutually exclusive when we talk about starting a solar industry; far from it, I think it means we have a much higher threshold of integration before we have to worry about dispatchability or base load generation issues.
I also recognize we are asking for a new paradigm from our electrical generation and distribution companies. We want cheap, reliable, electricity all the time and we want you to shoulder the burden of research and development of the next generation of electrical production today at no cost to us the rate payers and members.
So how do we come together, the people of South Carolina, those that want solar and the thousands of engineers and other hard working professionals who provide today's electrical needs? Luckily I think it is possible, with careful steps, open dialogue and economic development we can achieve a new set of rules for this changing electrical industry.
Solar in North Carolina has been regulated and mandated. What has this achieved? 1350 solar jobs created during the recession, $300m dollars of economic activity and less than 1% increase in rates for North Carolina. This seems to be a positive step towards economic development, grid security and job creation.
It all has happened with no meaningful impact to the overall health and well-being of NC power generation and distribution companies. So if we promise to take into account the history, economics and politics of our energy landscape I am sure we can find willing partners to build a solar industry in the state we all love and live in.
If you drive on I77 South at night you will see the brightest area in all of Columbia. No matter the time of night there is a huge commercial complex of buildings lit up like Las Vegas on the fourth of July. These newly designed buildings are the new headquarters of South Carolina Electric and Gas and it is beautiful.
I have to say that I work with SCE&G, know a lot more about power production than I did 4yrs ago and I am an advocate for Solar power. Lighting the night is our way of proving our capabilities to conquer nature. Darkness is the unknown and potentially dangerous; this is why we all appreciate the tremendous job the power companies do.
In less than 150yrs man has completed his conquest over nature by:-
Using fossil fuel to ignore 10,000yrs of home building knowledge and build any building, anywhere we wanted;
Burn away the night and move to a 24hr day;
Disregard the local climate and burn fuel to meet our temperature needs.
Fossil fuel has powered the industrial revolution; the post industrial revolution and likely the 21st century economy. Living in South Carolina I have to say I love what it has done. I can comfortably live in 100% humidity and temperatures in excess of 90’, 8 months of the year without breaking a sweat, thanks to the power companies.
Now I have to ask them to change! Stop using energy without thought to our long-term well-being. No longer can these complex and large companies burn the ‘midnight oil’. I am asking every power company in America to stop being ‘Purveyors of Power’ and become something new, something better and more grand; ‘Engines of Efficiency’.
Turn off the lights; we know how innovative and ingenious you are. I have personally visited two power plants and they were awe-inspiring Tim Allen x1000). Now do something immensely more complex, challenging and difficult. Build motion sensors in every room and have the lights turn off automatically, utilize renewable energy, move to all electric vehicles, move to a tiered rate structure, build out a smart grid. Bring us the same 99.7% reliability and do it with zero waste! The laws of physics say it can’t be done, I think you can do it.
The state, the country and all humankind ask you to lead, will you lead us? In a state with regulated energy you have the capacity and support. We all know you have mandated profits and rate controls but within this construct you can also think beyond 20yr energy portfolios and do something we haven’t seen recently, long term planning. What do I mean by this? Let me explain,
I recently read about an english home that was built 400yrs ago, at the time huge oak timbers supported the great hall. The owner planted new trees with the instructions to never cut them down. Through multiple generations time passed and the trees grew. The house changed hands and families but eventually the old timbers dried and cracked. Can we plan tomorrow's energy trees for our children?
So what will it be; ‘purveyors of power’ in total disregard for the costs it could be exerting on the planet, our health and economic common sense or ‘Engines of efficiency’ leading the way for generations of new Americans and a world where everything changes but power availability stays the same.
