2012 Report Card plus my 2013 trends and predictions.
Though I’ll blame my lingering flu, the Photovoltaics: 11 Trends to Watch in 2012 review and 2013 photovoltaic (PV) trends and predictions post has again extended well into February. As usual, I won’t be grading on a curve.
Photovoltaic Market Demand Growth
Last year, I said:
In 2012, I predict at least 25% global PV installation demand growth. I am tempted by the under since the early year Feed-in Tariff (FiT) headwinds seem stronger than ever with serious talk of a 1 GW cap in Germany and PV installations in Italy expected to decline sharply from 2011. Has the German PV market peaked with the estimated 7.5 GW of installations in 2011?
For the context of the prediction, both IMS Research and iSuppli believed global 2011 PV installations exceeded 26 GW around this time last year. NPD Solarbuzz now claims photovoltaic (PV) demand for 2012 reached just 29.0 GW (GigaWatt), short of earlier estimates of 30 GW or more. My empirical observation has been prior year demand numbers settle by the end of March, but my prediction is well short of 25% demand growth even using the 26 GW baseline for 2011.
If that’s not enough, the German PV market did not peak in 2011, and eked out a small gain in 2012 PV installations to 7.6 GW.
I wonder if NPD Solarbuzz 2012 PV demand will be revised back upward because of 4Q12 (fourth quarter of 2012) module shipment growth at Yingli Green Energy Holding Co. Ltd. (NYSE:YGE) and JA Solar Holdings Co., Ltd. (NASDAQ:JASO) raising 4Q12 shipment guidance with others maybe to follow?
In the second part of the prediction, I said:
For the US, I’ll prognosticate at least 75% PV installation demand growth buoyed by modules purchased under the expiring 1603 Treasury Grant safe harbor, utility scale solar projects, and residential growth.
Per GTM Research, a division of Greentech Media, the US was forecast to install 1.2 GW of PV in 4Q12 and totaling 3.2 GW for 2012. Since the US installed 1.855 GW of PV in 2011 again per GTM Research, that implies about 72.5% growth in 2012, just short of my prediction! Perhaps the final numbers will settle in my favor when the next U.S. Solar Market Insight report is released?
In 2013, I predict near 20% global PV installation demand growth from the 2012 29 GW baseline to almost 35 GW.
For the US, I’ll swing for the fences and prognosticate at least 4 GW of PV installations even though we make things so difficult here for solar. More of these 4 kW (kiloWatt) installations at $2.50 per Watt in Texas would help.
As a bonus, I’ll predict the German PV market will still be larger than the US PV market in 2013. The timing and investor uncertainty caused by proposed amendments to the Renewable Energy Sources Act (EEG) and the national fall elections in Germany will decide this one.
1603 Treasury Grant and Tax Equity and Solar Finance
I did not make a prediction last year. For 2013, I have a lot of questions.
First, if the US sequester is not avoided, 1603 Treasury Program grants awarded in Fiscal Year 2013 are subject to a 7.6% reduction.
I wonder if US Federal tax reform does happen after the manufactured fiscal cliff and sequester crises pass? How will comprehensive tax reform impact the Investment Tax Credit (ITC) and the chances of the Treasury Grant program being resurrected? If discussions about 2017 and beyond develop, I hope the SEIA (Solar Energy Industries Association) has strategized on an ITC phase out plan much like the AWEA (American Wind Energy Association) proposed for the PTC (Production Tax Credit).
How available is tax equity in 2013 and has the delayed extension of the wind PTC increased the availability for solar?
There are a number of innovative solar finance trends to watch in 2013 including solar leasing, crowdfunding, Real Estate Investment Trusts (REIT), and Master Limited Partnerships (MLPs). Most originated or are developing fastest in the United States.
Of course, solar leasing or so-called third party financing is on fire, and over 70% of residential solar installations in California and other states opted for solar leases in 2012. GTM Research forecasts the residential solar financing market will “rise from $1.3 billion in 2012 to $5.7 billion in 2016” according to the report, “U.S. Residential Solar PV Financing: The Vendor, Installer and Financier Landscape, 2013-2016”.
I’m a bit concerned about the solar lease gold rush and believe the downsides to this model may become apparent by yearend 2013. Much as with car leasing, I expect more regulation in terms of disclosure and proper comparison of lease versus buy options. I was pleased to see a low interest rate loan option being offered to California residents going solar. By the way, “Sunrun Faces Class Action Lawsuit Over Its Marketing” strikes me as frivolous but may be a harbinger of things to come.
On the solar crowdfunding front, I tried SunFunder on the suggestion of Bloomberg New Energy Finance CEO Michael Liebreich at the end of his Energy All-Stars presentation. I found investing in a not for profit SunFunder solar project to be a fun, easy, and rewarding experience. By contrast, I just looked over at the Solar Mosaic website and get the impression I have to sign up just to browse the potential investments. I wonder if Solar Mosaic is targeting certain gross sign up metrics?
I am less enthralled about REITs and MLPs though “Solar REITs: A Better Way to Invest in Solar [Updated]” by Tom Konrad at Forbes has these covered.
As soon as I hear the word securitization in the context of solar, I think of Wall Street and boom, bubble, and bust cycles.
US solar trade claim against China et al.
Jumping into the trade area, I said:
For political reasons, I’ll go further to argue the imposed tariffs will not be punitive but amount to a slap on the wrist. Indications are China will respond with equivalent retaliation against polysilicon imports from the United States. The message is abundantly clear from a headline just today at DigiTimes: “Four China polysilicon firms demand government start anti-dumping and anti-subsidy investigation against US firms, according to China media”.
I think the Harmonized Tariff System of the United States (HTSUS) schedule for the complaint subheadings will impose duties in a range from 2.5% to 10% on cells and modules manufactured in China and imported to the US. The duties will be tiered; cells will have a lower tariff than modules to encourage NAFTA (North American Free Trade Agreement) based module assembly.
I got a lot wrong here beginning with the countervailing duty (CVD) and antidumping duty (AD) only applying to Chinese photovoltaic cells and not modules. Of course, a recent Coalition for American Solar Manufacturers (CASM) appeal looks to close the PV module/panel loophole.
Global solar trade cases have proliferated since the US China trade case. A European Union (EU) solar trade investigation into Chinese PV manufacturers spearheaded by the SolarWorld AG (FRA:SWV) led EU ProSun may be decided as early as April 2013 per “EU and China stumble towards solar trade war” by Robin Emmott and Michael Martina for Reuters. Meanwhile, India’s antidumping investigation of China, Malaysia, Taiwan, and US based solar manufacturers has resulted in a US challenge at the WTO (World Trade Organization) concerning domestic content requirements in India’s Jawaharlal Nehru National Solar Mission. The WTO set a precedent on domestic content requirements in the ruling against Ontario, Canada, with regards to their solar Feed-in Tariff program.
Not be left out of the solar trade investigations, the Chinese Ministry of Commerce initiated an anti-dumping investigation of US, EU, and South Korean polysilicon manufacturers last year. US and EU polysilicon manufacturers are also being investigated for countervailing duties. The Chinese decision on the polysilicon investigation is supposed to have been delayed until at least March 2013.
Polysilicon and solar grade silicon outlook
Regarding polysilicon, I said:
I expect polysilicon spot prices will remain below $38 per kg in 2012 and may briefly dip below $20 per kg at some point later in the year as the largest polysilicon supply versus demand correction since the Internet bubble plays out.
In another tough grade, polysilicon spot prices did not dip briefly below $20 per kilogram (kg) but smashed it for an extended period of time. I heard of polysilicon prices as low as $14 per kg for high quality material, and I’m sure a topper will claim a lower price for material of unknown vintage. Reports conflict if these spot prices were for material direct from polysilicon oligarchs or second hand, resold material.
Using the latest data, polysilicon prices appear to have reached an inflection point in February and are on the rise per IHS Inc. (NYSE:IHS) as polysilicon spot market volumes declined to 20% of total sales in December 2012 indicating inventories had been cleared.
On the 2013 polysilicon outlook, Mr. Johannes Bernreuter, head of Bernreuter Research, said:
The global polysilicon industry will return to the path of growth and increase its production by 6.5% in 2013, according to the latest analysis of Bernreuter Research. The polysilicon market research firm projects the global polysilicon net demand – including that of the semiconductor industry, but excluding the consumption of inventories – will amount to approximately 250,000 metric tons (MT) this year. The spot price is predicted to rebound to a level of US$20 to 25/kg by the end of 2013.
Going conservative, I expect polysilicon spot prices will remain below $30 per kg throughout 2013.
Thin Film Photovoltaics
For thin film PV, I said:
Beyond the Solar Frontier, I’ll be watching Stion and strategic partner TSMC Solar Limited, a subsidiary of Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), along with MiaSolé and the Solibro division of Q-Cells SE (FRA:QCE) for a third thin film contender.
After First Solar, Inc. (NASDAQ:FSLR) and Solar Frontier K.K., a wholly owned subsidiary of Showa Shell Sekiyu K.K. (TYO:5002), Stion, TSMC Solar, MiaSolé, and Solibro were the emerging thin film companies to watch though both MiaSolé and Solibro were acquired (saved?) by Hanergy Holding Group, Ltd. However, all of these firms have not been manufacturing at capacity or expanding during the PV shakeout. To this short list, I would add NuvoSun which began ramping a 40 MW production line in early 2012, and AVANCIS GmbH & Co. KG by virtue of being a subsidiary of Compagnie de Saint Gobain SA (EPA:SGO).
Just since my CIGS PV Poll Results and Analysis post in December, Nanosolar has had a reported 75% layoff, and per “State approves $20 million tax credit for SoloPower, as Portland plant struggles to meet job, manufacturing benchmarks” by Molly Young for The Oregonian, SoloPower replaced CEO Tim Harris and President Bruce Khouri left the firm as it has apparently failed to meet production, efficiency, and sales milestones.
OK, I’ll jump out on a limb and predict Nanosolar will line up further investment or be acquired and survive 2013.
HCPV (High Concentration PhotoVoltaics)
In 2012, I said:
I predict at least 100 MWp (MegaWatt-peak) of HCPV will be installed in 2012.
It could have been close, but I’m not counting the 50MW CPV Power Plant in Golmud, Qinghai, China, listed by Suncore Photovoltaic Technology Company Limited as “Grid-tied: Will be the first Quarter of 2013”. Suncore is a Sino-US joint venture between San’an Optoelectronics Co., Ltd. (SHA:600703) and EMCORE Corporation (NASDAQ:EMKR).
In 2013, I believe Soitec SA (EPA:SOI) will become =the= HCPV market leader based on project pipeline and installations leveraging their state of the art concentrator photovoltaic module manufacturing capacity in San Diego and Germany.
Oil and Natural Gas
On crude oil, I said:
Once again I’ll predict oil will stay below $135 per barrel through 2012 barring a force majeure event including tensions with Iran over the country’s nuclear program. I don’t believe rumblings of oil prices dipping to $85 per barrel or even $70 per barrel unless the global economy tanks into recession.
According to U.S. Energy Information Administration (EIA) data, 2012 per barrel oil prices ranged from $83.59 to $111.26 per barrel through November 2012 across domestic and imported supply so there was a brief dip below $85 per barrel for Domestic First Purchase Prices.
“Oil and gas price forecast for 2013” by Chris Nelder for SmartPlanet has a detailed analysis with both WTI (West Texas Intermediate) and Brent average crude oil prices forecasts.
I’ll predict oil will stay above $79 per barrel throughout 2013 unless the global economy tanks into recession referencing the same EIA data. I’ve got to get bailed out by these caveats sometime?
Of course, natural gas prices are even more important from an electricity generation and new capacity addition perspective especially in the United States. In the post mentioned above, Mr. Nelder said:
My forecast is for gas prices to approach $4 by the end of 2013, simply because unprofitable endeavors don’t go on forever and after two years this one feels about played out.
Mr. Nelder also believes the $4 per mcf (1000 cubic feet) natural gas price will reverse the trend resulting in some power generation switching back to coal.
PV Industry Shakeout
As the PV industry shakeout intensifies in 2012, even more companies across the value chain will fail than in 2011. I predict at least one of the CIS/CIGS start-up companies listed in the PV Blog Poll will fail in 2012.
Well, I could have said several. As recapped in CIGS PV Poll Results and Analysis, Soltecture, once known as Sulfercell Solartechnik, began insolvency proceedings in May. AQT Solar put its assets and intellectual property (IP) up for sale in August after promising to commercialize CZTS (copper zinc tin sulfide) technology by 2013.
With “Global Solar Energy Continues Operations and Pursuit of Strategic Alternatives” in December, “Global Solar had reduced its work force by about 70% to preserve operational and production flexibility.” So the Global Solar soap opera continues.
Not content with a single choice, I’ll prognosticate Global Solar will cease operations, and SoloPower will fail to meet it’s milestones to tap the $197 million US Department of Energy (DOE) Loan Guarantee under the 1705 Program in 2013.
PV IPOs (Initial Public Offerings)
I don’t believe a western PV module manufacturer will IPO in 2012. Outright acquisitions or majority stake strategic investors are far more likely possibilities.
Wow, that was a pretty wimpy prediction! The only solar IPOs in 2012 were Enphase Energy, Inc. (NASDAQ:ENPH) and SolarCity Corporation (NASDAQ:SCTY) after both reduced the price range in order to make the respective IPOs happen.
My 2012 “Out There” Prediction
So I said:
In a multiyear “Out There”, I predict the General Electric Company (NYSE:GE) will either divest it’s majority investment in thin film PV manufacturer PrimeStar Solar or move production offshore by yearend 2014 when they come to their offshoring, portfolio theory, photovoltaic senses.
Before the 4th of July, the General Electric Company (NYSE:GE) laid off workers and placed their Colorado CdTe solar manufacturing plans on hold in order to develop the next generation of CdTe (Cadmium Telluride) technology with at least 15% module efficiency. As I have said to those who will listen, be careful with the word success in connection with solar companies such as “Another SunShot Success: GE to Make PrimeStar Solar Panels at New Colorado Plant” by Minh Le, DOE Program Manager, Solar Program.
So far, no CdTe follower has succeeded. Will GE wise up and just acquire First Solar already if they favor CdTe thin film solar so much? That’s a question, not a prediction!
Who ever said tough Pass/Fail grading was easy?