Despite 2011 having been a particularly challenging year for PV cell and module manufacturers, new small-scale module manufacturing facilities continue to be implemented, especially in emerging markets.
In some cases, these companies/facilities are either aligned to local government policies or are implemented purely as diversification strategies. Other examples are joint-ventures between private and government entities. Such JV’s are intended to represent ‘national’ centres-of-excellence to serve domestic or regional market demand.
The fact that these facilities continue to receive government support would suggest that many policymakers remain fixated on domestic solar manufacturing, despite the chronic oversupply that currently exists within the upstream segment of the PV value-chain. Moreover, many of these projects are funded as a means of local ‘job creation’, despite the fact that modern module fabs are not particularly labour intensive compared to downstream PV system requirements.
Such manufacturing ‘support’ policies are being implemented globally. For example, within South America, there are manufacturing facilities with capacities of 5-20 MW being developed in Brazil. In Argentina, national and state funds are being made available in an attempt to create a domestic PV value-chain to satisfy up to 0.5 GW of installations over the next decade. In the Caribbean region, several islands have proposed tax policies to stimulate domestic PV manufacturing. For example, project developers in Jamaica are required to invest in manufacturing facilities as a prerequisite to securing PV project activities.
Across Africa, countries such as Algeria, Nigeria, and Tunisia are utilizing state-owned energy firms to develop manufacturing facilities to serve domestic electrification projects and regional off-grid system demand. Ethiopia and Kenya also have domestic module manufacturing facilities that are owned by partnership ventures between foreign and domestic companies. While some of these facilities are currently operating at low capacity utilisation levels, they are producing PV modules, albeit courtesy of state support. Some recently-installed manufacturing lines are being configured to serve the growing demand for off-grid systems, from small to large-scale.
However, each of these domestic firms must still compete with large-scale international manufacturers. Therefore, it remains somewhat unclear if they can survive in the absence of state funding or when multinational firms start to expand into what were previously regarded as niche PV markets.
Domestic module manufacturing is also prevalent in more developed countries, in particular Canada. In Ontario, the Green Energy Act has enabled the creation of a robust domestic PV supply chain in just three years. In fact, the initiative has proved so popular that some Ontario-based PV manufacturers now find themselves at a competitive disadvantage, even within their own local market. By the middle of 2012, there will be over five times the amount of module capacity required to meet projected demand.
Another knock-on effect of the recent surge in small-scale domestic PV module manufacturing has been the creation of a new addressable market for PV equipment suppliers. Indeed, at a time when PV equipment spending is going through a prolonged downturn, any new market opportunity can be viewed as a positive development. Today, most PV module equipment suppliers are actively pursuing small-scale module fab builds to compensate for the absence of turn-key module line orders from countries such as Spain and Italy.
It remains likely that some form of local module manufacturing will be installed within all regions exhibiting PV market growth. However, with vertically-integrated multinational firms now aggressively targeting emerging PV regions, there is a distinct possibility that small-scale module manufacturing will only survive within niche markets that offer the security of local subsidies or domestic incentives.
Ultimately, all manufacturing must follow the global industry’s declining module ASP trajectory, with production costs at any stage of the value-chain being low enough to provide positive operating margins. With small-scale manufacturers dependent on upstream supply of c-Si cells, their ability to control costs will be challenged by the GW-scale vertically-integrated fabs of tier 1 industry-leaders.
As a result, domestic incentives will provide a limited window of opportunity for small-scale manufacturers to gain a foothold in their local markets, potentially by partnering with downstream project developers to offer a value-added proposition.