April 10, 2006
Rapid Growth In Photovoltaics Demand Driven By Germany

If photovoltaics installations were primarily market driven you'd expect photovoltaics installations to be heating up in high sunlight places like southern California, Arizona, and New Mexico. FuturePundit thinks the lop-sided growth in photovoltaic demand so heavily weighted toward Germany is a sign that the demand growth is driven by regulations, not market prices.

World solar photovoltaic (PV) market installations reached a record high of 1,460 Megawatts (MW) in 2005, representing annual growth of 34%, says the annual PV market report issued today by Solarbuzz LLC, a San Francisco based solar energy consultancy.

Germany's PV market grew 53% to 837 Megawatts in 2005, corresponding to 57% of the world market. This level is eight times the size of the United States market. Japan's 14% growth took it to 292 MW.

Solar cell production reached a consolidated figure of 1,656 MW in 2005, up from 1,146 MW. Japanese producers maintained their leadership with 46% share, while Europe accounted for 28%. US cell production was 156 MW in 2005.

"Cumulative installed solar PV electricity generating capacity expanded by 39% in 2005 and now exceeds 5 Gigawatts worldwide and investment in new plant to manufacture solar cells exceeded $1 billion in 2005," said Craig Stevens, President of Solarbuzz LLC. "Meanwhile, the PV industry raised more than $1.8 billion on capital markets over the past 12 months."

The increase in demand obviously was not driven by falling prices for photovoltaics.

Despite a rise of 12% in silicon feedstock capacity, tight supply caused long-term polysilicon contract prices to increase by up to 25%. The on-going capacity shortfall will restrict world PV market growth to just 10% in 2006.

Solarbuzz market demand forecast scenarios show worldwide industry revenues will reach $18.6 to $23.1 billion with annual PV installations between 3.2 and 3.9 Gigawatts in 2010

California's few hundred million dollars per year in subsidies doesn't make the grade against German subsidies.

Generous new German government subsidies for solar installations in that country have especially pressured supplies just as California has approved its own 10-year, $2.9 billion program giving residents a $7,000 subsidy to add the units to their homes.

How about spending a few hundred million a year on photovoltaics research? Or how about spending a few hundred million a year insulating buildings and doing other things to make buildings more efficient? I'm far from convinced that subsidizing photovoltaics purchases is the most cost effective way to reduce fossil fuels consumption or accelerate energy technology development. I bet smaller subsidies per house to install solar hot water in a far larger number of houses would save more energy per dollar spent.

Solar photovoltaics systems prices rose at least 10% due to high silicon costs.

For years, solar cell prices gradually fell as demand grew and efficiency improved. But the tug of war between the huge chip industry and the growing solar cell manufacturing sector has pushed costs of solar systems up at least 10 percent, said Howard Wenger, executive vice president of Berkeley-based PowerLight Corp., which calls itself the nation's largest buyer of solar cells. A typical installation of a system that is integrated into the roof now averages about $21,000.

We need scientists to discover ways to make non-silicon photovoltaics materials that are far cheaper to manufacture.

Germany's subsidies are driving up prices so far that California's subsidies are getting out-competed.

What's not going up is the rate of installations. In California, which boasts 80 percent of the nation's solar energy production, installations, which surged almost 40 percent in each of 2003 and 2004, slowed last year to 22 percent, according to California Energy Commission statistics.

The commission has subsidized up to 90 percent of the solar installations statewide since 1998.

The Prometheus Institute claims solar production grew even more in 2005.

Preliminary estimates for 2005 show global photovoltaic (PV) cell production increased more than 40% from nearly 1200 MW in 2004 to 1727 MW in 2005. European production growth outpaced Japan, U.S. production was relatively lackluster, but the real highlight was in the aggregate of small, global producers outside of the major markets that more than doubled cell production.

But what is the average output of that 1727 MW of theoretical capacity? 30% of that? Note that the shift in demand toward Germany from California probably lowers average realized output as a percent of total capacity for new installations as compared to existing installations since Germany is further north and has more clouds.

Ron Kenedi, an executive in Sharp's photovoltaics business, told Reuters that a shift toward much thinner silicon-based photovoltaics will provide a solution for high refined silicon prices.

One thing driving up the cost is a shortage of refined silicon, the main active component of solar panels. Its price has risen 120 percent over the last 14 months.

But costs could ease as Sharp moves to producing "thin film" solar panels that use 2 to 3 microns of refined silicon, rather than the 200 microns in conventional panels, he said.

"We're starting to produce them and probably will produce them in the United States," he said, adding that new silicon refineries should open in 2008.

SunPower Corporation, a majority owned subsidiary of Cypress Semiconductor, is pursuing another method to make photovoltaics more cost effective: Sunpower claims to have the highest conversion efficiency for light turned into electricity for any photovoltaics product on the market.

SUNNYVALE, Calif., April 4, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- SunPower Corporation (Nasdaq: SPWR), a Silicon Valley-based manufacturer of the world's highest efficiency, commercially available solar cells and solar panels, today announced volume shipments of its new line of industry-leading solar panels. This next generation line of products comprises panels rated at 220, 215 and 95 watts respectively, and is designed to maximize energy production from a limited solar array footprint in residential, commercial, and remote power applications.

The new line of solar panels, SPR-220, SPR-215 and SPR-95, offers efficiencies of up to 17.7 percent, producing up to 50 percent more power in a given roof area compared to conventional solar panels, while reducing installation costs per unit of power. The SPR-215 panel incorporates the company's uniquely attractive, all-black design that enhances the appearance of roof-mounted solar systems. The SPR-220 was recently listed by Photon Magazine as the highest efficiency panel available worldwide.

Yet some analysts think high and still rising silicon prices limit SunPower's growth till 2008.

Sales figures for photovoltaics are not the numbers to watch. Prices are key. I'll be a more excited when photovoltaics costs stop rising and start falling again. I'll be a lot more excited about photovoltaics when prices start falling rapidly.

Share |      Randall Parker, 2006 April 10 08:41 PM  Energy Policy

hamerhokie said at April 12, 2006 6:51 AM:

I think New Jersey is the gold standard for solar incentives right now. You get a whopping $5 per KW for residential applications subsidized in NJ, which means around a 70% reimbursement. This rises to around 90% for commercial. And as photovoltaics get cheaper those percentages will rise.

Paul Dietz said at April 16, 2006 6:00 AM:

There are some companies that are now bringing to market PV modules based on CuIn(Ga)Se2 technology. This is a thin-film technology with an active layer perhaps 1 micron thick, so the high price and scarcity of In and Ga are not immediate roadblocks to annual production at the gigawatt level.

Windsun said at April 16, 2006 6:51 PM:

We have been in the solar electric business for over 25 years, and what you say is pretty much all true. And it is pretty much a mess.

The solar business right now is not market driven, it is subsidy driven. And all the subsidies have have the opposite effect of what was "supposed" to happen. It has driven the cost of solar up so high that only those in the heavily subsidized zones can afford it now.

About two yeas ago we were paying $2.90 a watt for large purchases (at wholesale) for most major brand of panels. Right now it rapidly approaching $4.40 to 4.75 a watt for most (some are even higher) - and that is OUR cost - the retail costs have gone up from around $3.50 a watt to over $5 a watt, in just two years. And are predicted to hit $5.50 soon.

And as far as this statement goes "And as photovoltaics get cheaper those percentages will rise...".. Well, they are not GOING to get cheaper, at least not for quite a while. Predictions of huge shortages for the next 18 to 36 months are pretty common from manufacturers. And despite some predicted relief on silicon feedstocks, there will still be a 20-40% shortfall.

And don't hold your breath for any technical breakthroughs - we have been hearing about and waiting for these since 1979, and we will probably wait for another 25 years. And you are wrong about one thing - we don't need more scientists to come up with yet more unproducable methods, what we need are more engineers to improve the production of what we have.

And there is a great unspoken fallacy about solar - it is NOT about saving energy - it about NOT having to save energy by adding solar to our houses. That way all of us in the developed countries can keep on wasting energy like crazy, in the meanwhile driving the prices of solar out of reach for those third world countries that really DO need it.

Johan Trip said at July 21, 2007 12:11 PM:

More on Demand dynamics in the major PV markets: International expert symposium. Milan, Tuesday 4 September 2007. Organized by SolarPlaza.com.

jiele proust said at March 19, 2009 5:32 PM:

the true problem is that energy prices are too low to begin with. they don't take into account the cost of fighiting in the middleeasa. operations, deaths through pollution and costs to maintain companies like haliburton etc.,

jiele proust said at March 19, 2009 5:35 PM:

the true problem is that energy prices are too low to begin with. they don't take into account the cost of fighiting in the middleeasa. operations, deaths through pollution and costs to maintain companies like haliburton etc.,

solar electric systems said at March 22, 2012 11:46 PM:

I agree with hamerhokie and also think so that hamerhokie mentioned.

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