Falling costs for photovoltaic systems, components and manufacturing, combined with a shakeout among module manufacturers, are setting the stage for solar power to become a traditional market-driven industry, according to a new report from NPD Solarbuzz. One of the results of this shift will be the decreasing importance of individual markets and the rise of a more robust aggregate international marketplace for solar PV.
‘Until recently, the size of the PV industry each year was constrained by deployment levels across individual end markets, with global forecasting performed by adding demand from each country,’ says Michael Barker, senior analyst at NPD Solarbuzz. ‘Ultimately, 2014 year-end demand will be determined by how much product can be produced and shipped, analogous to a classic supply-driven market environment.’
The demand-constrained environment of the past few years was a catalyst behind the industry's over-capacity and over-supply problems that hindered capacity utilization rates, the report says. As a result, capital expenditure declined to an eight-year low in 2013. Demand during 2013 was driven primarily by the booming Asian market led by China and Japan, which are the top two markets globally. Adding in the U.S. – the third largest market – the top three countries accounted for almost 60% of total annual demand in 2013.
Over the past three years, PV installed system prices, module prices and module production costs have all fallen by more than 50%, while a shakeout of uncompetitive PV cell manufacturers has caused the number of suppliers to decline from 250 in 2010 to 150 in 2013, NPD Solarbuzz says. As a result of these falling prices, manufacturing consolidation and a more balanced supply-demand picture, PV demand will continue to grow, and the solar industry will shift from a demand-constrained market into a classic supply-driven market in 2014.
‘Looking at the global segmentation of the end-market demand in 2014, it is important again to consider the cumulative demand that is likely to be shipped into China, Japan, and the United States, rather than the specific number of gigawatts in each of these countries," Barker says. ‘A shortfall at any given time, in any one of these countries, will likely result in an uptick in demand from the other two.’