2.1      Report Highlights

  • The global market for solar modules grew by a compound annual rate of 40% from 1997 (114.1-MWp) to 2017 (93.9-GWp)
  • The cumulative total of PV cells/modules shipped from 1997 through 2017 is 378-GWp
  • In 2017 global system and application revenues increased by 9% from $99-billion in 2016 to $108-billion in 2017
  • In 2017 the grid-commercial application, all system sizes, consumed 89.1% of PV modules
  • Ninety-six percent of modules sold in 2017 were >300-watts and a majority were 72-Cell
  • Due to changes in China, the forecast for 2018 shipments ranges from 80-GWp to a potential of 103.3-GWp, with significant inventory hangover into 2019 with shipments at 103.3-GWp
  • Taken globally, Tender bidding for solar projects continues to trend downward with many bids <$0.03/kWh, indicating a global average in the mid-three cent range
  • From 2012 through 2017 the grid-connected application (residential, commercial and utility owned) grew at a CAGR of 29% while the grid-connected commercial application grew at a CAGR of 35%
  • The regional market of Latin America is estimated to experience growth of 31% to 39% through 2020
  • The regional market of West Asia (primarily India) is estimated to experience growth of 23% to 33% through 2020
  1. Introduction.. 9

1.1       Purpose and Scope. 9

1.2       Methodology. 11

1.3       Format. 15

  1. Executive Summary. 16

2.1       Report Highlights. 21

2.2       Overview of PV Industry Activity through 2017  22

2.2.1        What to Expect Through 2020. 24

2.2.2        Global Analysis Assumptions. 25

2.3       Application Overview.. 27

2.3.1        Application Growth through 2027. 28

2.4       Regional Overview.. 30

  1. Application Forecast: 2017-2022. 34

3.1       Historic Solar Industry Application Growth. 38

3.2       Application Market Share and Growth Rates  51

3.3       Photovoltaic Revenue Growth. 56

3.4       Selling Channels. 59

3.5       Solar Business Model Overview.. 67

3.6       Forecast Demand Volume 2017 – 2022. 74

3.7       Market Sector Analysis. 78

3.7.1        Market Share by Application and Module Size. 79

3.7.2        Remote Industrial Application. 83

3.7.3        Remote Industrial: Communications and Telemetry. 84

3.7.4        Remote Industrial: Cathodic Protection  90

3.7.5        Remote Industrial: Transportation Signals  93

3.7.6        Remote Habitation. 97

3.7.7        Remote Habitation: Water Pumping. 99

3.7.8        Remote Habitation : Village Power. 103

3.7.9        Remote Habitation: Outdoor Lighting. 111

3.7.10      Remote Habitation: Other. 114

3.7.11      Consumer Power. 117

3.7.12      Grid-Connected Application. 122

3.7.13 Grid-Residential 131

3.7.14 Grid-Commercial 135

3.7.15 Grid-Commercial Multi-Megawatt Deployment. 139

3.7.16 Grid- Utility Owned. 141

3.7.17       Consumer Indoor. 143

3.8       Application Forecast to 2027. 146

  1. North America: US and Canada. 151

4.1       United States. 158

4.1.1        U.S. Market Description. 158

4.1.2        Examples of US Business Models. 169

4.1.3        Examples of US Incentives. 174

4.1.4        Overview of U.S. States. 183

4.2       Canada. 186

4.2.1        Overview of Canada’s PV Incentive Programs  188

5      Latin America. 190

5.1       Mexico. 199

5.2       Chile. 203

5.3       Central America. 206

5.4       South America. 208

5.5        Caribbean. 210

  1. Asia Pacific & Oceania. 211

6.1       West Asia. 220

6.1.1 India. 221

6.2       Asia. 225

6.2.1        China. 226

6.2.2        Japan. 231

6.3       Southeast Asia. 234

6.4       Oceania. 237

7      Europe. 240

7.1 Germany. 250

7.2       France. 251

8      Africa and the Middle East. 252

8.1       Africa. 260

8.1.1        Republic of South Africa. 267

8.2        Middle East. 270

 

 

 

Figures

Figure 2.1 Photovoltaic Industry Activity: 1977 to 2017. 22

Figure 2.2 Global Forecast: 2017 through 2020. 24

Figure 2.3 Market Shares by Module Size, 2017. 29

Figure 3.1 Global Application Shares 2017. 35

Figure 3.2 Off-Grid Application Growth: 2012-2017. 40

Figure 3.3 Grid-Connected Application Growth: 2012-2017. 40

Figure 3.4 Off Grid & Grid Connected Application Growth, 1986-2000. 41

Figure 3.5 Off Grid & Grid Connected Application Growth, 1987-2017. 42

Figure 3.6 Photovoltaic Industry Activity: 1977 to 2017. 44

Figure 3.7 PV Inventory, Capacity, Production, Shipments, Installations & Defective Modules, 2017 into 2018. 55

Figure 3.8 Photovoltaic Module Shipments, Costs, ASPs, Price/Cost Delta, 2007-2017. 56

Figure 3.9 Worldwide Cell/Module Revenue Forecast 2007-2022. 57

Figure 3.10 Worldwide System & Application Revenues, 2016 & 2017. 58

Figure 3.11 Worldwide System & Application Shares, 2016 & 2017. 58

Figure 3.12 Market Shares by Module Size, 2016. 80

Figure 3.13 Market Shares by Module Size, 2017. 80

Figure 3.14 Remote Industrial Regional Market Shares, 2017. 83

Figure 3.15 Remote Industrial Sub-Application Market Shares, 2017. 83

Figure 3.16 Remote Habitation Regional Market Shares, 2017. 98

Figure 3.17 Remote Habitation Sub Application Shares, 2017. 98

Figure 3.18 Example of Remote PV Powered Generator. 104

Figure 3.19 Consumer Power Regional Market Shares, 2017. 118

Figure 3.20 Consumer Power Sub-Application Shares, 2017. 118

Figure 3.21 Grid Residential, Commercial and Utility-Owned Regional Market Shares, 2017. 123

Figure 3.22 Grid-Connected Residential, Commercial and Utility Owned Shares 2017. 123

Figure 3.23 Grid-Connected History & Forecast, 2012-2022. 126

Figure 3.24 Grid-Residential History & Forecast, 2012-2022. 132

Figure 3.25 Grid-Commercial History & Forecast, 2012-2022. 135

Figure 3.26 Grid-Commercial Off-Roof & On-Roof, Tracking Versus Non-Tracking 2017. 136

Figure 3.27 Grid-Utility Owned History & Forecast, 2012-2022. 141

Figure 3.28 Consumer Indoor Regional Market Shares, 2017. 143

Figure 3.29 Consumer Indoor Sub Application Shares, 2017. 143

Figure 3.30 Long-Term Photovoltaic Forecast, MWp 2007-2027. 146

Figure 3.31: Price History & Forecast all ASP Categories, 1997-2027 (2017 Constant Dollars) 150

Figure 4.1 North America Forecast 2016-2020. 153

Figure 4.2 North America Application Split 2017. 154

Figure 4.3 US PV Application Shares 2017. 158

Figure 4.4 US PV Application Contribution 2007-2017. 159

Figure 4.5 US PV Commercial Application System Sizes, 2012-2017. 160

Figure 4.6 US Top States for Solar PV Deployment, 2017. 164

Figure 4.7 US Demand/Supply Profile, 2012-2017. 166

Figure 4.8 US Supply and Demand Market Metrics 2017 into 2018. 167

Figure 4.9 Canada Application Shares, 2017. 186

Figure 5.1 Latin America Forecast 2017-2020. 191

Figure 5.2 Latin America Region Application Share 2017. 192

Figure 5.3 Mexico Application Shares 2017. 200

Figure 5.4 Chile Application Shares 2017. 204

Figure 5.5 Central America Application Shares 2017. 206

Figure 5.6 South America Application Shares 2017. 208

Figure 5.7 Caribbean Application Shares 2017. 210

Figure 6.1 Asia-Pacific/Oceania Forecast 2016-2020. 213

Figure 6.2 Asia-Pacific/Oceania Application Shares, 2017. 213

Figure 6.3 Global Module Assembly Capacity 2017. 214

Figure 6.4 Regional Shipments & Demand, Malaysia, Japan, China and India 2012-2017. 215

Figure 6.5 West Asia Application Shares, 2017. 220

Figure 6.6 India Application Shares, 2017. 221

Figure 6.7 India Solar PV Forecast 2016-2020. 224

Figure 6.8 Asia Application Shares 2017. 225

Figure 6.9 China Application Shares, 2017. 226

Figure 6.10 China Forecast 2016-2020. 230

Figure 6.11 Japan Application Shares, 2017. 231

Figure 6.12 Japan Forecast 2016-2020. 233

Figure 6.13 South East Asia Application Shares, 2017. 234

Figure 6.14 South East Asia Forecast 2016-2020. 236

Figure 6.15 Oceania and Australia Application Shares, 2017. 237

Figure 6.16: Australia Forecast 2016-2020. 239

Figure 7.1 Europe Demand for Solar PV 2005-2015. 242

Figure 7.2 Europe Forecast 2016-2020. 244

Figure 7.3 Europe Application Shares 2017. 245

Figure 7.4: Germany Forecast 2016-2020. 250

Figure 7.5: France Forecast 2016-2020. 251

Figure 8.1 Africa & the Middle East Forecast, 2017-2020. 253

Figure 8.2 Africa & the Middle East Application Shares 2017. 254

Figure 8.3 Africa Application Shares 2017. 260

Figure 8.4 North Africa Forecast 2017-2020. 264

Figure 8.5 Central & Southern Africa Forecast 2017-2020. 264

Figure 8.6 Republic of South Africa Application Shares 2017. 267

Figure 8.7 Republic of South Africa Forecast 2016. 269

Figure 8.8 Middle East Application Shares 2017. 270

Figure 8.9 Middle East Forecast 2017-2020. 273

 

Tables

Table 2.1 Overview of Low Forecast Assumptions. 25

Table 2.2 Overview of Conservative Forecast Assumptions. 26

Table 2.3 Overview of Accelerated Forecast Assumptions. 26

Table 2.4 Major Market Categories and Sales Volume by Channel. 27

Table 2.5 Major Application History, Growth, Forecast & CAGR Rates 2007-2027. 28

Table 2.6 Regional Application Shares 2017*. 30

Table 2.7: Regional Forecast 2016 – 2020*. 31

Table 2.8: Regional Attractiveness 2018*. 33

Table 3.1 PV Industry Growth 1997 – 2017. 43

Table 3.2 Application Trends 2002-2017 (1,2,3) 46

Table 3.3 Generic Application Segments. 47

Table 3.4 Regional Application Deployment, 2017*. 48

Table 3.5 Regional Demand, Installations and Shipments, 2012-2017*. 49

Table 3.6 2017 PV Module Assembly Capacity, c-Si Cell/Thin Film Capacity, Shipments & Announced Shipments *. 50

Table 3.7 Aggregate Application Growth 2012-2017*. 51

Table 3.8 Major Application History, Growth, Forecast & CAGR Rates 2007-2027. 52

Table 3.9 Three Year Application Forecast, 2017 – 2020*. 54

Table 3.10 2017 Selling Channels for Major Applications by Volume Share (1) (2) 61

Table 3.11 Major Photovoltaic Application Categories. 73

Table 3.12 PV Industry Application Growth* 1992-2017. 74

Table 3.13 Conservative Application Forecast, 2012-2022*. 76

Table 3.14 Accelerated Application Forecast, 2012-2022*. 77

Table 3.15 Application Categories. 78

Table 3.16 Historic Market Share by Application & Module Size. 81

Table 3.17 2017 Market Share by Application & Module Size (1) 82

Table 3.18 Communications & Telemetry, MWp & % of Category 2012-2022(1) 85

Table 3.19 Cathodic Protection Applications MWp & % of Category, 2012-2022(1) 92

Table 3.20 Transportation Signals Applications MWp & % of Category, 2012-2022(1) 96

Table 3.21 Water Pumping MWp & % of Category, 2012-2022(1) 101

Table 3.22 Village Power Applications MWp & % of Category, 2012-2022(1) 107

Table 3.23 Outdoor Lighting Applications MWp & % of Category, 2012-2022(1) 113

Table 3.24 Other Applications MWp & % of Category, 2012-2022(1) 116

Table 3.25 Consumer Power Applications MWp & % of Category 2012-2022(1) 121

Table 3.26 Grid-Connected Application Growth 1997-2017*. 122

Table 3.27 Grid Connected Applications MWp & % of Category, 2012-2022(1) 127

Table 3.28 Summary of End User Concerns*. 129

Table 3.29 US Average System prices 2012 through 2017. 130

Table 3.30 Residential Business Models*. 134

Table 3.31 Cost Analysis for PV Systems >5-MWp in the US, China and India. 140

Table 3.32 Consumer Indoor MWp & % of Category, 2012-2022(1) 145

Table 4.1: North America Regional Forecast 2016 – 2020*. 152

Table 4.2 North America Demand Growth* Low, Conservative & Accelerated, 2016-2020. 155

Table 4.3 North America Application % of Total* 2015, 2016, 2017. 156

Table 4.4 US and Canada Regional Attractiveness 2018. 157

Table 4.5 US Electricity Prices in Cents/kWh by Segment & Region Mid-2017. 165

Table 4.6: US System Prices, 2011-2017. 168

Table 4.7 US Forecast by Application Segment, 2017-2022*. 182

Table 4.8 US State Market Attractiveness 2018. 185

Table 4.9 Electricity Rates by Canadian Province in cents/kWh. 187

Table 4.10:  Overview of Rebates and Net Metering in Canada. 188

Table 4.11:  Ontario Power Authority FiT/MicroFiT Price Schedule as of January 1, 2017. 189

Table 5.1: Latin America Regional Forecast 2016 – 2020*. 190

Table 5.2 Latin America Regional Growth, 2016-20201,2,3,4) 193

Table 5.3 Latin America Regional Application Shares 2017*. 194

Table 5.4 Latin America Market Attractiveness 2018. 198

Table 5.5 Mexico Average Utility Scale System Costs. 199

Table 5.6 Chile Average Utility Scale System Costs. 203

Table 6.1 Asia Pacific & Oceania Regional Forecast 2016 – 2020*. 211

Table 6.2 Asia-Pacific-Oceania Growth 2016-2020 MWp (1,2,3) 216

Table 6.3 Asia-Pacific-Oceania Regional Application Breakdown % 20171) 217

Table 6.4 Asia-Pacific-Oceania Regional Attractiveness 2018. 219

Table 6.5 Example of Utility Scale Costs in India. 223

Table 6.6 Example of Utility Scale Costs in China. 229

Table 6.7 Example of Utility Scale Costs in Japan. 232

Table 7.1 Europe Regional Forecast 2016 – 2020*. 243

Table 7.2: Europe Growth 2016-2020 MWp. 247

Table 7.3: Europe Application Shares 2017*. 248

Table 7.4: Europe Attractiveness 2018. 249

Table 8.1 Africa & Middle East Regional Forecast 2016 – 2020*. 252

Table 8.2: Africa & the Middle East Application Shares, 2017*. 255

Table 8.3 Africa & the Middle East Regional Growth 2016-2020*. 256

Table 8.4: Africa & the Middle East Select Market Attractiveness 2018. 259

Table 8.5 Namibia Net Metering Avoided Cost. 266

Lyrics by Paula Mints, Copyright 2018

I walk this life alone

Don’t you worry about me baby

Can’t bring myself to atone

For sins I committed gladly

 

I know you want me home

But I lost the feel for it lately

I’m better on my own

Don’t you worry about me baby

 

I think of you sometimes

Usually when I’m lonely

These dreams don’t last too long

Just long enough to wake me

 

I walk this life alone

Don’t try and follow baby

If you want me, I’ll be along

Long enough for you to taste me

 

I know you cry sometimes

I know you think you need me

But I need to walk this life alone

This road is what completes me

 

I’ll think of you sometimes

When I’m taking things more slowly

Or maybe in the night

Dream of you pressing against me softly

 

And I’ll be back around

But don’t bother to expect me

Because I walk this life alone

Except for the ghosts who chase me

 

 

Despite its debunking by most (all) economists, policy makers still use Infant Industry Theory to justify protectionist trade policy. Infant Industry Theory holds that domestic industries need to be protected and nurtured (much as infant children need protection and nurturing) until these industries can compete on their own with imported products from more mature international companies. Alexander Hamilton, the first US Secretary of State under President George Washington, birthed the theory in 1791 in his Report on Manufactures. In 1841 German economist, Fredrich List, expanded on the theory in his paper, The National System of Political Economy, also referred to as the System of Innovation.

List argued that protecting infant domestic industry through tariffs and other trade barriers was an investment in the future. In his view, nascent domestic industry, properly protected, could grow strong enough to compete without support.

British philosopher and economist John Stuart Mill, known for his 1848 paper Principles of Political Economy, refined the basic concept averring that protection should be temporary, and lead to the industry becoming competitive without support. In 1921 Irish classical economist Charles Francis Bastable further refined the theory writing that ‘the cumulative net benefits of protectionism must exceed the cumulative costs of the protection.’

In sum, Infant Industry Theory holds that protectionism, within economic limits, is necessary in many cases in order for new domestic industries to become viable, but that the economic benefits of doing so must outweigh the costs.

And therein lies the rub, because the direct and indirect costs of Infant Industry Theory protectionism trickle through economies affecting side industries and consumers. The costs of the protection almost always outweigh the benefits, leading to a retraction of the protection and more damage to the nascent industry.

The problem with theories is that they operate best as islands of purity without the flotsam of real world interference. The real world is messy and industries, whether they are infant or mature, do not operate in a vacuum, instead being part of a large, complex value chain.

In practice the importing country, on which the tariff was imposed, often retaliates to protect its own industry by applying tariffs of its own. Buyers might, grudgingly, pay higher prices for products they prefer, or, they might not. As many industries are intertwined in an economy, buying components and raw materials from each other, some companies affected by the high prices of affected imports might choose to decamp out of the country or they might fail, both leading to loss of jobs. The emerging industry may fail to thrive for reasons unrelated to whether or not it offers a product worth buying in the first place. The point is that anything can and often does happen in a world filled with (more or less) independent actors making choices – particularly when governments are pulling a bunch of intertwined strings.

Assuming that domestic industries emerge from protection fully capable of competing in a dynamic future world economy ignores the cultural, political and very human responses that other governments undertake to protect their own domestic industries.

Protectionism: A brief and simplified history of US efforts to erect trade barriers

History has shown repeatedly that you cannot have your protectionist cake and eat it too, to wit, no tariff on imported goods has ever protected consumers from the higher prices that ensue. One reason for this is because imports become more expensive. Another reason for this is because, for example in the case of steel and aluminum, products made with imports become more expensive. Lastly, even if domestic industries do not raise their prices, which they typically do, the domestic price was probably higher in the first place. Tariffs act as a new on buyers.

Typically, protectionism is direct (aka tariffs), but it can be also be indirect, as in unofficially closed borders.  As indicated previously, PV cell and module manufacturers in Japan and China benefited from a booming FiT driven export market to Europe while also benefiting from domestic markets with covertly closed borders. Unfortunately, in a global market the protectionist actions of one country have an effect on all countries interacting in the market for the good or goods in question.

Again, you cannot protect your domestically baked cake and not pay higher prices for it too.

The US is not the only country to use tariffs as a revenue generating and/or protectionist tool, but it has a long and less-than-storied history of doing so.

The Tariff Act of 1789 was signed into law by George Washington for the purposes of protecting trade and raising revenues.  This law, along with the collection act of 1789, set US trade policy. It was supported by his Secretary of State, Alexander Hamilton, who argued that it would encourage the development of domestic industries by protecting them against more mature subsidized foreign competitors (Infant Industry Theory).

In 1816, an overtly protectionist tariff of 25% on textiles and up to 30% on manufactured goods was enacted. In 1821 these tariffs were extended to goods manufactured from wool, iron, hemp, lead, glass and other products.

In 1828 this period of significant protectionism peaked with the Tariff of Abominations (named by US Southern State objectors, in particular, South Carolina) during which tariffs were >50% on many goods. The 1828 tariffs, designed to protect goods manufactured in the Northern US states from imports, angered the states of the south, the economies of which were primarily agriculture, who objected in the increase in prices.

The US experienced a recession from 1828 to 1829 as England and the United States conducted a trade war.

Tariffs were scaled back in 1832, and by 1857 averaged 20%.

In 1861, the US threw protectionist caution to the wind, and the Morrill Tariff was enacted. This initiated a period of steadily rising tariffs, and all the discontent that went with them, from Southern State detractors who viewed the increases as impacting their economics. In 1861 the Southern US States seceded from the Union. The Morrill Tariff was one in a number of factors that incited the Southern States to secede, and by any standard the least important historically. The Southern states were reliant on an unpaid workforce consisting of slaves.

By the time of the civil war this practice of building an economy on the unpaid, enslaved backs of people against their will while denying them freedom had become abhorrent.

Following the Civil War, in 1888, new tariffs were enacted to protect domestic industry. It was also argued that tariffs were needed to reduce the Treasury’s surplus.

In 1909, the Payne Aldrich Tariff (Representative Sereno Payne and Senator Nelson, both Republicans), lowered 650 tariffs, raised 220 and left 1150 tariffs unchanged.

Under President Woodrow Wilson, the Underwood Act of 1913 was passed establishing a Federal income tax with the goal of lowering tariffs and raising revenue from domestic sources (taxpayers). The result was a decrease in the average tariff from ~40% to ~20%.

From 1914 through 1918 the world was busy with World War I. Following World War, I the Fordney-McCumber Tariff of 1922, passed to protect US farms and manufacturers, returned the US to a policy of higher tariffs.

In 1930, Smoot-Hawley, the descendent of many protectionist tariff laws and far surpassing most of them, was enacted leading to the highest tariffs in 100 years (between 50% and 100%) on ~900 products and a global trade war.  It likely exacerbated the great depression, 1929 to 1939. Though Smoot-Hawley was not the first US tariff, it is the granddaddy of bad trade policy.

From 1939 to 1945 the trade war was interrupted by a real war, World War II.

In 1944, and in recognition of the need for global cooperation, the World Bank and IMF were created by the Bretton Woods Agreement. In 1947, the ITO was created, out of which GATT arose with the goal of progressively lowering tariffs.  In 1995, the WTO was formed to resolve trade differences, because, frankly, people interacting in global markets will act in their own best interests, sometimes leading to actions against everyone’s best interests.

President John F Kennedy signed the Trade Expansion Act of 1962 to give the US President stronger negotiating power with partner nations.  In signing it he wrote: “This act recognizes, fully and completely, that we cannot protect our economy by stagnating behind tariff walls, but that the best protection possible is a mutual lowering of tariff barriers among friendly nations so that all may benefit from a free flow of goods.”

Though the Trade Expansion Act may not have been intended as a tool to impose new tariffs the law of unintended consequences will almost always rise up and slap down a few consequences just for kicks and giggles. In the case of the Trade Expansion Act, it granted the president heretofore unprecedented power to negotiate tariffs up to 80%. The act may have been intended as a negotiating tool, but it is used often as a cudgel.

A lesson from the Trade Expansion Act is that though the direr use of a political policy may not be foreseen, eventually it will be used, and its use justified.

The Trade Act of 1974, in theory, was designed to expand US manufacturing participation in global markets and reduce trade barriers. It also – and this is important – gave the US President broad fast-track authority.  Under it the US president can give temporary relief to an industry.  Gerald Ford, who became the 38th president after the resignation of Richard Nixon, was president at the time.  The Trade Act of 1974 was deemed necessary because it gave the president a stronger negotiating position during the Tokyo multilateral trade negotiations.

Section 201 of the 1974 Trade Act theoretically sets a high bar for petitioners. Theory and practice often fail to intersect and once the door is open for interpretation based on personal bias and agenda it is very difficult to close it.

In 2002, having learned nothing from history, President Bush moved to protect the US domestic steel industry by using Section 201 of the 1974 Trade Act to enact protectionist tariffs. In 2003, announcing the tariffs a success, they were cancelled. The 2002 steel tariffs led to the successful loss of ~200,000 jobs as prices for steel rose.

In 2012 and again and 2014, President Obama used tariffs to protect the US solar manufacturing industry from the dumping of Chinese (2012 and 2014) and Taiwanese (2014) cells and modules. Infant Industry Theory cannot be used as a justification in these cases as, depending on your view, the US solar manufacturing industry was either well out of its infancy or stuck in a protracted babyhood. Nor were some of the companies (Solyndra for example) worth saving for either their technology or their business models. Moreover, as the Obama administration misunderstood the cultural dynamics at play, in that China’s manufacturers have different margin goals and that there were other factors at work in the slow decline of the US solar industry, the tariffs had little effect on either the countries being punished or on US solar manufacturing. Chinese manufacturers absorbed the tariff, with Taiwanese manufacturers following suit to a lesser degree.

US solar manufacturing of PV cells began declining years before the 2012 tariffs were imposed. It declined through lack of government manufacturing policy support, and an inability to compete with markets such as China and Japan who, as previously noted, had their own protectionist policies and a different view of margin health, among other reasons. 

Turning to the current situation, the Trump Administration has used 201, section 232 of the 1962 Trade Expansion Act, and other justifications both clear and illogical to impose tariffs on basically everything (washing machines, solar cells and modules, steel, aluminum, cars, etc.). Trading partners have responded in kind leading to a Smoot-Hawley tariff stand-off that holds US industries and consumers hostage.

Section 232 authorizes the Secretary of Commerce to investigate whether imports of a specific good are having a deleterious effect on national security. Thus, traditional trading partners, such as Canada, have been rendered by implication as national security risks.

Hanwha Q Cells, Jinko and LG have announced plans to assemble modules in the US. The higher costs of manufacturing in the US may lead to a reconsideration of these plans. It is also worth remembering that a plan and an action are two different things.

Is the solar industry making the climate change deniers argument for them?

The solar industry should not ask for subsidies, incentives and mandates to continue while simultaneously arguing that these supports are no longer necessary.  To continue to do so is to set up a situation that risks the supports being taken away, and the solar industry’s own statements used to rationalize the action. Meanwhile, of course, conventional energy supports continue unabated.

The solar industry’s statements in this regard unfortunately, play well into the hands of climate change deniers who would prefer less progress towards a new energy paradigm, and more status-conventional-energy-quo.

Another viewpoint is that the support the solar industry insists that it does not need is actually necessary support for the environment. It’s the ongoing and very real climate change disaster that needs support and protection. The solar industry’s supporting policies (incentives, subsidies and mandates) are therefore in place to protect the environment and though the environment is not an infant, but it does need protecting.

If the benefits must outweigh the costs then the argument for continuing support for solar, wind and other renewable technologies is made, as the costs of climate change are far more significant than the costs of switching to renewables. These costs cannot be fully appreciated in the current political vacuum however, they are very clear to those still without electricity in Puerto Rico.

As for protectionism, all countries have a vested interest in protecting the climate. Bluntly, we are in this together. A country-by-country tax on carbon is a worthwhile tariff with benefits that outweigh the costs.

The broader view then is that government policy support for solar, wind and other renewables is necessary to combat climate change. In this view, an overall reconstruction of the generation, transmission and distribution of, in this case electricity, requires government funding.

If only it were that simple.

Circling back to protection of infant of domestic industries, in a global context and in terms of solar, this does not work in all political systems.

In the case of China, for example, different cultural, political and business norms are at work. China’s government began supporting domestic cell and module manufacturing in order to serve the market in Europe that is, it funded an export market. China’s PV manufacturers undertook a scorched earth strategy and, in essence, pummeled the markets they entered with below cost module product and rapidly gained share.

The ideal healthy industry has domestic supply to serve domestic demand while competing in a fair and open free market. Ideal environments rarely exist, though it is fun to develop theories about them. Nor are there any unsupported industries in any country.

Protectionism, via tariffs rarely work as advertised, lead to higher costs, and retaliation.  Closing the borders to imports only works in closed societies and even then, only when covertly applied, meaning that everyone knows, but no one admits to the practice.

Ways in which protectionism can backfire include retaliatory tariffs, international alliance shifts, shifts in production wherein the very manufacturers the tariffs were meant to protect, moves offshore due to the higher cost of inputs, and consumer backlash as prices for goods increase. After the EU retaliated against the Trump Administration’s tariffs, Harley Davidson announced that it would move some of its production to Europe.

Concerning higher prices to support domestic industry, consumers rarely agree with the logic when their personal margins are affected. Using solar as an example, US demand side participants (installers, developers) rose up en masse against the 2012, 2014 and recent 201 based tariffs on cells and modules.  They did so to protect their margins.

The trickledown effect of tariffs is unavoidable and escalation of tariff activity an unfortunate byproduct of protectionism. Retaliation, unfortunately, becomes a game of market-chicken while governments escalate actions and consumers are caught in the middle. The question of how to encourage domestic supply in a vibrant, volatile and uncontrollable global market has no easy answers.

Free Will – or, free markets – in the context of the global solar industry

There are very few, if any, free markets and the market for energy certainly is not a free one. This is because all up and down the energy value chain there is direct or indirect policy support of some kind.

A free market has no supports or protections and all participants compete on a level Darwinian playing field. Not the misinterpretation of Darwin that holds that only the strong survive, but what Darwin actually mean, that species adapt. In a free market, industries and companies adapt or fail to adapt and technologies are adopted or fail to be adopted and, in the end, the whole is served. In theory, of course.

Darwin’s theory of national selection is: “Variation is a feature of natural populations and every population produces more progeny than its environment can manage. The consequences of this overproduction are that those individuals with the best genetic fitness for the environment will produce offspring that can more successfully compete in that environment. Thus, the subsequent generation will have a higher representation of these offspring and the population will have evolved.”

Free market theory would hold that industries and companies adapt in the environment that they exist and to changes in that environment.  But, no free markets exist.  In part, this is because the participants in the free markets insist on subsidies, incentives, mandates and protections even while, in the case of the solar industry, often denying the need for them.

As to free will, each individual is a product of the environment from which they sprang and the ongoing multi-dimensional pressures of the world around them.  This is the long way of stating that everyone makes decisions based on a set of circumstances over which they have little control and from a set of preconceptions that insinuate bias into each and every decision – and … this is not a bad thing. It just means that free will is a complex set of decisions often rooted in past experience. Industries, which are filled with individuals, operate much the same way.

The solar industry has a history of fighting for its supports.  This fight comes from a belief held by all participants that they are making a difference. At the same time, the industry has promised that it will not longer need support and will be able to compete against its well supported competitor (conventional energy).

It is a solar conundrum not likely to be solved in the near, mid or long term.

 

 

In 47 BC after his rapid defeat of Pharnace, King of the Bosphorous at the battle of Zela, Julius Caesar announced to the senate: Veni, Vidi, Vici – I came, I saw, I conquered.

In just a few short years, China’s PV manufacturers entered global cell and module manufacturing and rapidly dominated it. Since 2002, with annual shipments of 2-MWp, shipments from its manufacturers and domestic PV deployment have grown faster than the global market as a whole to over half of total shipped in 2017.

There is no doubt that in terms of solar, China came, it saw, it conquered. But…corrections happen, and a hiccup in either China’s production of PV cells and modules or in its deployment of PV systems would ricochet around the global PV industry.

Figure 1 depicts global shipments of PV cells and modules and shipments from China. During this 15 year period shipments of cells/modules from China grew at a compound annual growth rate of 97%, while global shipments (including China) grew at a CAGR of 41%. China has become the engine driving the global solar industry.

Figure 1: China and Global Shipments, 2002 through 2017

China and Global Shipments, 2002 through 2017

The global PV industry has been gliding along on the strength of China’s manufacturing and deployment strength for several years.  During these years the market for PV deployment boomed mostly driven by Chinese manufacturer acceptance of low margins and by almost relentless deployment of PV systems even when China’s Central Government indicated it wished to slow its market.

Figure 2 presents China’s domestic deployment of PV systems and those of the Rest of the World from 2012 through 2017. Installations can differ from shipments on an annual basis depending inventory and the application focus. That is, multi-megawatt installations can lag that of other categories for a number of factors including the development process itself. For simplicity, shipments have been used as the standard in this one case, understanding that it presents a simpler, big-picture view.

In 2012, China’s PV deployment was 16% of the global total.  Its share of global PV deployment doubled in 2013 to 32% and then held at ~30% until 2016 when deployment of PV in China surged to 49% of the global total. In 2017, China deployed 53-GWp of PV systems giving it a 58% share of global installations.

Figure 2: China and Rest of World installations, 2012 through 2017

China and Rest of World Installations, 2012 through 2017

Figure 3 offers China’s annual share of global shipments from 2012 through 2017. During the period depicted in Figure 3 China’s share of global shipments increased from 45% in 2012 to 57% in 2017.  China’s complete domination of PV manufacturing means that it dominates price at which cells and modules can be sold – globally. It also means that other manufacturers are captive (to an extent) to the low margins that are acceptable to manufacturers in China. The solar industry has suffered through decades of low to negative margins and now finds itself with an average gross margin of ~8%. Examples from other industries include: Coal 40% to 50%, Iron and Steel 20%, Construction ~30%, Appliances 30%, Aluminum 20%, Industrial Machinery and Components 40%, Aerospace 40% and Agriculture 8%.

Figure 3: China and Rest of World Cell/Module Shipments, 2012 through 2017

CHina and Rest of Wolrd Cell Module Shipments, 2012 through 2017

China Came, it Saw, it Conquered, It backed off

The global PV industry has been gliding along on the strength of China’s manufacturing and deployment strength for several years.  During these years the market for PV deployment boomed mostly driven by Chinese manufacturer acceptance of low margins and by almost relentless deployment of PV systems even when China’s Central Government indicated it wished to slow its market.

China’s central government may get its wish this time, though, not as rapidly as it might want to.  Though China’s system of government is essentially one party with one man at the top, there are layers of provincial and local governments making decisions, lending money and otherwise supporting their local industries. In other words, as the theme of the changes to China’s PV deployment are to, essentially, shuffle unwanted projects back to the provinces, it may take a while for the expense of supporting domestic deployment to slow things down. As an analogy, a large tractor trailer truck weighing 80,000 pounds and going 65 miles per hour needs 315 feet to stop.

China’s market, which had been accelerating, will need some time to slow.

Measures that China’s central government are taking are (in a nutshell):

  • DG capped at 10-GWp for 2018
  • Systems connected as of May 31 receive the FiT, after which developers must turn to the local government (a move that favors local companies)
  • A pause in utility scale deployment (meaning approvals) until further announcements
  • A reduction in grid curtailment, meaning that more electricity will be fed into the grid and that FiT payouts will increase

As with many countries, faced with the high cost of supporting PV deployment, China’s central government is (and has been) moving towards a bidding scheme.  Bidding schemes always undervalue solar and further constrain margins.

Though governments plan incentive programs for solar with the best of intentions, they also consistently under estimate their success and it is this very – expensive – success that leads to the collapse of many programs.
Figure 4 depicts the rise and fall of select country solar markets during the EU FiT period.

Figure 4: Rise and Fall of EU FiT Programs, 2005-2015

Rise and Fall of EU FiT programs, 2005 through 2015

And where will it all go if China slows?

At one point during the FiT era, referring to Figure 4, the market in Europe annually consumed over 80% of PV modules shipped. As markets collapsed the refrain was – where will it all go?  Then came the market in China to rapidly pick up the gigawatt slack. In 2018 there are several country markets where demand is ~10-GWp annually.  It will take more than one country market to make up for a slowing in China. Should China slow by 10-GWp in 2018, that 10-GWp will float out to other markets at, likely, negative margins. Good for developers but not good for PV manufacturing. A slowing China means that the market as a whole will be flat or potentially shrink in 2018.

Past 2018 … the market in the US, despite the Trump administration, is accelerating. Countries in the Middle East and Africa are making and implementing plans to install solar. The next big markets are already here and as long as we do not repeat the mistakes of the past, growth for the near to long term appears set to continue.

Figure 5 offers the original outlook for 2018 – which included a still accelerating China market, and a lower forecast with a slowing market in China. The most likely scenarios are, in both cases, the accelerated case.

The lesson is that the solar industry is still young, still immature, still struggling to find balance and that planning ahead requires an acceptance of the ever present risk of market collapse.

Figure 5: Six Scenarios for 2018 – all dependent on China

Six Scenarios for 2018, All dependent on China

Written in 2016 for The Solar Flare and still true in 2018

Historically, participation in the global solar industry has been subject to volatility from one end of the value chain to the other. Jobs have been lost and are not always regained. Money has been lost, businesses have failed. Dreams have come true and have been shattered.

Solar is an addictive industry in good and bad ways. Floating overhead is the chance – again, at every point in the value chain – to change the world, to be part of something bigger than oneself and to potentially profit from doing so. Think about it, a person could actually make a living being part of the solution to the climate change crisis.
Often, it is not an easy living.  High hopes and optimism float uneasily on top of volatility creating an environment where:

  • Observers make a living or garner attention for announcing big deployment numbers at cheap prices while oversimplifying and ignoring pesky and unpleasant details
  • Governments offer generous incentives without properly considering what measures can be undertaken if the market accelerates and whether any control measures will actually result in controlling an out-of-control market
  • Governments enact tariffs or price floors (minimum price levels) to counteract what they perceive as dumping seemingly without realizing that an entirely new grey market may spring up as a result
  • The price function and the true cost of manufacturing PV cells and modules is poorly understood while the lowest price, which may be a grey market price, a black market price or an inventory price is celebrated as the global average
  • Downward price pressure often forces manufacturers into the uncomfortable position of choosing quality over margin or unfortunately, margin over quality
  • The solar roller coaster is celebrated while ignoring those who broke their necks or hearts on the ride
  • Low margins for developers and manufacturers are ignored while low bids and prices for components are celebrated as proof of the solar industries competitiveness with fossil fuels
  • Business models with obvious flaws such as the residential solar lease are lauded while also scorned while losses pile up and the negligible value to customers is left more or less unexplored.
  • Companies such as SunEdison announce new products and ventures often expanding in too many directions often far from their true core competencies. Example: SunEdison announced an expansion into off grid micro-grid deployment at the 2015 Solar Power International mere months before it failed. The vision of SunEdison’s Frontier Power was energy, connectivity and water, viewed through the lens of an off grid utility where SunEdison owned the assets. Now SunEdison’s creditors own its assets.

The Point

Though the global solar industry has been historically volatile it does not have to continue in this vein.  A new path would require participants and stakeholders to choose slower more careful growth based on sustainable margins and value to customers.

 

Less volatility and sustainable growth means … slowing down, taking a breath and bypassing business that in the end serves no one well.

 

 

Quantifying future production from photovoltaic systems of all sizes and into all applications is important for LCOE modeling and by extension, tender and PPA bidding. For these models to be useful uncertainty, that is risk of poor performance, must be appropriately weighted. Underweighting the effect of potential poor performance due to low quality installation practices, low quality components, and unexpected weather pattern shifts can lead to underperforming installations that fail to meet economic goals. As tender and PPA bidding are in part based on production expectations, care must be taken to appropriately quantify the risk(s) of poorer than expected performance.

There are solid and observable reasons humans often fail to foresee negative outcomes and outright disaster. Humans are hardwired to highly weigh optimistic outcomes, and prone to choose data or assumptions that back up their biases.  In sum, we cannot imagine a disaster outside of our experience and thus will, most of the time, discount the probability of it. Optimism bias, the tendency to over weigh the potential of positive outcomes, and under weigh the possibility of negative outcomes is difficult to overcome, even for those trained to look out for it. Precommitment to a positive outcome can outweigh data that might indicate the need to consider a less positive outcome, in this case, poorer than expected performance.   Biases aside, as photovoltaic installations become a larger part of global electricity generation, forecasting the risk of poorer than expected production is crucial to the industry’s maturity and continued health.

The Photovoltaic Manufacturer Shipments: Capacity, Price and Revenues report provides an analysis of quantitative shipment, capacity, and module price data for the supply side of the terrestrial photovoltaic industry. This report has been published annually since 1975. It focusses on the most recent two years of supply side activity also forecasting the next five years of crystalline and thin film shipments.

Report Highlights:

  • Cumulative shipments from 1975 through 2017 reached 376.6-GWp
  • Cell and module revenues to the first buyer grew by 15% from $39.7-billion in 2016 to $45.8-billion in 2017, with shipment volume (32% growth) ameliorating the decrease in ASPs
  • Cell and module revenues to the first buyer expected to be flat at an estimated ~$60-billion in 2018 under both the conservative scenario, 105.5-GWp, and the accelerated scenario, 116-GWp. Under the accelerated scenario volume ameliorates low prices
  • Average cell/module prices to the first buyer decreased by 8% from $0.53/Wp in 2016 to $0.49/Wp in 2017
  • Average cell/module prices to the first buyer expected to increase by 6% in 2018 due to tariff and other trade issues
  • Prices to the first buyer reported as low as $0.29/Wp in 2017
  • In 2017 China had a 57% share of global shipments at 52.9-GWp (total shipments of 91.9-GWp), and a 57% share of PV deployment at 53-GWp (total installations 92.9-GWp)
  • Shipments of cells and modules to the first buyer grew by 32% from 69.5-GWp in 2016 to 91.9-GWp in 2017
  • Commercial cell/module manufacturing capacity grew by 36% from 79.6-GWp in 2016 to 108.1-GWp in 2017
  • Module assembly capacity reached 134.3-GWp. Currently there is 26.2-GWp more module assembly capacity than cell manufacturing capacity, indicating price pressure on module assemblers (buying cells and shipping to second buyers in the value chain). In this case, cell suppliers can increase price as long as demand remains high, while module assemblers have little power to increase price to buyers
  • In 2017 shipments of monocrystalline grew by 47% over 2017 for a 45% share of total shipments (91.9-GWp) Trend favoring p-type PERC mono expected to continue.
  • 72+ cell modules now dominate shipments with manufacturers of 60-cell modules hoping to command a price premium. Unfortunately, the price premium has been eroded and the slight premium is unlikely to hold in the long term