Market Watch

The solar photovoltaics market in the United Kingdom was virtually non-existent until April 2010, when the long-awaited feed-in tariff scheme was implemented. Yet, despite coming late to the game, the UK’s solar industry took off immediately, installing more than 80MW in the first 12 months alone. Now, just two years down the line, the market is placed as the world’s eighth largest. This paper will take a look back at how the UK got to this point as well as considering just how bright the future of this fast-paced market will realistically be.

Predicting what will happen to the global PV market is very nearly an impossible task. Its underlying principles are very similar to the dozens of other electronics markets that IMS Research studies, but the key difference in the PV industry is the very close link to, and ultimate dependence on, government policy. In a few years’ time, the introduction, halting or change (or rumoured change) of a single government’s PV policy will have little effect on the global industry, and the huge swings in demand will be less common and less severe. The reasons for this are clear. First, because of geographic diversification in the industry, a single country will account for a smaller portion of the global total (unlike in 2011, when Germany and Italy accounted for more than half of global demand) and thus individual governments’ policy changes will have a smaller impact. Second, if system prices continue to drop rapidly (and IMS Research believes they will), a growing number of regions will achieve the ‘holy grail’ of grid parity and will thus no longer depend solely on government policy to drive their markets.

The benefits of solar photovoltaic (PV) power are well known, and, as this awareness rises and the cost of generating PV electricity declines, the technology is becoming more competitive with conventional electricity sources in market segments all across Europe. But bureaucratic hurdles remain a persistent threat to the widespread installation and integration of PV, often making it difficult to take advantage of the technology. In many countries, administrative processes and permitting procedures still require significant improvement. As a result, planning and connecting a solar photovoltaic system to the grid can still take several years in Europe.

The PV industry stands on the verge of an enormous achievement – an installed base of PV plants with 100GW of energy generation capability. This milestone has come about because of the contributions of a fully global industry that has blossomed in the past decade. Yet even though the PV industry traces its heritage to before the space programme, as with any dynamically growing industry most industry members have joined in the past five years. And each generation often makes the same mistakes that a previous generation made. Sometimes the same people move from one industry to another and repeat the same mistakes there. The PV industry is rediscovering ultra-competitive market dynamics that have previously been seen in other high-technology commodity markets. This paper begins with a discussion of one such market – the dynamic random access memory (DRAM) industry – and then looks at the current PV market and the industry outlook.

In recent years, Germany has seen impressive growth in its PV market. From a virtually non-existent market based on the 1,000 roof support program at the end of the 1990s, Germany now represents the world’s biggest PV market and has created a strong PV industry base. With approximately 17GW of installed PV capacity at the end of 2010 – accounting for 2% of its electricity consumption, Germany has become a solar super power and triggered market growth and technology development worldwide. Nevertheless, the innovative scheme of feed-in tariffs (FiT), which provided incentives for solar PV installations and helped to ramp up an unknown cycle of innovation, will have to evolve towards more diversified ways of supporting system transformation of the electricity market and PV market integration until full competiveness of PV technology is reached in Germany, anticipated for 2017.

Traditional markets for PV will be scaling back on the level of demand for PV, but there are already signs that the developing countries will be stepping in to pick up the slack. This will be a combination of both standard grid-connected and micro-grid types of installation. Micro-grids present the opportunity for countries to develop a cellphone type of model for power distribution whereby regions without electrification can have a regional power source that allows for local access. This market is projected to become significant in the next several years, as the access to lower cost PV makes this option more easily implemented. This paper evaluates the market size of what has been an overlooked ‘niche’ for PV and describes the key considerations for a micro-grid installation, the developing conditions favouring installation, and some of the specifics of a micro-grid case study. The point is made that the grid-connected market will be increasingly assisted by the micro-grid segment as the latter becomes a significant source of PV demand and energy provision. Contrary to common notions, the micro-grid and hybrid off-grid segments will play an increasing role, even in areas with a grid in place.

The behaviour of PV markets over the last decade in Europe has taught us that not only it is necessary to optimally design support schemes, but that priority access to the grid for renewable energy sources and the reduction of administrative barriers are the key market drivers for sustainable development and essential for the markets to sustainably develop in the long term. This paper provides an overview of Europe’s PV market performance and delivers policy recommendations by means of EPIA’s PV Observatory model.

The Italian PV market is poised to become the leading market worldwide. However the recent GSE estimates have revealed unexpected volumes installed in 2010. This may lead to an adjustment of the feed-in tariff (FiT) level in the course of this year. GIFI (the Italian PV industry association) is preparing the field for a proposal to make the market development more sustainable, long-lasting and to upgrade the 2020 target.

Over the past two years the solar industry has shown itself to be incredibly resilient to general economic crisis. Supported by cost-cutting and efficiency improvements, the PV industry managed to achieve a growth rate of 120%, or 16.2GW, of newly installed capacity in 2010. Although individual companies are feeling the strong price and margin pressure and intensifying competition, the large, international and vertically-integrated companies are surviving. At least eight new PV markets with a potential annual capacity of 500MW are expected to be added over the next two years. The PV industry will therefore acquire the stability and political autonomy it needs to be able to grow unimpeded and to enter new dimensions. There might also be further tailwind for the PV industry from the catastrophic nuclear crisis in Japan.

One of the most important ways in which inorganic thin-film photovoltaics (TFPV) and organic photovoltaics (OPV) can distinguish themselves from more conventional crystalline silicon photovoltaics (c-Si PV) in the marketplace is through the commercialization of flexible photovoltaic products using those technologies. But flexible photovoltaics brings with it some challenges of its own in terms of excluding air and moisture from the cells; challenges that translate into opportunities for suppliers of advanced encapsulation materials and systems as well as for TFPV and OPV firms.