Posted by Michael Mendolia
Even in the midst of global economic weakness, the global photovoltaic market grew in 2011, though the exact figures remain in dispute. Bank Sarasin’s highly-regarded report from November 2011 estimated that in 2011 the newly installed PV capacity was at 21 GW, reflecting only a 3% growth since 2010. In contrast, the solar market report published in 2012 by the European Photovoltaic Industry Association (EPIA) indicated that 27.7 GW of photovoltaic installations were newly connected in 2011. Notably, the EPIA analysis discusses projects that were put in place in 2010 but were only connected to a grid in 2011. Such projects were particularly common in Italy, where systems which were installed towards the end of 2010 were only connected by mid-2011 and thus benefited from more generous Feed-In Tariffs (FITs). In fact, EPIA reports that Italy was the top PV market in 2011 with 9 GW of newly connected systems, catapulting itself ahead of Germany with only 7.5 GW.
Despite the positive results for 2011, most experts are cautious about the year ahead. This skepticism is primarily linked to the subsidy cuts that have already occurred in 2012 in several key markets – the Germany FIT was reduced by 15%; Italy cut its FITs by high single digit percentages (depending on system type and size) with further reductions expected in mid-2012; and the ITC Cash Grant expired in the US. According to EPIA, Italy and Germany accounted for 60% of the global PV demand in 2011, so their slowdown will have a significant impact on overall market demand. In fact, some analysts believe that the global solar PV market will actually decline in 2012 as a consequence. Because of the unpredictability of governmental policies, some solar players (such as First Solar) have changed their strategy and now focus on “natural” markets whose attractiveness is not due solely to incentives.
Administrative hurdles pose a further obstacle to solar adoption. A February 2012 report by PV LEGAL indicates that permitting and grid connection processes remain too burdensome in most of the investigated European countries. For example, in France, the administrative and legal costs for an average residential rooftop PV system account for 22% of overall project development costs (excluding the cost of the PV equipment); in the more mature (and efficient) German market, such costs only account for 11%, while in Italy, these costs account for a whopping 61% of the overall development costs. PV LEGAL concludes that permitting and grid connection processes remain too complicated, as too many authorities are involved, in countries such as France, Italy, Greece, and Spain.
Nevertheless, there is a reason to remain optimistic. The Bank Sarasin study indicates that Germany, Italy, and France continue to show plenty of potential (even though their growth rates will not be as exceptional as in previous years) and that the US, China, and India remain promising growth markets. Furthermore, EPIA has suggested that, despite dwindling government subsidies, photovoltaic systems will be viable in the long-term, since their costs continue to decrease and they will eventually be competitive even in the absence of such subsidies (the so-called point of “grid parity”). It is expected that photovoltaic electricity will be competitive with grid electricity for the commercial segment in Italy as early as 2013, and that, under the right conditions, photovoltaic electricity will be competitive with other energy sources throughout Europe by 2020. In certain limited markets, it seems as though grid parity has already been achieved; for example, it was recently announced that there is a 1 MW photovoltaic system currently being built in the Atacama Desert in Chile without any public subsidies; the high costs of grid electricity and the high solar irradiance of the region make photovoltaic energy a reasonable solution here, even without additional financial incentives.
Posted by: Michael Mendolia Ph.D., IBT Partners cleantech sector expert
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Data sources:
“First Solar slashes forecast, staff & plans to flee subsidized markets,” by Ucilia Wang of Gigaom.com, December 14, 2011.
“Market Report 2011,” EPIA.
“PV Manna in the Desert,” Photon, 2012, Issue 2.
“Reduction of Bureaucratic Barriers for Successful PV Deployment in Europe,” PV LEGAL, February 2012.
“Solar Industry: Survival of the fittest in a fiercely competitive marketplace,” Bank Sarasin, November 2011.
“Solar photovoltaic electricity can be a fully competitive energy source in Europe by 2020,” EPIA press release, September 2011.