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
hwicht@isuppli.com

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

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

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 Forecast 2014, actual
 Production data: Production capacity, production, and Historical
shipments, utilization rates (Production capacity:
2010 forecast by quarter
 Financial metrics (32 companies at present): Revenue, Annual forecast to 2014)
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

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

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

Source – iSuppli Corporation PV market tracker, Q1 2010

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

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%

Source – iSuppli Corporation PV market tracker, Q1 2010

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


Global supply-demand outlook – long-term

PV module capacity
(iSuppli forecast)

Polysilicon capacity
(iSuppli forecast ) Installations (iSuppli forecast)

PV module capacity
(industry roadmap status Q1 2010)


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
2011 2012 2013 2014
Additional module 1500 4000 7000 13000
capacity MW
Capex (0,2$/W) 0.3B$ 0.8B$ 1.4B$ 2.6B$

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

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

2011 2012 2013 2014
Additional wafer capacity 0 4500 5500 9000
MW
Capex (1$/W) 4.5 B$ 5.5B$ 9 B$

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


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

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

2011 2012 2013 2014
Additional cell capacity 0 3000 5000 9000
MW
Capex (0,6$/W) 1.8B$ 3.0 B$ 5.4B$

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


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$/ 0.3B$ 0.8B$ 1.4B$ 2.6B$
W)
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$/ 0.12 B$ 0.07B$ 0.05B$ 0.05B$ 0.2B$
W)


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.


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