After recent explosive growth capped by a 66% surge to 26.5 GW in 2011, solar installations will grind to a near halt this year – adding a mere 0.4 GW, totaling 26.9 GW of new installations, says Lux Research in a new report. Industry revenues will drop from $110 billion in 2011 to $92 billion in 2012 due to crashing prices.
However, new installations will rebound to 38.3 GW in 2017 as the industry learns to navigate a global market fast losing its subsidies, the market research firm predicts. A supply glut – caused mainly by Chinese manufacturers, speculation of incentive cuts in Europe and the end of the Section 1603 cash-grant program from the U.S. Department of the Treasury – fueled the sharp growth in installations last year.
‘The solar industry's storied history has created a massive misperception of technology maturity and commodity status,’ says Matthew Feinstein, an analyst at Lux Research and the lead author of the report (titled ‘Market Size Update 2012: The Push to a Post-Subsidy Solar Industry’).
‘Opportunities remain and extended success is possible for stakeholders, but the market's shifting geographic profile – combined with a forced withdrawal from subsidy addiction – means strategic, surgical moves are needed,’ Feinstein says.
Lux Research analysts ran a levelized cost of energy (LCOE) analysis in 156 separate geographies, accounting for 82% of the world's population, calculating internal rates of return, to determine the viability and competitiveness of solar in each market. Findings included the following:
Emerging markets will more than quadruple in size. They will be both a battleground for suppliers and a source of great strength, with South Asia accounting for the majority of growth, rising from 1 GW in 2011 to 4.5 GW in 2017, Lux Research says. However, Southeast Asia, Africa and South America will take the reins from 2017 to 2022, hurtling toward gigawatt status.
The utility-scale application segment will grow. In large, emerging markets like China, utility-scale solar will gain as conditions favor fewer, larger-scale projects that allow more control over financing and regulatory factors. This segment will grow from 6.3 GW globally in 2011 to 13.8 GW in 2017.
Oversupply is still a possibility, the report adds. Even the boom of 2011 was not sufficient to utilize all of the world's module capacity, which reached 50 GW and pushed prices down to $1/W. With China's 12th Five-Year Plan calling for major expansions in solar capacity, global markets will still see strong downward price pressure.
Securitization will boost smaller installations. Asset-backed securities are spurring growth of the small-scale segment in the U.S. residential and commercial markets. Securitization and renewable bonds, which have been tested in the past by SunPower (in Italy) and Wells Fargo (in New Jersey), are likely to see widespread growth in 2012 or 2013. Lux Research expects that major commercial banks, such as Citigroup, will lead this effort.