Although the PV industry has seen a partial shakeout, and various claims of widespread factory closures, the net effect on ramped manufacturing capacity has not been that pronounced until now. And as a consequence, the question of balancing supply and demand remains just as pertinent at the start of 2013 as it was 12 months ago. What needs to happen before supply and demand are balanced in the PV industry, and reasonable pricing discussions can be had along the value chain?
Put simply, one of two things needs to happen. Either useful ramped capacity needs to be taken offline, or demand needs to increase significantly. For ramped capacity to come offline, a range of barriers need to be overcome, the most significant of which is typically state or government intervention to maintain domestic employment.
This can be seen most in China, where a large portion of tier-2 capacity may be forced to merge with tier-1 manufacturers, as a partial requirement to sustain bank and state preferences.
Over the past 12 months, new capacity coming online has more than offset the useful ramped capacity that has been taken off line. This is due mainly to companies finishing off expansion phases that were begun in 2010 or 2011, or debottlenecking or upgrading of lines for higher efficiencies.
There is still the issue of nameplate, versus ramped, versus effective capacity that continues to cause confusion in the PV industry. But the simple conclusion is that there is about 40-45 GW of effective ramped capacity that is likely to be ready to produce during 2013 and 2014. Therefore, the key issue is getting end-market demand to the 45 GW level.
Our latest research shows that the variation in the different cell/module annual capacity figures. The main capacity to track is ‘All Tiers (Annualised & Effective)’ – not just the Tier 1 only category. While Tier 1 PV manufacturers may steal the headlines with module shipment levels and revenues, the use of outsourcing and contract manufacturing means that there is a large and critically important segment that is a key part of the total capacity picture.
Source: Adapted from NPD Solarbuzz PV Equipment Quarterly
Once end-market demand reaches 45 GW, capacity additions should be in line with end-market growth, and stability and certainty could be expected across a range of different industry parameters. However, the PV industry does not have a great track record in doing anything from a collective standpoint, and the worry is that with the first signs of end-market growth, excessive capacity expansions will again occur as countries and companies strive to gain market-share and global dominance.
Were this to occur, supply/demand balancing and rational pricing discussions would again be pushed out while industry participants fight with short-term survival tactics.