Solar installations will stall this year, but make rapid strides in emerging markets and find sustained growth without government subsidies, says Lux Research.
BOSTON--After recent explosive growth capped by a 66% surge to 26.5 GW in 2011, solar installations will grind to a near halt this year — adding a mere 26.9 GW — while industry revenues drop from $110 billion in 2011 to $92 million in 2012 due to crashing prices. However, new installations rebound to 38.3 GW in 2017 as the industry learns to navigate a global market fast losing its subsidies, according to a Lux Research report.
"Opportunities remain and extended success is possible for stakeholders, but the market's shifting geographic profile – combined with a forced withdrawal from subsidy addiction – means strategic, surgical moves are needed"
A supply glut, caused mainly by Chinese manufacturers, speculation of incentive cuts in Europe and the end of the 1603 Cash Grant in the U.S., fueled the sharp growth in installations last year. "The solar industry's storied history has created a massive misperception of technology maturity and commodity status," said Matthew Feinstein, Lux Research Analyst and the lead author of the report titled, "Market Size Update 2012: The Push to a Post-Subsidy Solar Industry."
"Opportunities remain and extended success is possible for stakeholders, but the market's shifting geographic profile – combined with a forced withdrawal from subsidy addiction – means strategic, surgical moves are needed," he added.
Lux Research analysts ran a levelized cost of energy (LCOE) analysis in 156 separate geographies, accounting for 82% of the world's population, calculating internal rates of return, to determine the viability and competitiveness of solar in each market. That model and methodology is part of the Lux Research Solar Demand Forecaster. Among their conclusions:
Emerging markets more than quadruple in size. Emerging markets will be both a battleground for suppliers and a source of great strength with South Asia accounting for the majority of growth, rising from 1 GW in 2011 to 4.5 GW in 2017. However, ASEAN, Africa and South America take the reins from 2017 to 2022, hurtling toward gigawatt status.
Utility-scale application segment grows. In large emerging markets like China, utility-scale solar will gain as conditions favor fewer, larger-scale projects that allow more control over financing and regulatory factors. This segment will grow from 6.3 GW globally in 2011 to 13.8 GW in 2017.
Oversupply still a possibility. Even the boom of 2011 was not sufficient to utilize all of the world's module capacity, which reached 50 GW and pushed prices down to $1/W. With China's 12th Five-Year plan calling for major expansions in solar capacity, global markets will still see strong downward price pressure.
Securitization boosts smaller installations. Asset-backed securities are spurring growth of the small-scale segment in the U.S. residential and commercial markets. Securitization and "renewable bonds," which have been tested in the past by SunPower (in Italy), and Wells Fargo (in New Jersey), are likely to see widespread growth in 2012 or 2013. Expect major commercial banks like Citigroup to lead this effort.
The report, titled "Market Size Update 2012: The Push to a Post-Subsidy Solar Industry," is part of the Lux Research Solar Systems and the Lux Research Solar Components Intelligence services.
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