The silicon dust is still settling after the great photovoltaic market crash of 2012. The shock to the system was borne almost entirely by the upstream segments of the PV supply chain, with end-users downstream reveling in lower prices and ever-increasing global demand for solar power.

If that was not entirely corrected this year, certainly the imbalance was not nearly as pronounced. Moreover, many analysts are looking to 2014 as the year that brings balance to the PV supply chain. While suppliers are not likely to recover lost ground in the near term - and casualties from wounded manufacturers are likely to mount - the worst of the bloodletting seems to be over.

Michael Barker, a senior analyst with NPD Solarbuzz who monitors the status of the global photovoltaic industry supply and demand balance, says the numbers are shaping up to be a year of price stability on the supply side of the chain. In particular, strong demand for PV modules in key markets is accelerating, and there is still money to be made for supply-side survivors.

“Global demand needs to exceed 40 GW of new capacity in order to achieve a balanced supply chain,” Barker says. “We expect demand to fall within the 45-55 GW range next year.”

Price stabilization seems likely, Barker says. Between the second and third quarters of this year, prices were down 1%. Over the same interval in 2012, prices fell 12%. “There is a price stabilization trend,” he says. “We are seeing more steady prices quarter on quarter.”

On the other hand, NPD Solarbuzz is not projecting any price increases in PV modules in the near term. This may be good news for solar project developers and installers but less heartening for suppliers. Leveling prices and increasing demand will produce an overall increase in revenues for the solar sector at large.

The raw deal

Raw material prices are also stable, and Barker expects polysilicon to remain flat for the next four quarters. Suppliers back up this observation. In the estimation of San Jose, Calif.-based solar silicon provider Silicor Materials Inc., annual installations will increase approximately 22% in 2014 to 42.8 GW from 35 GW this year, driven by growth in emerging markets, as well as China, Japan and India.

According to Silicor, silicon prices are expected to recover slightly next year. The company forecasts the spot and contract prices for silicon to average $26 and $27 per kilogram, respectively, in 2014. This compares with average spot and contract prices of $20 and $24 per kilogram this year.

Barker says increasing demand from Japan, China and Southeast Asia, along with continuing growth in the U.S., will cause PV capacity to almost double in 2014 on a global basis. According to an August quarterly report from NPD Solarbuzz, solar PV demand from China and Japan during the second half of this year is forecast to reach 9 GW, representing an increase of 100% compared to the first half of the year and 70% compared to the second half of 2012.

Overall, PV demand from the Asia Pacific (APAC) region will exceed 16 GW during this year, up 90% from 2012, and will account for over 40% of global PV demand, the report says.

Within the key APAC markets, NPD Solarbuzz says PV demand is being affected by policy disruptions. India’s economic problems are delaying implementation of Phase II of its ambitious National Solar Mission. Other problems include the ongoing anti-dumping case and the prospect of reduced feed-in tariff payments.

According to solar market research firm ENF Solar, 2012 was a disastrous year from the standpoint of Chinese core solar chain producers, which include ingot, wafer, cell and module manufacturers. The influx of Chinese core solar chain producers in the heady years of industry growth resulted in a severe price crash, ENF Solar says. In December 2011, the price for Chinese modules was approximately $0.92/W. By December 2012, selling prices had fallen to $0.60/W.

Profits evaporated, and the PV upstream supply sector experienced a dramatic shake-out, with many manufacturers going bankrupt and some vanishing all together. ENF Solar says that during 2012, the number of core solar supply chain manufacturers in China dropped from 901 to 704. Manufacturers of solar modules were particularly hard hit, with the number of suppliers dropping from 624 to 454.

Year of recovery

The survivors, however, still dominate the global PV market. NPD Solarbuzz reports that Chinese Tier 1 manufacturers of silicon PV modules - represented by 14 companies - have been steadily increasing their share of global shipments, growing from 40% at the start of 2012 to 50% of shipments by the third quarter of this year.

In terms of capacity, NPD Solarbuzz says quarterly PV module shipments for the top 20 Chinese manufacturers grew 21% from the second quarter of 2012 to exceed 5.8 GW during the second quarter of this year.

Global demand is likely to soak up what overcapacity remains from the supply end of the chain. During the third quarter of this year, demand from the global solar PV industry reached a new record of 9 GW. According to NPD Solarbuzz, this figure represents a 6% increase from the second quarter and almost a 20% increase from the third quarter of 2012.

“The record levels of mid-year demand in 2013 have been critical to the overall recovery of the solar PV sector,” Barker says. “Restored confidence in end-market growth is allowing leading solar PV manufacturers to pursue aggressive shipment strategies within both established and emerging territories, despite previous concerns that trade wars could dampen growth.”

NPD Solarbuzz projects solar PV demand to grow to 10 GW to 12 GW in the fourth quarter of this year, mostly represented by typical end-of-the-year demand from China and the U.S. Revenues for the downstream system end of the PV supply chain are expected to reach $21 billion in the fourth quarter, NPD Solarbuzz says, resulting in total revenues for the year to be in the $65 to $75 billion range. This compares to $68 billion in 2012 and $92 billion in 2011, when module and system prices were 20% to 50% higher.

Barker says he expects end-market demand to continue into the first quarter of 2014, which he notes is typically the weakest quarter for the industry. This demand is generally the result of rate incentives in major PV-consuming countries. Barker forecasts record solar PV installations in Japan and the U.K. during the first quarter of 2014.

According to Silicor, the gap between silicon production and capacity will narrow in 2014. Silicon capacity utilization will increase from 73% this year to 89% in 2014. Silicor says pricing of silicon has stabilized and will increase in 2014, driven by manufacturers as well as a shift in price-setting mechanisms for contracts. S