Intersolar Europe was upon us again last week in Munich, and GTM Research was there. Here are some highlights (and lowlights) from the show:
Despite proclamations to the contrary, the German downstream market is still alive and well. While only 650 megawatts were installed in January and February (typical for Germany), preliminary results from the BSW indicated deployment of 1.15 gigawatts in March, largely due to pull-in effects of an expected April feed-in tariff cut, which was subsequently delayed. Q2 installation run-rates are proceeding at a healthy clip, in large part due to the deployment of “grandfathered” ground-mounted projects under the pre-April 1 feed-in tariff regime. GTM Research is currently estimating 2012 installations in Germany to come in at around 6.5 gigawatts, compared to 7.5 gigawatts in 2011. As always, forecast risk with Germany remains firmly on the upside. Two other key stats: PV penetration in Germany is up to 4 percent of total generation, and average system prices in Q2 2012 were estimated at EUR 1.776/Wp, or $2.24/Wp at current FX rates. Since Germany is dominated by rooftop systems (72 percent of installations in 2011), this is an impressively low number. Assuming a module price of around $0.90/Wp, this implies an average BOS cost of $1.34/Wp.
Other European Markets
Romania and Bulgaria are receiving a lot of attention from module suppliers at the moment, with large numbers of megawatts going into the ground as we speak. It remains to be seen whether these are sustainable markets, positioned for long-term growth, or boom-and-bust plays like the Czech Republic in 2010.
Grid Parity Business Models in Spain
Multiple sources indicated that systems are currently being installed in Spain without the support of the feed-in tariff. Yingli, for example, talked about a 300-megawatt (!) project that would begin installation at the beginning of 2013. In terms of absolute megawatts, one expects the overall numbers of FIT-less deployments to be quite small, but this is still highly encouraging news.
Module ASPs are still on their way down. There is a pretty wide spread, but at the moment, modules are being sold for over $1.00/Wp on the high end (top-tier European/Japanese firms) to as little as $0.63/Wp (lower-tier Chinese firms desperate for cash). With Q3 expected to be slow across the globe, we expect prices to drop further still: our Q4 global ASP estimate for Trina, for example, is $0.77/Wp, compared to a Q1 ASP of $0.94/Wp -- and we’re afraid this could be too high.
Rationalization of Chinese Capacity
There were still a lot of unknown Chinese module suppliers exhibiting at the show, but my general impression was the numbers were down from last year, which can only be a good thing for the supplier landscape overall. Rumors were circulating that Chinese government officials were instructing state-owned lenders to adopt a tougher stance toward less-competitive component suppliers. Our view remains that the current supply-demand balance will persist well into 2016 unless Chinese lenders withdraw support from less-competitive firms – not just smaller, lower-tier suppliers, but large, established firms such as LDK Solar, for example.
Insolvent Suppliers Still Doing Business
A number of European firms that recently declared insolvency, including Sovello, Q-Cells, Scheuten Solar, and Soltecture, were still exhibiting at the show, some of them having generously sized booths. Some of these firms were hopeful of being able to emerge from their insolvencies leaner and stronger. We are skeptical.
Storage Solutions Abound
As one would expect, non-Chinese suppliers in high-cost regions are attempting to counter the ongoing commoditization of “plain-vanilla” components to below-cost levels (for these firms) by introducing value-added features that effectively de-commoditize the module. Chief amongst these were storage solutions. Examples of firms displaying combined photovoltaic-storage products were SolarWorld, Samsung, BYD, Aleo Solar, Centrosolar, Bosch/Voltwerk, and Kyocera. Most vendors are focusing on the battery management system, as well as the batteries themselves. We think that the presence of non-Chinese suppliers in the module space is critically dependent on the ability of these firms to successfully differentiate on the technology, business model, or product front going forward -- otherwise, it would be wiser to cut their losses and walk away right now.
U.S. Anti-Dumping Impacts
The U.S. Department of Commerce’s decision to impose anti-dumping tariffs on China-manufactured cells was still a focus of many discussions involving suppliers and the U.S. market. Response from Taiwanese cell suppliers, which were expected by many (including myself) to be one of the prime beneficiaries of the tariff, was mixed. While some firms indicated that order volume from Chinese module suppliers was indeed robust, others said that they had yet to see substantial business on this front. The challenge for some Chinese manufacturers remains how to ship modules incorporating proprietary cell technology to the U.S. without paying the tariff – examples of such products include Suntech’s Pluto and Yingli’s PANDA modules. At this point, the official line is that these firms are waiting until the DOC makes its final determination regarding the tariffs (which will be July or August). Ultimately, the answer depends on how important these firms view such proprietary, high efficiency products to their U.S. market strategy. If the answer is "very," an obvious solution would be to open cell manufacturing lines in nearby Taiwan. Such a measure has already been adopted by Astronergy, which opened a 50-megawatt cell line in Taiwan in January 2012.
SolarWorld vs. China Set to Get Uglier
Word on the street suggested that it was only a matter of time before SolarWorld initiated an anti-dumping trade case against Chinese competitors in Europe as well. However, it will be more difficult for SolarWorld to make this happen in the EU. One of the reasons is that in both regions, manufacturers representing at least 25 percent of production would have to stand behind the action. While SolarWorld’s 350-megawatt Oregon plant dominates U.S. c-Si manufacturing, its production share is much smaller in the EU, and many of the large cell-module suppliers in Europe such as Schott, REC, Isofoton, to name a few have ongoing relationships with Chinese firms which they would be leery of endangering. On a slightly different but related note, we heard that SolarWorld has been airing nightly TV spots in Germany starring Larry Hagman of Dallas fame. Apparently, the ad goes as follows: a young boy is playing with a toy, which he then drops and breaks. Hagman steps in says “Must be Chinese.” Make of it what you will, but subtle it ain't.
The Enduring Image
Yes, I saved the best for the last. And by best, I mean a new nadir in the objectification of women at German trade shows. Europe may be a more socially progressive society than the U.S. in many ways, but ask yourself whether this would be allowed at SPI or Intersolar North America. And no, I can guarantee you that this was not a wardrobe malfunction.