Goodbye to 2014 and 10 Things to Look Out for in 2015

It is that out with the old, in with the new, first-month-of-the-New-Year-when-anything-is-possible time again. The following list offers some cautions about the many announcements to come as the solar industry begins another year in competition with entrenched (and getting cheaper) conventional energy, another year surviving well-meaning government interference, another year of technological progress and struggles to maintain a margin. In short, it is time for another year in the ever volatile, always wonderful solar industry. Turn the page for the first of my 10 precautions.

Lead image: Looking Ahead in 2015 via Shutterstock

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1.      When sizing the industry, do not mix metrics.

When perusing information about the photovoltaic industry’s size it is important to remember that there are many ways to slice that particular pie. Figure 1 offers several metrics, supply and demand inventory, commercial capacity, production, shipments from production, shipments + inventory, installations and defective modules.

Grid connections are not included in Figure 1. Also, counting only grid connections ignores the remote (off grid) market.

Figure 1: 2014 into 2015 Photovoltaic industry metrics

Figure courtesy of SPV Market Research

The point is to ask what is being counted and more important, what it means. Production and shipments are not the same number and, when there is significant inventory from the previous year, production can be lower than shipments. Installations lag shipments and grid connections lag installations.

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2.     Capacity can be confusing and module assembly capacity is not necessarily the same as cell manufacturing capacity.

The capacity that counts in terms of what can generate electricity is the capacity to produce the semiconductor technology (crystalline cells and thin film panels). Currently there is on the order of 40.5-GWp of capacity to produce crystalline cells and about 45-GWp of module assembly capacity. Manufacturers that also manufacture cells hold most of the module assembly capacity. There are also pure module assemblers who buy cells from other sources and assemble the cells into modules. Many cell/module manufacturers have more module assembly capacity than cell manufacturing capacity. Nonetheless, industry capacity to produce an electricity-generating product is limited by the size of its semiconductor (crystalline cell and thin film panel) capacity. In 2014, more module assembly capacity was added than cell manufacturing capacity. Misunderstanding the difference risks misunderstanding what the industry can really produce. Figure 2 presents regional capacity for 2014 to produce crystalline cells and thin film panels.

Figure 2: Regional Capacity to Produce Crystalline Cells and Thin Film Panels.

Figure courtesy of SPV Market Research

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3. When manufacturers buy cells and modules from other manufacturers and everybody reports everything the industry becomes significantly over-counted.

Recalling item number 2, many manufacturers have more module assembly capacity than cell capacity. When these manufacturers announce shipment numbers that are higher than their cell manufacturing capacity, unless inventory from the previous year is included, the manufacturer bought cells from another source. When the seller announces shipments of 2-GWp, and the buyer announces shipments of the same 2-GWp, the industry has been oversized. Since in a business it is important to understand what your competitors are doing as well as what the real size of the market is, double and sometimes triple counting leads to a situation where strategic planning is made even more difficult. Figure 3 presents preliminary shipment shares from 2014 production. PV manufacturers in Taiwan primarily produce cells.

Figure 3: 2014 Preliminary Regional Shipment Shares

Figure courtesy of SPV Market Research

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4.     This year’s top ten manufacturers may be out of business tomorrow.

Today’s number one manufacturer will eventually slip from the top ten and potentially no longer be in business. Sharp Solar was the number one manufacturer from 2001 through 2007. Q-Cells was the number one manufacturer in 2008 and Suntech was the number one manufacturer in 2010. Figure 4 presents the top ten manufacturers for 1999, 2012 and 2013 (the year 1999 was included for context).


Figure 4: Top Ten Manufacturers for 1999, 2012 and 2013

 

Figure courtesy of SPV Market Research

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5.      This year’s strongest market will eventually fade.

Compiling the annual list, or lists, of the top ten markets for solar used to be in vogue, though, in such a young, vulnerable, volatile industry, still driven primarily by incentives of some type, these lists are moving targets. The rapid rise and decline of the market(s) in Europe provide a lesson as to how rapidly things change. Figure 5 presents the rise and decline of the market for solar (primarily PV) in Europe from 2008 through 2014.

Figure 5: Europe Shipments and Demand, 2008 - 2014

Figure courtesy of SPV Market Research

Figure 6 offers preliminary regional market shares for 2014. Remember, this year’s celebration is probably next year’s what happened? Changes to Japan’s FiT as well as grid constraints, and upcoming changes in the U.S. may, or may not, portend another shift in demand shares. Once upon a time Canada (Ontario) was expected to be a multi-gigawatt market.

Figure 6: Regional Market Shares (Demand) 2014

Figure courtesy of SPV Market Research

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6. When reading announcements about efficiency records, remember that there is a difference between a lab or champion result and commercial results.

Lab and/or champion cells are not developed on production equipment and cannot be compared with commercial conversion efficiencies. When manufacturers announce champion conversion efficiency results often it is not explained that these results are not synonymous with their commercial production. Unfortunately, this can lead to the perception that efficiencies are increasing more rapidly and more dramatically than they are. The time to progress from lab scale to pilot scale to commercial production is years, and this reality is often lost in excitement over the press release announcing the achievement. A champion cell result is an achievement. Pilot scale results are achievements. The road from lab result to commercial production is trod through repeatability and it takes time.

 Image: Silicon Crystal With Photovoltaic Cells In The Hand Of The Scientist via Shutterstock

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7.     Keep the optimism, but keep it in context.

Think of the solar industry as a long distance runner somewhat near the start of a grueling, exhilarating race while competing with many other runners, some with significant head starts. Every year (or, in the case of the solar industry every other week) at conferences amazing growth is celebrated and illustrated with PowerPoint slides without providing context concerning the electricity market in which PV competes. A little context will not kill you, nor will it discourage the committed. It is healthy to remind ourselves from time to time how much conventional energy renewables have to displace to shift the balance and to see where solar stacks up among the other renewable technologies.

Image: Solo Runner on a Beach via Shutterstock

Figure 7 offers US electricity production by technology in 2013, when, according to the EIA, the US generated 4,058 billion kWh of electricity.

Figure 7: US Electricity Production 2013

Figure courtesy EIA

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 8.     Prices go up and prices go down and prices for all goods can and often are manipulated.

The recent dramatic and manipulated drop in the price of oil should send shivers down the spines of all LCOE model builders. Price is a market function and as such is inherently unreliable. The price function is manipulated for various reasons and by almost all industries. Price is manipulated to gain share, when a product is not selling and often to pressure a competitor. In terms of prices, what goes up will come down and likely go back up again. Expectations of ever lower prices for solar ignore the fact that the solar industry is a business and as such needs a healthy margin to support ongoing activities including R&D.

Image: Up and Down Graph via Shutterstock

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9.      LCOE models are sales tools not oracles.

LCOE models (Levelized cost of electricity) are models, often used as sales tools and are subject to the biases of the modeler. Among the biases are that the price of conventional energy will continue to rise and that the cost/price of renewable technologies will continue to fall. In the case of solar, the prices/costs used for system components as well as operations and maintenance (O&M) used in LCOE models are based on prices that are artificially low and then are assumed to decrease significantly from that unrealistic point. Models can also be manipulated to prove the point of the modeler – and this last is a point worth remembering.

Image: Math and Numbers via Shutterstock

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10.  Government interference in markets almost always brings about more problems.

Finally, energy markets are heavily subsidized, prices for fuels and technologies are manipulated and the general public is uninformed that the price it pays for energy is almost always not reflective of its true cost. When governments – and this is mostly well meaning – further manipulate the situation in an attempt to correct a perceived imbalance the result is further imbalance, not correction.

Image: Red Rope in a Tangle via Shutterstock

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