MARKET BOOMS, OVERCAPACITIES AND 2016 AS THE BEGINNING OF A NEW PV MARKET CYCLE

by Gaëtan Masson, Managing Director

The 10 years of market and industry development have been marked by a series of market booms and failures, local markets growing faster than light and going into burst before one could notice, and forecasts being beaten one after the other. Many countries, especially in Europe experienced such rapid development, which was the mark of the early years of PV development. Many believed this was over.

After a reasonable market growth in 2015 that saw the market growing to slightly more than 50 GW, 2016 could have been a comparable year: some progresses in China and an expected growth in the US, a decline of the Japanese and European markets that was foreseen but compensated by the growth of India and other emerging markets. This could have triggered again a 10 GW growth, mostly concentrated in the utility-scale segment. But market drivers continue to be policy-driven and the influence of policy changes is still reflecting in hectic market developments.

Forecasting market evolution will always remain a difficult task, which requires first to understand which are the drivers. In that respect, the influence of the fear of policy decisions remains a major cause of anticipated market booms. The boom that China experiences this year is clearly the last episode and the 25 GW+ expected this year are largely caused by the announced FiT decline.

The second market in 2016 should be the US PV market, with an expected surge at the end of the year.

However, the two first quarters were to a certain extent disappointing. The market could still reach up to 13 GW, while a number above 10 GW seems in any case highly possible.
The Japanese market experiences a first decline this year, in line with expectations and the European market continues its difficult transition, with still some support from the now declining UK market.

Finally, growth continues is many markets, starting with India and in almost all continents.

2016 and 2017

The PV Market Alliance scenarios take into account these aspects to provide a central scenario for 2016 installations around 70 GW, which still depends on many factors and especially the final number for China. Finally, the market could range reasonably from 65 to 70, and even 75 GW. With enough installations in the first two-quarters to beat any other country, China becomes the new point of attraction, as Spain, Germany or Italy used to be. A point of attraction that will suffer from the announcement of China to limit its 2020 PV target to 110 GW instead of 150 GW. This point will be discussed further in the coming months but it already announces one thing: China will export more and more its PV technology, rather than concentrating all the development at home, with all due consequences. In addition, the election of Donald Trump in the USA raised concerns about the role that PV will play in the next years. Will the fear of an end to the ITC accelerate the market significantly in the coming months?

Coming from 50 GW in 2015, the growth is so significant that it might have surprised many spectators. But the most critical aspect of this growth is its unpredictability. Obviously, observers noted that China could see once such a level of installations, but not that it could experience a devastating boom that could let the entire PV market crippled next year. The worst is never sure, but the probability increases to see 2017 decreasing after a huge 2016 market, or stabilizing, which could have the same dramatic effect for the PV industry.

A wearying Chinese market could unassumingly bring the PV market down to a level below the one that could have been expected in 2016 without the Chinese boom, by an order of magnitude, and below 60 GW.

The declining PV market, the complex situation in Europe, and a decreasing market in China won’t be compensated by the expected growth in the US (but will it last until 2017?), India, and other emerging countries. This unfortunately could postpone most capacity expansions for the near future, while already achieved capacity extensions should trigger a new price war that we already see now.

Down from 0,45 USD/Wp in April, prices as low as 0,33 USD/Wp have been recently reported for tier 1 PV modules: the low range of prices is now sinking below the production costs of several tier 1 players.  This is alarming to know because even the most competitive producers might have difficulties to make a reasonable profit at this price level. This is especially import since the industry that just came out of a strong consolidation process and had some key players that are still struggling with their profitability.

From a market point of view, the price decline is always a good hook for further growth. Except in this case the market inertia (or policy inertia) doesn’t provide new markets to open soon enough to influence the prices upwards. The conditions for unlocking new PV markets, ensuring a stable development framework allowing them to live long and prosper, require more time than what would be needed to counterbalance the price decline, and the new overcapacity.

As a temporary conclusion, the PV market is entering a new zone of uncertainty, which might be a new step towards a higher level. But probably a painful one for some competitors. So far, 2016 is bringing many interesting wonders and 2017 might be even more surprising: the question is in which direction. Sound market analysis show that the uncertainty remains huge for the main PV markets in 2017, and a widespread fear of overcapacities is bringing module prices down. The PV Market Alliance will continue to bring the most sound and accurate information about PV market development, supporting the industry with key data and forecasts.