The Global Solar Power Market Shines Again


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Frost & Sullivan estimates that the global solar market revenue decreased by 12.9 percent in 2013 compared to the previous year. Market revenues are now on the rise again and it is estimated to reach $137.02 billion in 2020 growing at a compound annual growth rate (CAGR) of 12.6 percent. The market is expected to follow a positive growth pattern throughout the forecast.

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The Global Solar Power Market Shines Again

  1. 1. Global Solar Power Market Solar PV is Becoming a High-growth Mainstream Energy Source in Emerging Markets MA28-14 June 2014
  2. 2. 2MA28-14 Contents Section Slide Number Executive Summary 4 Market Overview 11 Solar Power Market - • Drivers and Restraints 20 • Forecasts and Trends 29 • Market Share and Competitive Analysis 58 CEO’s 360 Degree Perspective 67 North America Analysis 69 Europe Analysis 91 Asia-Pacific Analysis 113 Latin America Analysis 135 Middle East and Africa Analysis 157 The Last Word 178 Appendix 181
  3. 3. 3MA28-14 CEO’s Perspective 2 The Asia-Pacific market is the fastest and largest market for industrial, commercial, and residential solar PV systems. 3 FiT incentives, subsidies, and supportive government legislation have increased solar power market attractiveness. 4 Demand is fast emerging in the Latin America region and the Middle East and Africa (MEA) region due to rapid growth and unreliable electric grid networks. 5 Aggressive expansion by Chinese PV module manufacturers has led to global overcapacity and market consolidation. 1 Prices of solar PV modules are expected to decline further or, at best, stabilise because most companies still have high inventory levels. Source: Frost & Sullivan
  4. 4. 4MA28-14 Key Findings • Frost & Sullivan estimates that the global solar market revenue decreased by 12.9% in 2013 compared to the previous year. Market revenue is estimated to reach $137.02 billion in 2020 growing at a compound annual growth rate (CAGR) of 12.6%. The market is expected to follow a positive growth pattern throughout the forecast period despite economic uncertainty in the global market. • As a result of significant overcapacity and price decline of photovoltaic (PV) modules, the market registered negative growth in 2013 and larger global suppliers of PV panels struggled to make a profit, with some of them filing for bankruptcy. • In 2013, the industrial and public projects segment accounted for the majority of the annual installed capacity at 50% and will be the fastest- growing segment for annual capacity installed at a CAGR of 10.2%. • One of the key drivers for this market has been defining the structure of feed-in tariffs (FiTs) for solar PV-generated power. Favourable legislation should continue to propel the growth of the industry as a whole. • A number of government-sponsored initiatives are expected to boost the proportion of energy coming from green sources, and political willingness will also be a key driver of this market throughout the forecast period. With climate change high on the agenda for most governments, renewable energy has come to the forefront as one of the solutions proposed to combat global warming. Source: Frost & Sullivan
  5. 5. 5MA28-14 • Growth in the solar power market is impacted by the level of insolation that a region receives. Insolation is defined as the amount of solar energy reaching the earth, which is usually strongest on and around the equator and is measured in kWh/m2/day. • Higher latitudes have lower insolation levels, therefore, some regions are unattractive markets for solar PV. Key Findings (continued) • According to the European Photovoltaic Industry Association (EPIA), ‘‘China and India will lead the way as PV prices fall and economies rapidly develop in countries located ±35° around the equator.’’ China and India have become the most attractive markets over the last 5 years. Most large PV module manufacturers are building up their capabilities with tie- ups and alliances in these countries. Increased investment into this market is a result of the likely introduction of FiT systems, adequate solar radiation, and increasing awareness of renewable technologies. • With increased technological efficiency, the cost of generating solar energy has decreased significantly, though the installation and maintenance costs still remain relatively high. Therefore, incentive mechanisms are an important factor encouraging investments for growth of the solar power market. Key: kWh/m2/day = kilowatt hour/square metres/day Source: Frost & Sullivan Solar Power Market: Solar Radiation Map, Global, 2013 Image Source:
  6. 6. 6MA28-14 Key Findings (continued) • The reduction of emissions from greenhouse gases (GHGs) and other pollutants is a priority for many countries, while energy efficiency is one of the most cost-effective ways to enhance security of energy supply. In many ways, energy sufficiency is one of the drivers impacting growth of the solar power market. • The competitive landscape of the solar power market has been extremely dynamic with companies registering high growth at one point and declaring bankruptcy a few years later. • Low manufacturing costs in Asia, particularly China, have resulted in the liquidation of some industry pioneers such as BP Solar, Photowatt (one of the first PV companies to become profitable), and Evergreen Solar (which closed its solar division, as was the case for BP). Q- Cells also closed down (although it was later rescued by BMW heir, Quandt). Suntech declared bankruptcy in March 2013. • However, the market currently looks quite buoyant and Frost & Sullivan expects the market revenue to reach $74.79 billion in 2014, an increase of 25% over 2013. Source: Frost & Sullivan
  7. 7. 7MA28-14 Drivers and Restraints Solar Power Market: Key Market Drivers and Restraints, Global, 2014–2020 DriversRestraints DriversRestraints Greater demand for energy sustainability drives opportunities for solar PV. Recession-triggered price declines will accelerate installations. Government incentives promote the solar power market. High reliance on government support impedes development. Lower energy return on invested (EROI) compared to conventional energy systems reduces growth potential. Economic downturn and global instability still discourage significant capital investments in the market. The wider market for other renewable energy technologies restrains uptake of solar PV systems. Denotes long-term impact Denotes current impact Source: Frost & Sullivan Increasing environmental awareness and decreasing dependency on fossil fuels will drive the market. Technological improvements and advances in efficiency create new opportunities. Key Takeaway: Energy sustainability, price declines, and environmental awareness drive the market.
  8. 8. 8MA28-14 Revenue Forecast Discussion 0 20 40 60 80 100 120 140 160 2013 2020 Revenue 59.84 137.02 Revenue($Billion) Solar Power Market: Revenue Forecast, Global, 2013 and 2020 • The global solar power market revenues are expected to increase from $59.84 billion in 2013 to $137.02 billion by 2020. • The market is driven by increasing the focus to curb emissions, drafting strict clean energy regulations, and offering adequate subsidies to the renewable energy sector. Solar power finds applications across residential, commercial, industrial, and public projects. • As a result of significant overcapacity in the solar power market, larger global suppliers of PV panels in the emerging markets were struggling to make profits. The market witnessed drastic changes in the supply- demand pattern, regional policies, and tariff cuts. • The market is largely influenced by pricing patterns of PV modules and the ability of the global suppliers to exploit short-term revenue opportunities. • Because the market is likely to be driven by the emerging markets, it is important that the solar PV value chain is adequately integrated such that suppliers and project developers can adjust project deployment between different countries and regions on short notice. Note: All figures are rounded. The base year is 2013. Source: Frost & Sullivan Year
  9. 9. 9MA28-14 Annual Installed Capacity Forecast Discussion 0 10,000 20,000 30,000 40,000 50,000 60,000 2013 2020 Annual Installed Capacity 28,528 54,190 AnnualInstalledCapacity(MW) Solar Power Market: Annual Installed Capacity Forecast, Global, 2013 and 2020 • Frost & Sullivan estimates that the global solar market annual installed capacity decreased by 9.1% in 2013, compared to 2012. The annual installed capacity is estimated to reach 54.2 GW in 2020, growing at a CAGR of 9.6%. • A total of almost 45 GW of solar PV capacity is expected to be added every year until 2020. The price decline of PV modules will be a key market driver supporting the penetration of solar power, especially in emerging markets. • The solar market is sure to benefit from various incentive schemes in the forms of tradable green energy certificates, FiTs, and tax rebates for the use of renewable energy for power generation. However, it continues to remain very heterogeneous and solar PV penetration varies widely and is dependent on local and regional policies. • Policy decisions will drive the market during the forecast period. Environmental policies, along with upgrades and modifications of the electricity grid, will continue to have a heavy influence on the electricity prices for final consumers. Note: All figures are rounded. The base year is 2013. Source: Frost & Sullivan Year
  10. 10. 10MA28-14 Market Structure The most prevalent material in solar PV is solar-grade silicon in the form of ingots, wafers, or ribbon. Prices of silicon have declined dramatically in recent years, affecting manufacturers’ profits. Leading suppliers include China’s GCL and LDK, Korea’s OCI, US-based Hemlock, and Germany’s Wacker. Cell manufacturing is dominated by Chinese and Taiwanese firms. Most companies manufacturing cells also produce modules. China has been increasingly importing solar cells from neighbouring countries to circumvent US trade sanctions. To gain more control over the supply chain, most cell/module producers provide end- to-end solutions through a vertical integration strategy. Many integrated suppliers in China will shut down because the glut in supply will result in their factories being underutilised. Balance of system equipment suppliers refers to all other associated equipment manufacturers and suppliers in a PV system. The main components include inverters, charge controllers, and batteries. This is the most fragmented segment in the solar PV industry. Unlike the more upstream segments, it has remained highly profitable, benefitting from low-cost supplies and growing end-user demand as a result of falling costs. Solar Power Market: Market Structure, Global, 2013 Raw Material Suppliers Solar Cell Manufacturers Solar Module Manufacturers Balance of System Equipment Suppliers System Integrator/ Installer Source: Frost & Sullivan
  11. 11. 11MA28-14 Distribution Channels Solar PV Cell/Module Manufacturers End User Company-owned Dealers/Distributors Independent Accredited Installers Agents Partners Direct Sales Superstores EPC Sales Solar Power Market: Distribution Channel Analysis, Global, 2013 Key: EPC = engineering, procurement, and construction Source: Frost & Sullivan 30% Key Takeaway: Independent accredited installers are dominant in the distribution system. 10% 25% 15% 5% 5% 10%
  12. 12. 12MA28-14 Pricing Analysis Solar Power Market: Price Component Structure, Global, 2013 Component Per cent of Overall Capital Costs Trend PV module/panels 40–55% Inverters 20–35% Mounting Frame 8–12% Balance of Systems 6–8% Planning and Installation 10–20% • The PV module is a critical component of the solar PV system. Modules are clusters of PV cells incorporated into a unit usually under a sheet of glass. • The inverter is used to convert direct current (DC) electricity produced by the PV module into alternating current (AC) electricity. • A mounting frame’s purpose is to hold the modules together. Frames can vary in design and materials, depending on the type of installation: roof-mounted, pole-mounted, or ground-based. Also, tracking systems can be used to optimise the angle of the PV module relative to the sun, increasing the yields by 25% to 40% • Batteries can be used mainly for off-grid systems. Deep-cycle batteries in solar power systems are designed to be discharged constantly, over longer time periods. • The balance of system components includes meters, switches, and the cables. Note: All figures are rounded. The base year is 2013. Source: Frost & Sullivan Trend Decreasing Stable Increasing
  13. 13. 13MA28-14 Pricing Trends Solar Power Market: Price Trends, Global, 2001–2020 • The continued panel price reduction and the volatility of legislative policies make it difficult to predict the future of solar PV price movements. Frost & Sullivan forecasts that the price of PV modules is, at best, likely to stabilise, if not reduce further. • Although the price of solar systems has decreased in the last few years, the costs are still high for an investor with no incentives. • High costs lead to lengthy payback periods that may deter investments in solar power. • Moreover, several original equipment manufacturers (OEMs) from the United States and Europe are likely to penetrate the untapped Southeast Asia market to survive competition. • FiTs are the most popular form of government support. Source:; Frost & Sullivan 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 PricePerPeakWatt($) PV Cells PV Modules Year
  14. 14. 14MA28-14 LCOE Analysis LCOE, $/MWh Green energy Total Lifetime Expenses Energy Output, MWh Resource Availability Rated Power of Equipment Equipment Lifetime Equipment Availability Capital Costs O&M Costs Discount Factor Equipment Lifetime Discount Factor Comparison with ‘grid’ electricity Solar Power Market: LCOE, Global, 2013 • The LCOE is defined as the total life cycle cost of a PV system / total lifetime energy production. Massive regional variations and assumptions exist on every element of the LCOE equation. Capital costs and resource availability are the main factors affecting LCOE for solar energy. • The LCOE for PV solar electricity ranges between $0.10 and $0.20 per kilowatt hour (kWh). A few renewable energy sources are already competitive with conventional generation. However, solar is still above grid parity at present. • The price reduction of PV modules, FiT incentive schemes, and net metering policies that are adopted globally are likely to reduce LCOE and make it comparable with other conventional/renewable energy sources. Source: Frost & SullivanNote: operations and maintenance (O&M)
  15. 15. 15MA28-14 Solar Power Market: Solar PV Technology Curve, Global, 2013 Technology Analysis MaturityDevelopment Growth Decline Time Source: Frost & Sullivan Dye-sensitised solar cell (DSSC) MarketPenetrationandCommercialisation Organic Cell Hybrid HIT Cell 2nd Generation PV (thin-film based) 1st Generation PV (crystalline based) Third-generation solar cells aim to achieve high efficiency but still use thin film and second- generation deposition methods. This should be done with only a small increase in area costs and; thus, reduced cost per watt peak. Thin-film solar technologies primarily use non- semiconductor materials including copper, cadmium, and tellurium to create PV cells. Second-generation solar cells are cheaper than first-generation solar cells but have lower efficiency. They have lower cost per watt and are effective under low light conditions. First-generation solar cells dominate the commercial market because they have higher efficiencies. There is likely to be a sustained demand for this solar PV technology because it is cheaper, reliable, tested, and proven over the years. 3rd Generation PV
  16. 16. 16MA28-14 Technology Trends • Polysilicon-based technologies are the most widespread, but thin-film technologies have been gaining market share. However, the on-going price falls of polysilicon have eroded some of the cost advantages of thin film as its market share has remained at about 14% of the annual installed capacity in 2013. • The maximum recorded lab cell efficiency is about 20% for polysilicon-based technologies and 15% for thin-film solar cells. However, scientists at Empa, the Swiss Federal Laboratories for Materials Science and Technology, announced in early 2013 that they had developed thin-film solar cells with a new efficiency record of 20.4%. • According to the Fraunhofer Institute for Solar Energy Systems, material usage for silicon cells has been reduced significantly during the past 5 years from about 16 grams per Watt-Peak (g/Wp) to 6 g/Wp due to increased efficiencies and thinner wafers. Source: Frost & Sullivan • Until now, adoption of the first-generation technology (i.e., polycrystalline cells and modules) has dominated the solar power market. This includes both the on-grid and off-grid markets. • There is a slow and steady demand for thin-film solar cells, especially amorphous silicon cells and modules. • Extensive research and development (R&D) spending in recent years, combined with mass market development leading to scale economies, has led to dramatic declines in the cost of solar PV modules, estimated at up to 75% from pre-recession levels.
  17. 17. 17MA28-14 Solar Power Market: Life Cycle Assessment, Global, 2013 Regional Life Cycle Assessment MaturityDevelopment Growth Decline Time Source: Frost & Sullivan North America MarketValue Latin America MEA APAC Europe Middle East: Power demand and supply gaps and demand from infrastructure projects have created a market for solar PV. Africa: The African market is in a growth stage. The oil and gas and construction sectors are driving demand for solar PV. Major power outages in these regions will lead to increased demand for energy security. APAC: The power supply gap and demand for adequate electricity have created a need for solar PV in APAC. India, China, and South Asia have become attractive destinations for market expansion. Europe: The European market is in the late growth stage. European participants are considering geographical expansion and improving technological efficiency. North America: The expiration of the 1603 program in the United States will affect new system installations. Industry participants are convinced that the market in the Americas will grow, albeit at a slower rate. Latin America: Latin American countries are highly reliant on hydroelectric power. During droughts, the demand for solar power increases.
  18. 18. 18MA28-14 Strategic Analysis—Five Forces Model Source: Frost & Sullivan Intensity of Rivalry: High Opportunities are well known; therefore, many suppliers compete to enter bids in a good position. Bargaining Power of Customers: Medium- High In the current environment, the bargaining power of end users is high due to a large number of suppliers in the market. Bargaining Power of Suppliers: Low The market is end-user oriented for solar PV, and competition is fierce among suppliers to win projects. Threat of New Entrants: High The increasing activities by regional manufacturers, chiefly in the APAC market, have resulted in price competition and increased threats to large global participants of solar modules. Threat of Substitutes: Medium-High Most substitutes come in the form of other renewable and distributed generation technologies, such as gensets. The flexibility of the technology and support incentives are key decision drivers for solar. Solar Power Market: Five Forces Model, Global, 2013
  19. 19. 19MA28-14 The Last Word—3 Big Predictions 2 APAC will continue to be the largest region for solar power. Most manufacturers are likely to build up manufacturing capabilities either organically or through partnerships and alliances in the region. 3 The solar PV supply chain participants are likely to develop new technologies that will integrate PVs with flexible infrastructure grids. Solar PV power will mature into a mainstream technology with the help of efficient grid integration and management. 1 Effective policies and regulatory frameworks, the low cost of solar modules, and active participation and high awareness among customers will drive the growth of the global solar power market. Source: Frost & Sullivan
  20. 20. 20MA28-14 Research Team Lead Analyst Research Director John Raspin Partner Energy and Environment (+44) 20 7915 7814 Pritil Gunjan Industry Analyst Energy and Environment (+44) 20 7915 7832 Contributing Research Manager Alina Bakhareva Research Manager Energy and Environment (+44) 20 7915 7829