The Solar Future DE - Henning Wicht "How will the dynamics of supply and demand look by 2013? "

Applied Market Intelligence

How will the dynamics of supply and demand look by 2013? The Solar Future II: PV Vision and Strategy Conference Munich, June 8, 2010 Dr. Henning Wicht – Senior Director and Principal Analyst [email protected]

iSuppli Corporation – 2 Copyright © 2000-2010 iSuppli Corporation. All Worldwide Rights Reserved. Confidential – Patents Pending

Agenda

The Solar Industry – what is going on?

Solar Installations – how will the market look by 2013?

Supply/Demand - Is Another Crash Coming?

Bottleneck Forecast


The solar 18 month cycle: From boom to bust and back to boom

The strategic questions of the PV industry Will we see an outbalanced market, can we increase prices?

Shall we procure short-term or do we need long-term contracts for 2011 and 2012?

Which business strategy is best: specialist or integrated?

iSuppli analyzes the industry along the value chain

Silicon and Wafer Cells and Modules PV Installations


Tracking the solar industry – data, models, forecasts

Company level: Top 60 Solar companies averaging 80% of the market Production data: Production capacity, production,

shipments, utilization rates Financial metrics (32 companies at present): Revenue,

gross profit, COGS, revenue per Watt, cost per Watt

Market level: Polysilicon, solar wafers, c-Si cells, c-Si & TF modules Production data: Production capacity, production,

shipments, utilization rate Supply / demand gaps

Inventory levels Supplier inventory Channel inventory

System demand / installations for 14 key PV countries Installations by market segment Revenues by market segment

Forecast 2014, actual and Historical

(Production capacity: 2010 forecast by quarter Annual forecast to 2014)


Solar Installations – How will the market look by 2013


Worldwide PV Installation Forecast


PV Installations by country

Total PV Installations in MW 2010 2009 2014 CAGR %

Germany 6,600 3,860 4,500 -9* Italy 1,070 582 6,743 58 Czech Republic 1,000 411 840 -4* USA 836 387 5,316 59 Japan 715 400 2,919 42 China 580 200 2,370 42 France 540 220 4,158 67 Spain 450 150 1,100 25 Belgium 420 220 1,405 35 Ontario (CND) 250 57 1,950 67 Korea 145 100 700 48 Greece 100 50 400 41 United Kingdom 95 1 501 52 Bulgaria 93 47 1,067 84 Rest of World 679 352 11,323 102

Total 13,573 7,037 45,290 37.1

* CAGR for Germany and Czech R. is negative since markets are expected to peak before 2014


Global Demand Forecast – The iSuppli Approach

1. Detailed analysis of key solar markets accounting for 90% of PV installations in 2009 and about 80% in 2014

Europe: Germany, Italy, France, Czech Rep., Belgium, Spain, Greece, Bulgaria North America: USA, Ontario (CND) Asia: Japan, China, Korea Rest of the World

2. Calculation of ROI and time to cash break-even per region and per market segment

5 kW residential rooftop 250 kW commercial rooftop 1 MW ground installation

3. Determine growth corridor by comparison with growth experience in Spain, Germany and Italy

4. Detailed evaluation of regional- and segment-specific parameters Capital availability/ impact of credit crunch, permits, FIT limits etc.

5. iSuppli forecast 2009 to 2014


PV installations will record again in 2010

Market size differs from XXL to M XXL: Germany 6600 MW XL: Italy, Czech R.*, USA, Japan

700 – 1100 MW

L: France, China, Spain, Belgium, Ontario 300 -600 MW

M: Greece, Bulgaria 50 -200 MW

A total of 13.5 GW of new installations is forecasted

Largest growth is coming from Germany, Italy and Czech* Republic.

*Note Czech Republic PV Moratorium: Czech R. put on hold new PV installations in March 2010 due to risks of grid instability. The current forecast of 1000 MW is uncertain. iSuppli will review the situation in CZ and update the forecast in June 2010


Germany 2010: monthly installations swing due to FIT changes

Jan. Feb. March April May June July Aug. Sept. Oct. Nov Dec Total

2009 MW* 2,89 16,5 56,3 115 150 205 308 291 327 377 497 1460 3860

2010 MW forecast 100 200 400 800 800 800 200 300 450 450 550 1550 6600

2010 MW* 224 162

* Data Bundesnetzagentur


The new German feed-in-tariff

What is happening? On May 06, 2010 the German parliament (Bundestag) accepted the

following changes proposed by the Ministry of Environment. New legislation should become mandatory by July 2010

Decision did not pass the Bundesrat (June 04); decision is pending Dates and Content of new FIT probably less sever

Originally proposed Changes by July 2010: One time cut of tariffs

– FIT cut of 16% for all rooftop installations – FIT cut of 11% for ground installation on conversion area (e.g. ex-military) – Self consumption bonus of up to 8 cts/kWh applicable for rooftop – No more funding of ground installations on agricultural ground

• still possible in 2010 if permitted before Jan 2010 Annually decreasing tariffs. Target: 3.0 GW of new installations per year

– FIT decreases 9% per year to compensate/stimulate productivity increase – If installations in the previous year pass the 3.5 GW, the FIT decrease accelerates

• 2011: 1.0% per additional GW

• 2012: 3.0% per additional GW Source: BMU, print 17/1604 dated 05.05.2010


Installations in Germany are expected to grow in 2011 but are likely to drop from 2012

The FIT, supporting self-consumed PV electricity, will stimulate new installations in 2010 and 2011.

PV systems delivering 30% of self-consumed power, will offer ROI of 8 to 10%.

Ground installations on conversion ground can achieve ROI of 6 to 8%

In 2011 new installations of 9,5 GW are forecasted from todays perspective. Rooftops will dominate with 8,5 GW.

Reaching out to 2012 it is expected that the German government might reduce the FIT again targeting a corridor of 3 to 5 GW of new installations as announced by the Ministry in February 2010.


Annual PV Systems installations by solar regions, 2009-2014

* Europe (Italy, France, Spain, Greece, Belgium, Bulgaria, excluding Germany) ** North America (US, CND) *** Asia (Japan, Korea, China)


Annual Installations by Application

Globally -- Commercial Roofs Remain Largest Opportunity


Supply/Demand – is another crash coming?


Polysilicon Capacity increases up to 50 GW

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2009 2010 2011 2012 2013 2014

Total Polysilicon Production Capacity (MT) 122.025 179.732 214.699 241.107 267.039 271.639

Electronic Demand [MT] 14.440 17.048 20.458 22.503 24.191 25.401

Conversion g/W 6,33 5,862 5,730 5,670 5,600 5,540

Solar Polysilicon Production Roadmap (2010-2013) [GW] 19,3 30,7 37,5 42,5 47,7 49,0


Solar Module Capacity to increase by 100% from 2009 to 2013

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2009 2010 2011 2012 2013 2014

Total Production Capacity (MW) 12.746 18.527 22.877 25.918 27.003 27.838 Additional required Capacity (MW) 1.500 4.000 7.000 13.000 Utilization rates 70% 87% 85% 83% 88% 92%


The short term view in 2010: PV is a very seasonal business


PV module capacity (industry roadmap status Q1 2010)

PV module capacity (iSuppli forecast)

Installations (iSuppli forecast) Polysilicon capacity (iSuppli forecast )

Global supply-demand outlook – long-term


Bottlenecks by 2013 – will Inverters still be the hot spot?


Bottleneck Analysis

1. Check Supply/Demand Data Demand vs production capacity

Utilization

Channel Inventory, Supplier Inventory

2. Is additional capacity beyond the industry planning needed?

3. If yes, is the industry able to invest or is there a risk of a bottleneck? Solar Modules

Silicon

Wafer

Cells

Inverter


Data analysis - Solar Modules (c-Si and Thinfilm)


Solar Modules – bottleneck (2011) is likely to be overcome

The Data shows that additional capacity is needed from 2011

Is the Industry able to add the additional capacity? Pro – Many large size Solar companies are able to invest

Competing on market share, size matters (economy of scale) Outsourcing companies are expanding (Flextronics, Jabil)

Pro – equipment industry can support market growth Numerous module lamination equipment on the market Equipment becomes cheaper for Chinese (weakening Euro)

Pro – ramping times are only 6 to 12 month Con – weakening Euro reduces margins for Chinese prodcuers, less

cash

2011 2012 2013 2014

Additional module capacity MW

1500 4000 7000 13000

Capex (0,2$/W) 0.3B$ 0.8B$ 1.4B$ 2.6B$


Data analysis - Solar Wafer


Solar Wafers – yes, a potential bottleneck from 2012 on

The Data shows that additional wafer capactiy will be necessary from 2011 on

Will the Industry be able to invest? Pro – the large players in the market REC, LDK, Solarworld are able to invest Pro – Silicon manufacturers can expand into wafering.

Option for Tier 2 and Tier 3 Silicon producers to increase margins

Con – Less large players than on Module level are interested in wafer; Tier 1 and Tier 2 suppliers are forced to expand

Con – Additional capacity has to be ramped fast already in 2011 Longer lead times and ramping cycle than Module production Higher Investments

2011 2012 2013 2014

Additional wafer capacity MW

0 4500 5500 9000

Capex (1$/W) 4.5 B$ 5.5B$ 9 B$


Solar Cells – a potential bottleneck from 2012 on, likely to overcome

The Data shows that additional wafer capactiy will be necessary from 2011 on

Will the Industry be able to invest? Pro – as in modules very large players are in the market Pro – as in module business scale matters Pro - Ramping time of 6 to 12 month and Capex of 0,3 to 0,5 $/W are feasible Con – weakening Euro reduces margins for Chinese prodcuers, less cash for

expansion

2011 2012 2013 2014

Additional cell capacity MW

0 3000 5000 9000

Capex (0,6$/W) 1.8B$ 3.0 B$ 5.4B$


Data analysis - Solar Inverter (Scenario)


Summary on PV Bottlenecks – Wafering can become a hotspot

Incremental Capacity required (B$) Capex ($/W) 2010 2011 2012 2013 2014 Modules (0.2$/W)

0.3B$ 0.8B$ 1.4B$ 2.6B$

Silicon

Wafer (1.0$/W) 4.5 B$ 5.5B$ 9 B$

Cells (0.6$/W) 1.8B$ 3.0 B$ 5.4B$

Inverters (0.01$/W)

0.12 B$ 0.07B$ 0.05B$ 0.05B$ 0.2B$


2013 - strong installations and strong seasonality

Installations will grow strongly +30 GW

Germany is expected to resume from 2012 on

In 2013 Europe still installs more than 50% of all PV Systems

Supply and Demand will continue to swing, strong seasonality of demand during the year

New capacity is needed beyond actual announcements

Modules, cells, wafer, inverter

Inverter shortage is not fundamental

Wafer capacities are running short by 2012. Potential Bottleneck.

The Solar Future DE - Henning Wicht "How will the dynamics of supply and demand look by 2013? "

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Transcript of The Solar Future DE - Henning Wicht "How will the dynamics of supply and demand look by 2013? "