The (R)evolution of PV Power Plant Sizes

All the way back in 1995, a revolutionary 3.3 megawatt ground-based solar PV power plant was connected to the grid in Serre, Italy. At that time the world’s largest PV system, it was built as a demonstration project and financed through various subsidies.

From Big Beers to the Biggest PV Plant
It took almost a decade before the market for bigger PV projects really took off. From 2004, when the German Feed-In Tariff started to flourish, tens of power plants of 1 MW or more were being built in Germany. A 5 MW plant, at that moment the world’s largest, was built near Espenhain for 22 million euro, or 4.4 euro per Wp.
And in 2005 the new record was a 10 MW power plant project in Bavaria, which cost 49.5 million euro. Bavarians think big - be it cars, beers or solar PV.

From that point on, development grew faster and faster. By the end of 2007, even more PV plants of over 10 MW had been built, with several in Spain, where the lucrative Feed-In Tariff had started two years earlier, with further 10 MW projects in Germany.

Large-Scale Power Plants at Rocket Speed in Spain
Due to the Spanish FIT law, large-scale power plant developments gained rocket speed in 2008, with 4 power plants above 40 MW and one at a whopping 60 MW in Olmedilla, Spain. The latter was constructed in 16 months at a cost of 384 million euro, or 6,40 euro/Wp. Due to the lucrative Spanish Feed-In Tariff, the price could go up to provide a nice margin for everyone involved… Like a Pamplona bull run, the Government’s Feed-In law resulted in large-scale development of further such projects.  Even today, Spain still contains about 70% of the world’s large-scale PV power plants - in total over 1000 big projects. An impressive overview of the world’s largest PV power plants can be found on the great website www.pvresources.com.

Thin Film Enters the Ballgame
Although an outsider might think that the bigger the project the more interesting it will be to use high-efficiency modules, less efficient thin film technology entered the arena in 2009. In this year a few more +50 MW projects were completed, mainly in Germany, including one using Cadmium Telluride thin film modules. At the end of 2010, three projects of over 80 MW will be finished and connected to the grid, including the first one in North America: the Sarnia project in Canada, once again built using First Solar thin film, at around 3,75 Euro/Wp.

‘Small Step for the Industry…’  
From +50 to 250 MW is a relatively small step for the industry, but a giant leap for market development. Energy utilities are now starting to seriously consider solar PV. The next steps will likely take place on that side of the Ocean as well. Sunpower and NRG Solar plan to start construction of the 250 MW California Valley Solar Ranch project in 2011. And earlier this year, First Solar announced the development of a 550 MWp power plant project in the desert near Los Angeles. Energy utilities PG&E and SCE will buy the power.

Solar PV: Fast, Experienced and Cheap
What does this teach us? First of all, development of large-scale PV power plants is progressing rapidly. Secondly, the building process goes fast. In 2008 in Spain, over 2 Gigawatt was installed in the space of a year. Thirdly, there is a tremendous track record of experience. Finally, prices have come down, but there is room for improvement. If large-scale orders of top-tier module brands can be purchased for less than 1,30 euro/Wp and the other BOS-cost will be less than 1 euro/Wp, total system cost should be able close at 2,30 euro/Wp today. With module prices expected to decline the coming years, turnkey system costs must be achievable at under the 2 euro/Wp mark.

The Next Step: Better, Faster, Bigger and Cheaper
Anyone who says that solar PV is not yet a proven technology is invited to take a look at the overview of existing large-scale power plants throughout the world. And do not forget that behind each project are investors, installers, banks, engineers, consultants and many more experts involved who made this happen. Through sheer drive, these involved people and companies are keen to prove that they can do better, faster, bigger and cheaper next time around.

Not Available Around the Corner
And this will continue. We will see bigger projects, for cheaper. It will be nothing more than a natural development to see +100 MW plants being built over the next 3 to 5 years. Not one, but several. Because if one company can, others will want to prove they can do better and cheaper. For example in the case of First Solar taking the 500 MW mark, the market and industry are following suit, aiming at 1000 Megawatt projects. To my expectation, these projects will be announced within 3 years and built within 6 years.
These projects will require the involvement of strong, bankable, large companies. Even if the projects cost less than 2 euro/watt, the investment cost of a 100 MW project will be around 200 million euro. Not something a multinational energy utility will buy from the first PV installer around the corner....

A Different Ballgame
Today, production costs have been achieved at as low as 15 eurocents per kWh by a solar PV plant in France. The cost per produced kWh will soon get close to 0,10 euro/kWh, even without any support of feed-in tariffs. That is a different ballgame. The PV power plant proposition will become attractive for many utilities looking for quickly-installed, clean, reliable, cheap power, without future risks related to global political changes, possible CO2 taxes, fuel price and currency fluctuations.

Separating the Men from the Boys
The development of these large-scale projects will fuel industry consolidation and will distinguish the men from the boys in this industry. Only the real big bankable companies will be able to guarantee a continuous supply of these large amounts of modules. And these companies will compete heavily for these projects - they guarantee their base load manufacturing capacity, and take a hell of a lot less sales and acquisition time than selling 30,000 systems to households at the same volume…
And although the title “The biggest solar PV project in the world” is moving around faster and faster, it is not bad for your image and branding to have it bestowed on your company for a while....

Why the Indian PV market will grow fast

India will not wait for centralized electricity grids

Why is India set to soon become one of the world's largest PV markets? Because all the necessary ingredients are there: Permanent energy shortages, strong economic growth, growing energy demand, lack of fossil energy sources, and abundant sunshine. Solar PV is already competitive in India in several market segments such as for powering telecom towers. Tens of thousands more will be built in the coming years. Interesting market... But let’s take it one step further. Solar PV will be competitive with grid electricity in India within 5 to 10 years.

We are talking serious business

Average electricity consumption per household in India is expected to show a stunning growth, from a little over 600 kWh to more than 1000 kWh. So wake up Europe and the US - this is still per year and not per quarter as is the case for us! Because India’s population is more than double that of Europe and the US combined, we are talking serious business. How to power the rapid economic growth in India?

Can anyone make a serious guess as to coal prices in 20 years’ time?

Import more fossil fuel? Build more coal and nuclear power plants? Like in most democracies - and India is the world’s largest - it takes a couple of years to have such a plant available for power supply. Bureaucracy comes with democracy. Let’s say the plan to build a new central power plant starts today. You will be a winner if the power supply is operational in 5 years’ time. Plus, you will need expansion of the grid. On the other hand, what will the cost of (decentralized) solar PV systems be in 5 years’ time? At the very least, a lot cheaper than today - and likely close to grid prices. But even more important, you can calculate the exact cost of the produced (solar) energy for its 25 years’ lifetime. Those costs will be flat and completely predictable. Put that against the cost of electricity from coal or oil over the next 25 years - not forgetting possible CO2 taxes. Can anyone make a reliable prediction? So, if you are an investor and you don’t like risks in your business model, what makes more sense?

Skip the old-fashioned cable phase

No wonder the Government of India is taking first steps with solar energy under the National Solar Mission. The target: 20,000 megawatts of cumulative installed solar power by the year 2022. This seems an impressive number, but the program might indeed become reality...
Let’s make a comparison with telecommunication systems. Countries like China and India went straight from no telephones to mobile telephones for everybody. They never went through the era of cabled phones. Phones with wires - how old-fashioned is that? Now, will it make sense for India to invest its money into expensive and financially risky projects like centralized fossil power plants and grid expansion? With solar PV sure to become competitive in India within 5-10 years, this outdated approach can be skipped. Like with mobile phones, India can go straight to a decentralized power supply from financially more attractive and predictable PV systems.

No waste of money on old-fashioned technologies

In fact, their growth and development stage gives India a clear advantage. They don’t have to waste money on old-fashioned technologies. They will learn from the mistakes we made in the past - and this in a period of strong economic growth. Compare that with financially struggling economies in the Western World, where government budget constraints hinder investments in renewable energies.

Bureaucracy? Talk to a Californian installer!

There are some hurdles here and there - such as bureaucracy and corruption. But, is that much different from the Western world? Ever talked to a Californian solar entrepreneur about all the paperwork required for a new PV installation?

Power to the wireless people

It won’t surprise me if market development in India progresses at a faster rate than the National Solar Mission is targeting. Within a decade people in India will not wait for the Government stimulus programs in order to use solar power - just as no-one waited for the Government in order to install cables underground for “new telephone connections.” Photovoltaic energy systems will just provide the cheapest energy. This decade, no-one will wait for expensive centralized fossil power stations and grid expansions. People and new entrepreneurs will use and provide decentralized cheap solar energy. More than ever it will be “Power to the people!”

The white-list for solar electricity

The solar industry is growing up. First there were solar modules. Then more and more manufacturers entered the market. How to distinguish? TüV certification came up as the new hype. A sign for quality, and reliability of the manufacturer. At least they had to pay a serious amount of money for certification, so this proved the company was not a opportunistic one-day-fly. But, with more than 400 brands being TüV certified a new step was necessary. Next came the ‘white list’ of Banks. Your module is not on the ‘white list’ of a bank? Then forget about obtaining financing for the PV project. By the way, can anyone provide the qualification rules and name the independent body qualifying modules for the ‘white list’? Your module can be IEC-certified by TüV, but banks aren’t so transparent about how they produce lists and financial products.

The white lists are growing. Some banks can accept more than a hundred module brands. More and more manufacturers have grown into big companies with a solid track record and balance sheet.

Modules are not rocket science

Does it make sense to focus so much on the solar modules? The modules are guaranteed for 25 years of power. Quality in most cases is more than sufficient. What other products can be found these days with so much guarantees and quality certification? Manufacturers claim that production of PV modules is ‘not rocket sience’. So why focus so much on a piece of glass with some silicon slices?

And next came insurances. Modules, projects and the companies can be insured, all for the sake of the investors and banks. Does this all make sense and what will be the end of this development?

Do banks have inverter white lists?

Solar modules are only part of a solar PV system. If modules hardly ever fail, aren’t inverters a more crucial component? Inverters are the real high-tech part of your energy production unit. Your module could be doing pretty well, if the inverter fails you won’t generate much electricity.
Still, we don’t hear banks talk to much about a white list of acceptable inverter brands.

But, thinking one step further, even certificates and white lists of inverters won’t be sufficient for customers. What counts in the end, is the reliability of all the components together: your complete PV system. Customers just want to be sure that a system will produce electricity.
What is needed is a quality guarantee for your complete PV system. And maybe even more important: the produced electricity should be of acceptable and good quality. The grid operator will have to accept your electricity input. And your appliances at home should work well on the solar electricity coming from your inverter. The electricity quality guarantee will put even more emphasis on the only high-tech component of the PV system: the inverter.

White list for PV systems

What might be helpful is a ‘white list’ of complete pv systems. Systems well designed and engineered with a perfect combination of components that have proven to work well together. The financing industry should take its focus a step further to quality control of the end product, a reliable complete system producing good quality electricity.

Did you ever complain about the certificates of the boogies in a new car? Ever asked if your tiles are on a white list? You just want all components in a car to work well together, for many years. In the near future, the brand of the solar system supplier, could become more important than the module or inverter brand. In that perspective it makes sense that module manufacturers expand their activities over the complete supply chain. From silicon to cell and module and even further downstream to complete system and project supply. The future might be system branding or branding of the end-product: electricity. Will the customer be ready to buy First Solar electricty, Trina solar energy or accept uncertified ‘Jansen solar electricity’?

France: the new booming market... soon...

The idea of organizing a French PV conference was warmly welcomed by some of our French contacts. "Are you sure? We have holidays coming up, an expo is taking place in the same period, we are waiting for new regulation and, if you do, you will need to do it in Paris and in the French language, otherwise forget about French speakers and participants". You can’t get more motivated to pick up the challenge, I thought. And without regret, because the Solarplaza conference last week in Marseille was well attended and a success.

Simple as the Italian market

"French like to make things complicated first, so they have a challenge to work on", I quote from a French senior executive and speaker at the conference. A foreign participant sighed and stated: "I wish the French market was as simple as the Italian market". Times have changed...as if the currently booming Italian market was a well organised paradise for investors a few years ago.

Femmes fatale and bureaucracy

Beautiful landscapes, great architecture, numerous historical places and castles, the best wines, beaches, mountains with snow, les femmes fatales and plenty of sunshine. France is one of the most beautiful countries in the world, ideally suited for solar PV. But, France is also different in many ways. A nuclear energy powered nation, and a utility monopolist closely tied with the government. EDF plays a crucial role in grid connection applications of new pv projects, currently leading to a multi GigaWatt pipeline. Sometimes, inscrutable relationships exist between the elite government officers and EDF managers. And, didn’t the French invent the word bureaucracy?

PV: looking like a normal power plant!

So far, France is a BIPV focused market. The FiT for BIPV is higher, but discussions about what BIPV is, are more complex. The government beliefs that this segment will create more domestic jobs, since solar modules in the end are just a building product. A fair conclusion. Now, let's hope that the new jobs created will not be a result of bureaucratic complexity.

Nevertheless, promising new developments are taking place. In Southern France, some bigger ground based projects have been built and others are planned. The first power shortages have occurred in this vital economic and beautiful touristic region. Although it is not easy to find a piece of land for a large PV project, it seems more easy these days than planning, permitting and building a new nuclear power plant. And,since wind energy has a bad image for some reason in this area, large scale solar will be one of the best and fastest solutions. Even EDF now seems convinced of this.

A French contrator explained: "During a pv roof project visit, the EDF people were surprised. Seeing the inverter and transformer room and recognizing the power devices, they reacted enthusiastically: "wow, this looks like a normal power plant!"

Educating the nuclear elite

As stated in a previous blog, France proves once again that it takes time to develop a market. Growing a market is not just opening up new sales offices. Government people and even more the elite MBA schooled nuclear supporters need to be educated. This will take more than serving one glass of its solar radiation based, most famous and indispensable product over lunch time...

There is reason to be optimistic. The potential for PV application in France is enormous. Like with a lot of things in France, a little more patience will be needed. And besides, Italy, has shown that a country known for bureaucratic complexity can turn into the number two market of the world.

The Sarkozy challenge

Time to work on education and a strong solar lobby. Why not start in the centre of power: a pv system for President Sarkozy. If the white house has solar panels, this world leader cannot remain without. Of course, French historical architecture ‘is something different’ and definitely ‘more complicated’ for PV application. But, isn't the French focus on BIPV and looking for challenges? Well, here is one to get started!

What will happen at “grid parity”? We need “Solar As a Service”

"Grid parity" is considered the holy grail for the pv industry: the moment in time and place where the cost of solar electricity equals the price of electricity from the grid. The long awaited moment when solar PV will be able to compete (without subsidies or other incentives) with fossil generated electricity. But, what will actually happen when this mark in time is reached?

First of all, there is no 'one' grid parity for the solar industry. It will depend on various variables, like region (local sun shine conditions), the local cost of grid electricity
and the actual price of a PV system (varying per application and country due
to different cost for permits etc.).

Solar electricity is not an Apple gadget
Grid parity will be achieved sooner in Southern Italy than Germany for residential applications (more sunshine, higher electricity rates and, sometimes, higher cost for permits) than in Germany. Actually, grid parity is close (maybe even within 2
years) for home owners in the South of Italy.
Will these lucky Italians run to their installer when grid parity is reached? I am afraid not...
There is an important hurdle to take: will these lucky Italians in 2013 have the 6000 euro on the shelf to buy their money making 3 kWp solar energy system? They probably can save a few euro’s per month, admitted, for the next 20 years. But I’m afraid that it will not convince them. Like other people, electricity is not their top-priority. Electricity is not an Apple gadget, but a commodity. A natural thing that is supposed to be available all the time. Not something to worry about. A commodity that will be available anyway, green or not. Probably the Italians  will be more concerned about tickets for the next football game, which is typically not a commodity, providing more pleasure (emotion and passion). For most Italians, like others with a grid connection, having a PV system is not their dream or lifetime fulfilment. Except maybe for the green and environmental oriented people and some technology geeks. But this is (still) a minority group and won’t make the solar PV market boom.

The ‘energy utilities of tomorrow’
The critical challenge for PV market development at, or even just before, grid parity is the financing. Almost half of the modules is put up a residential roof. So, the financing of such a PV system for private households is the new business opportunity. So, how can the solar industry reach the masses to create a real market boom?

The most logic way is by offering a simple and compelling service: selling cheaper electricity for a fixed price during the next 20 years. It is time for ‘the energy utilities of tomorrow’. Where you pay less per month, still are secured for permanent electricity supply and can show off with your own green power system on your roof. Without any upfront investment. The new energy utilities will take care of all the risks and hassle: investment, system design, installation, financing, maintenance, billing, etc.

Solar As a Service
Grid parity will mean the start of a new era opening up many business opportunities for lease companies and for the financing industry, offering new types of PV mortgages and other financing products. This also means that the solar pv market development will not depend on the brand, size or price of solar modules. To reach the critical mass of customers, more companies are needed to sell the new financial services. The pv industry, for good reason, has been very focused on technology. But what is needed next to let the market really boom, are (new) players selling solar as a money saving service. Like the software industry, we switch to SAS: Solar As a Service. This means that many new companies are needed to develop the market. The industry will have to switch its focus. Electrical installers, are not born financial service companies. It will take time to develop this new business infrastructure.

Solar is all about saving money
At grid parity, customers will be able to save a few euro’s on their monthly energy bill. But, this will not offer them the high returns like in the good old times with high feed-in tariffs. Grid parity without further incentives will not inspire the many investors. In the residential sector, a new market and customer group will have to be explored. And this will take time. My forecast is that, at grid parity, the solar PV market will continue to grow substantially, every year again. But, without incentives, an enormous grid-parity market boom does not seem logic. Unless, of course, the oil price jumps to $200 in 2 years (who knows?) and solar becomes so attractive....But, even such a case, I expect the financing to be critical.

In the near future, PV systems will be sold to the mass as a smart way to save money without any hassle. Solar energy as a service. Financially attractive. The money you save, you can use to visit more often the arena supporting your favourite football team. 

The silent revolution continues

Last week, one of the international solar heroes died: Hermann Scheer. We had the pleasure and honour to have him as a keynote speaker at two events. Driven, passionate, energetic and convincing. Listening to him gave you the feeling: it is a matter of time until the non-believers will find out why the solar energy revolution is unavoidable. We mourn over his death, but his legacy and message will remain.

The left wing hobby
Even today, many critics are convinced solar energy is just a left-wing hobby.
Why is the development of solar energy going so slow? Why isn’t it yet affordable without subsidies? You see, it is just a hobby for dreamers...

Well, in fact, the development of solar energy isn’t going slow. The market and industry are growing like crazy. Can we reasonably expect a world to change its whole fossil infrastructure into a renewable one in just a few years? It will take more years, maybe even a few decades, but to my opinion,it is going very fast already. And even more important, it will only go faster and nobody will be able to stop this development. Solar energy is here to stay and its role will grow, whether we like it or not.

Where are your sandals?
Times have changed. When I started in this business, in the early 90’s of last century, the solar industry and business were small, very small. Talking about my passion, reactions were always with the undertone of “sure, solar energy, very nice for left-wing oriented environmentalists and dreaming fundamentalists. Where are your sandals by the way?”.
At the start of this century, when the business grew into a tiny global industry with emerging activities in China, the mood among friends changed when explaining the about latest developments. “Still in solar pv? Can you make a living in that business?”. And now, only less then a decade later, the reactions changed to the positive even more: “Wow, you have a business in solar energy? Cool! I was thinking to switch my career into renewables too and solar is really a cool technology!”.

PV a danger for the grid?
In his many presentations, Hermann Scheer described three similar stages as well. First, there is the denial: “Solar can never be taken serious.” Then, when it is getting more serious, the established bigger corporation will fight against it, like: “solar PV is a danger for the grid”. This is what can be seen in the German media today. Big companies are afraid of what will happen. If the German market will continue to grow rapidly, in a few years, solar PV will become a major, if not dominant energy source. And because renewable energy has a privileged position on the grid, the established energy giants will have to live with it and accept it. For now, they still try to fight it.
After these two stages, will follow the third, even more interesting phase. It is the phase where the former non-believers will state “that they always believed in it from the start and that is why we are getting involved now as well”. It is the phase where solar PV can no longer be ignored. Simply because the mass wants it and because it has become attractively cheap, cheaper even than electricity from the grid.

The last ones without a PV roof
This phase is closer than many in the world can imagine. Only a few years away in Germany. Just picture yourself as German citizen 3 years from now. Solar pv systems, will be on roofs of many of your German neighbours and will generate cheaper energy than you buy from a major utility. You will be a fool if you don’t invest in it yourself, and maybe even more relevant, you will be among the last ones in your neighbourhood without a PV system.

The US: bigger, bigger, bigger
On the other side of the Ocean, in the US, a similar revolution is going on. Nowadays, one after another, energy utilities in the US are starting solar PV programs and large scale initiatives. It is only a few years ago, that with a single exception, none of them showed any interest. Now, the initiatives are all multi MegaWatt and even the first “1 GigaWatt” project proposal has been launched. This is only the beginning of course. Utilities will find out, that there is hardly a more abundant, secured and stable energy source, with guaranteed and predictable cost for a 25 year period. For a comparison: which utility can predict its cost for coal and fossil fuel and thus its energy prices for the coming 25 years? For solar PV plants, no financial State guarantees are needed (like for Nuclear plants), you don’t end up with garbage (either nuclear or green house gasses) and after 40 years, you don’t have to clean up mess or cover it for many years. And the great news from the solar industry is: solar PV will only get cheaper in the coming years. So, if your peers are getting involved, you better join soon too. More utilities will follow and more and more they will start with bigger projects. In the US they like everything bigger: from hamburgers, pizza’s, SUV’s to PV power plants. The development goes only in one direction: more solar energy.

Keep on dreaming
There is no argument or reason why this development will stop or turn. Solar energy will only get cheaper and cheaper. Can we imagine that within 10 years from now, in almost all its small and large scale applications, solar energy is cheaper than electricity made from any fossil fuel? Without any government support? And, o yeah, it is clean energy by the way as well...

My message for those who don't believe in a solar future yet and for the
‘dreamers’ of the past who started in solar many years ago: keep on dreaming! We are close to the tipping point.

The solar pv industry: will anything stop the optimism?

Almost all manufacturers of silicon, solar wafers, solar cells and modules have announced capacity expansions for 2011. Some even claim that they are already sold out for 2011. The solar industry is full of optimism. There is good reason for that. This year the global solar industry will see its sales almost grow 60% compared to 2009, which was already a record year with more than 70% growth compared to 2008.

There seems to be an unbeatable optimistic feeling within the solar pv industry. Solar PV is taking an unprecedented growth path. Capacity expansions are announced every day. And even as we speak, new manufacturers throughout the supply chain are entering the market. Who and what will stop this industry and solar energy on its way to become a major energy source? 

I know, capacity is not production, and Press Releases about capacity expansions are just Press Releases. But you don’t announce or build new capacity, if you are not optimistic about the near term solar business future.

The ‘what if’ scenario

In my thoughts, I have to admit, sometimes I have some doubts. Haven’t we seen such unstoppable optimism before in some other industry, just before a force majeure leads to severe market and industry corrections? Has anyone considered where all the modules will go next year and in 2012? What if German politicians pull the break and this major market, which covers 55% of the world market, will shrink instead of grow? What if a new Italian government will change the Conto Energia? After all, Italy has an unbeaten record of governments changing almost once a year on average, since the middle of last century…What if the double dip economy crisis will hit the US? And what if France caps its market to 500 MW next year? And if the Czech Republic disappears out of the top-10 markets in 2011? And what if all of this happens at the same time? Am I too much of a negative pessimist here?

The party has just begun

Maybe I am just too much influenced by the renewable energy policy changes in my own country. By the status of our government as unreliable partner and the common phrase among businesses: “Never trust the government”. The global solar PV market market development is still 99% dependent on subsidies and feed-in tariff incentives  initiated by governments. Isn’t the global solar industry just a little too positive about the governments in all the fore mentioned countries?

On the other side, more and more countries are just starting off with incentive schemes and even if some countries pull the break, there are more than 100 countries which have not even thought about supporting PV financially. Besides, PV is getting cheaper every year, so we will be arriving at grid-parity shortly. The party time only just began.

Cumulative board room expertise

But, more importantly, all these capacity expansions and all these new market entry decisions will be based on serious board room discussions. Based on business market studies, market surveys, consultant and investor advise, internal expert knowledge, sales trend analysis and well examined business plans with complex Excel spreadsheet models. These decisions will be based on the cumulative knowledge of all the involved internal and external solar industry experts. All of the industrial players together can’t be wrong, isn’t it? They probably know that they can produce a solar ingot, wafer, cell and module much cheaper than today’s market price. They know that even if the leading German market will face another 22% Feed-in tariff reduction in 2012, profitable production is still feasible. They probably know that mass production is still profitable even at a price level necessary to achieve grid parity in major markets like Germany and the USA. They will have to know, because grid parity is only a few years away and these new production equipment and plants normally are written off in less than 7 to 10 years.

So, if all these experts know where to go, there should be good reason to be optimistic. I will need to push away this little voice in my head that has some concerns. After all, photovoltaic solar energy is an infinite energy source, so why can’t we be on a route to infinite growth?

Why will the global market show further growth in 2011 and 2012…?

The year 2010 promises to become another revenue record year for the global solar PV industry. The newly installed solar PV power in 2010 could reach the all time high of around 14,000 Megawatt worldwide. This will be a market growth of around 100% compared to 2009. Will the industry continue this boom in 2011 and onwards?

Germany: 55% of the global PV market
Germany will take up around 55% of the global PV market volume in terms of newly installed solar power in 2010. The Feed-in Tariff will decrease 13% per 2011, as regulated by law. As stated in a previous blog post, to my opinion, this will not impact next years’ market growth. The industry can and will adjust their pricing in order to keep this major market alive and kicking. Even in 2011 a strong German market growth can be expected again, as customers will be encouraged to quickly install a PV system, before the FiT will be cut-back a more serious 22% in 2012. That is, if the German government will not decide to implement a ‘cap’ on the market volume eligible for the FiT. As Spain demonstrated, ‘caps are killing’ for a market and in the case of Germany, depending on the cap figure, it could have a serious impact for the global solar industry.

Scenario 1: Germany introduces a market cap
Let’s visualize a scenario where the German government will introduce a market cap in order to control the costs for the electricity rate payers paying the FiT premium. A cap that’s lower than the current market volume will force the industry to sell its extending product volumes elsewhere. There are no markets able to consume several GigaWatts, simply because the business infrastructure is not yet ready for it. As a leading and well developed market, Germany was ready to cover up for the losses in Spain in 2009. The companies, the sales people and the engineers were available to do the job.

But, which market can backup for Germany if a cap will reduce demand in Germany in 2012? Which market could easily take over a few GigaWatt extra from Germany? Can Japan take a few more GW and grow 200% in one year without importing modules? Can Italy grow with a few more GW in one year? It seems at least more logic than for instance the world’s number 3 market California taking a few GW extra. California is yet far away from the 1 GW mark and the financing issues and administrative and procedural hurdles make it unlikely to take up a few GW in just one year. If all these markets can’t, where will all the modules go? And if no market can consume the GW’s, what will happen? A price fight competition is a likely scenario, making casualties among manufacturers, including several German companies. Not only downstream, but also upstream. A cap on the German market effectively means a cap on the global market. And that will lead to a natural stop on production capacity expansion. Thus leading to a fall back for the leading German equipment manufacturers. They will lose high qualified jobs too. Can a German government afford to lose jobs in its globally admired and growing solar industry and current economic environment? This seems unlikely and let’s hope the government is smart enough to stay away from a market cap…

Scenario 2: FiT reduction will lead to further market boom
It is my belief however that, without a cap, but with further cut-backs on the FiT up to 22% in 2012, as regulated by law, the German market and global market will continue to grow rapidly. There is a good chance that the industry can bear this 22%. First of all, there is still room for reduction of PV system costs. Modules can be produced cheaper by technology improvements, and further upscale of mass production and acceptance of a lower profit margin. Some manufacturers of crystalline modules stated that they are already close to $1 per Watt production cost. Add to that cheaper inverters and other BOS components, where cost reductions based on mass production have not yet really taken off, and turnkey PV system cost should be close to $2,50 per watt very soon. And with the Euro improving against the dollar as currently is the trend, it should be feasible.

Back-up market for Germany
In other words, there will be room to keep the German market going. And, once module and system prices are this low, other markets like Italy, with higher FiT’s will become even more attractive and thus very thirsty for modules and systems too. Not to forget about the many new and emerging markets, like the UK, India, China, etc. Bringing down the PV system prices to match the German requirements will also open up new markets. All in all this could lead to an even greater hunger for modules and systems on the global market. Manufacturers will sell as much as possible in the most profitable markets and sell anything else in Germany. In this scenario, the global market could grow along with the industry, which is still expanding its capacity rapidly and with new entrants looking for a piece of the pie. This scenario could lead to continued strong growth of the global PV market and industry until at least 2012.

44 more GW in Germany by 2014?
This scenario will give other markets the possibility to grow and build up their business infrastructure. By the end of 2012 these markets, like the US, Italy, India and other Asian and European markets will then become ready to consume multi GW’s per year. That will hopefully make the world market able to survive a fall back scenario in Germany. And that seems inevitable in the end. Even a ‘modest’ 30% annual market growth scenario in Germany would mean an additional 44 GW of installed PV power by 2014. There are enough question marks if Germany, its grid and energy infrastructure can accept this huge amount of solar energy production capacity.

The maximum beer consumption
So, let’s hope the German government understands the dilemma and will give its industry and market at least another 2 years of reduced FiT, but without any cap. That will give the rest of the world the possibility to get ready for GW consumption, for the modules Germany can’t take anymore. That will not only help the global PV industry, but of course its own German solar businesses as well. They will then be able to expand their activities to these new markets in the coming years. It is a little like the Germans taking beer. They can consume a lot and maybe even the most per capita in the world, but there is a physical limit too…

A growing solar cell and module industry in China will help Europe

The Chinese solar pv industry is growing rapidly. In less than a decade, starting with a few small module manufacturers, China today turned into the leading upstream manufacturer of silicon, wafers, solar cells and modules. More than half of all solar cells and modules produced in the world are now from China. The share is likely to increase with huge investments and factory expansions coming up.

Factories are built where no markets are...
Where are most factories being built these days? Actually, not where the biggest markets are... First Solar modules come from Malaysia, REC produces in Singapore, Sunpower in The Philipines and China isn't a big market as well. The reason is simple: the factories are built where the incentives are the highest. Tax holidays, investment subsidies, cheap land and other incentives are offered to seduce companies to build a cell or module factory in their country. There seems almost a competition going on among countries. Someone has to pay for that and in the end that will be the tax payers.

The Chinese PV industry built with German tax money
The pv industry and market is considered to be small and still in its infancy. In the coming decade the global revenue pool for solar pv will increase to more than 200 million euro. More then once, it can be heard that government and industry people complain, that this huge Chinese solar pv industry complex has been built with European/German tax money.

With a very small domestic market, the majority of all Chinese solar modules are sold on the subsidized leading European markets, with Germany by far the most important. At the same time, the German solar industry is facing hard times with tougher competition from China. The German market is booming, meaning German rate payer will have to pay a higher premium on their electricity bill and at the same time Chinese brands are increasing their market share in Germany. Is it fair that a big part of the German rate payers money goes to China?

In other countries, like France, government people and advisors are questioning whether incentives like a Feed-in Tariff actually help to develop a domestic solar industry...Isn't it only helping the Chinese with the development of their PV industry?

German equipment in Chinese factories
A few thing can be said. First, it does not have to be bad if mass manufacturing of solar cells and modules will have its base in China. To start, let's not forget that in most factories in China, German equipment is installed to produce the cells and modules. Upstream, German companies have achieved a leading position in high-tech equipment manufacturing.

Germany is in the driver's seat
Secondly, the Chinese companies, in their aim to achieve a bigger market share, will have to bring down cost of cell and module production. Like in 2011, Germany will decrease its FiT in 2012 again. With the expected further market boom in 2011, Germany will cut back its FiT's with another 22%, as described by the latest regulation. The Chinese solar industry, being completely dependent on the German market, will have no other choice than to bring down cost accordingly in 2012. In other words, Germany is fully in control, and will steer and drive down the cost of (Chinese) solar modules faster and faster towards grid parity. Even sooner than expected, Germany will achieve a market situation where FiT incentives are no longer needed. Solar energy, based on very cheap Chinese solar modules, will then be able to compete with electricity from the grid. Solar cells and modules will become a mass and commodity product. Produced in huge factories, this mass production will result in tiny margins. For comparison, look at the current situation of flat screen production. Fully automated mass production, tiny margins and job cuts more than new job generation. Only interesting for a few big industrial multinationals. With the high-tech jobs related to the installed manufacturing equipment. In this scenario, it makes more sense for European countries to be positioned more upstream in high-tech equipment manufacturing.

Jobs, jobs, jobs: the future will be downstream
Secondly, talking about job creation. As mentioned above, the most jobs will not come from automated mass cell and module production. Besides high value and high-tech jobs in equipment manufacturing, the large numbers of jobs will be created down stream. Like the design and installation of solar pv systems based on Chinese modules. Global leader and front running Germany is the example for other markets: most of the thousands of new jobs are created downstream. Development of projects, sales, engineering, roof and electrical installation and financing and insurance of PV systems. Market development is the real job generator, not industrial mass production.

Downstream business is the real job generator
And let's not forget the expected industrial opportunities for local product development. As mentioned in one of my previous Blog postings, every market will offer new business opportunities for new solar (roof) products. Based on imported cheap standard solar cells from Asia, products can and will be invented to fulfill local market needs. Hence, this will offer new high value jobs, which require creative, smart and well skilled local people.

Europe: help yourself and start more FiT's!
My conclusion for now is and advise would be to the French and other governments: don't be afraid for the Chinese module invasion based on a generous FiT program. Don't bother that you don't see a solar cell and module industry emerge in your country. Let China have this piece of the cake. You will only help yourself more. Then, even sooner French and other European companies will be able to import the best and cheapest cells and modules to create new and more profitable local downstream solar business. That will create a bigger revenue pool and the most jobs! Let China produce the fireworks and let's do the party in Europe!

The solar future: looking ahead 10 years

Ten years ago...

Ten years ago the global PV market was around 200 MW. Currently, that is what is being installed in Germany alone in less than 2 weeks….For the year 2010, the newly installed volume is forecasted to be around 12,000 MW. That is a multiple of 60 times in 10 years. Big companies, and none of them were Chinese, were producing like 20 MW per year in 2000. Ten years ago it was predicted that with an average of 30% market growth per year, in 2010 the installed volume would be around 4,000 MW per year. Instead, in reality, we are now facing 3 times that amount….

Ten years from now

Now, let’s take a snapshot of how the solar pv market and industry will look like in 2020…

For households, solar electricity generated from your own roof is cheaper than electricity from the grid in the USA and all Southern European countries. And even in the ‘rainy’ Northern European Belgium and The Netherlands. Of course, without any subsidy or Feed-in Tariff. FiT programs do not exist anymore. ‘Grid parity’ is an old fashioned word. Now the trend is ‘cheap solar’. The market showed a CAGR of 30% since 2010. The global annual market volume is around 140 Gigawatt, which is more than 10 times the figure of 2010. But that was long time ago, when pv was still a tiny energy source. The revenue pool is now over 200 billion euro per year and millions of people are working in solar.

India and China doing 8 to 10 GWp per year

In ‘history’, PV was still heavily subsidized and completely reliant of Germany. Things are different these days. The German market is not yet saturated, but the best roofs in the country are full with panels. All new buildings have PV integrated. Architects start their design with a optimal roof for solar pv generation. Currently, the biggest growth markets however are USA, Southern Europe, the Middle East and Northern African countries. And of course Asia. India and China are huge and booming markets. Each around 8,000 to 10,000 MegaWatt per year. Hundreds of multi MegaWatt power plants and several plants each hundreds of MegaWatt in size are built this year. All countries without fossil fuel resources are switching to solar. No other energy source is so predictable in terms of cost per kWh in the sunny regions. Investors do not trust coal and other fossil energy sources. The cost of ‘ old fashioned’  polluting fossil kWh’s is unpredictable and high due to carbon taxation.

The leading manufacturers produce 15 GWp per year

The sunny North African countries are building GigaWatt scale PV power plants, preparing for supply of cheap energy to Southern Europe via High Voltage connection lines through the Mediterranean Sea. Standard crystalline solar cells and modules are so cheap, that the solar industry, besides producing large volumes for utility scale pv power plants, is working on high profile products for optimal building integration. Nowadays, leading manufacturers, all from China, are producing 15,000 MegaWatt per year.

Europe is focusing on building integrated products

Residential customers and the building industry are now only interested in good looking products, which, by culture and tradition, vary per country. Cells are shipped around the world in huge quantities and assembled into building products and solutions in each market. A new industry in Europe has emerged around building products based on solar cells. Red and pink modules are doing very well in Italy, Spain and Portugal these days, fitting perfectly on traditional terracotta roofs. Black modules are a hit in Northern Europe. Booming is the market of energy storage systems and smart grids. And of course all technology combining electric car charging systems and solar energy production.

GW scale power plants are built in 2 years...

Nowadays, GW scale pv plants can be built within 2 years. That is the reason that Energy utilities like them so much. And of course because the production cost per kWh are so predictable and the O&M cost are so low. The global industry is positive about its future for the next decade and is predicting further growth of at least 25% per year. The forecasts are that around 2030, the annual market volume will reach 1,000 GigaWatt. Impressive, but still tiny compared to the potential addressable market volume as the global electricity demand is still increasing. And, let's face it: even at this impressive growth rate, solar PV is not even able to cover only the growth of the global electricity demand...

Let's get back to 2010 and agree to talk again on 20 sep 2020 to evaluate if I was too pessimistic.

Is the UK the next gold rush solar pv market?

Last week in Valencia, many experts and friends shared their market knowledge, insights and views at the Fourth Global Demand Conference.
At the first day, the emerging PV markets were discussed. At the second day the demand dynamics in top-10 markets in the world.
At the conference and at the PVSEC exhibition floor, it was the general opinion that the UK is one of the most promising PV markets.

Facts and rumours suggest that hundreds of MegaWatt's are under development. Some market players expect a GigaWatt market in 2011. Not only many residential and commercial pv roof projects. It was said that big financial institutions are preparing ground mounted projects for hundred or more MW's. Financing seems not the biggest problem. For equity funds, the opportunities to make a decent return on investment, are limited these days. The interest rates are very low. The feed-in tariff for solar energy provides an attractive investment alternative. And many investors and funds from the UK have built up experience with pv power plant investments in Spain. They understand the pv technology, worked with a FiT mechanism and know the UK market.
How fast will the UK PV market grow? As stated in my previous blog, it normally takes new markets at least 3 years to develop to a level of one or more hundred MW of new installations per year. Can and will it go faster in the UK? There are more international players, there is more experience and more money available.
On the other hand, the UK market is relatively unexperienced, is lacking a well developed supply chain and most potential customers do know nothing about solar pv and feed-in tariff mechanisms.

In it's second year, the pipeline of (ground mounted) pv projects under development in Spain was endless, but at least many thousands of MW's in volume. Most of them were never built. Permits were not in place, the project financing could not be arranged, modules were lacking, etc. At the time more than thousand solar PV parcs were actually built in 2007/2008, the government paniced and killed the market with a revised incentive scheme. More than 10 billion euro's were invested, with a substantial share by foreign big investors. Those investors, making a very good return on investment, will have to be paid for 25 years.

Although the UK is a big country, with enough room for ground mounted projects, it does not seem like the natural fit. Does it make sense to fill the beautiful Cornwall landscape with large solar PV fields? It seems more logic to use the free commercial and residential roof space. After all, PV is the ideal distributed energy source to produce energy at the point of energy use. In extremely sunny area's (here is meant sunbelt countries and deserts and not Cornwall), it makes sense to built large scale PV power plants.

The UK FiT is so attractive, that several companies are even offering solar pv systems free of charge to roof owners. The roof owner receives the solar energy free of charge and saves money on its energy bill. The pv system owner, using the roof owner's roof, receives the FiT and maintains the system. Both benefit and make money and apparently the system owner makes a very good return on investment. The model is so attractive, that more and more companies start offering it.
In a similar situation some years ago in The Netherlands, the offering of free-of charge PV systems lead to questions in the parliament and not much later the whole incentive program was killed, completely. 'Over subsidized' and not the intention of the pv stimulus program, was the conclusion. Although more was at hand and the arguments were incorrect, the sentiment was so negatively influenced that it took another 4 years before a new complicated and unsuccessful incentive program was introduced again in 2008.
A similar thing is about to happen in the Czech Republik. The market boom, or better explosion, will lead to a possibly disastrous reduction of the current over attractive FiT. Most PV projects are ground mounted and although better than the UK, the irradiation is still considerably less than in Southern Spain. The experts at the conference expect the Czech market will shrink in 2011.

Except for sunshine itself, for anything that is offered for free, someone has to pay for it. When a pv market is extremely hot and PV systems are even offered for free, rather sooner than later, some will raise their voice. Electricity rate payers will question their premium payments flowing in the pockets of big investment firms. Opposing politicians will question the generousity of the incentives and debate even more the effectivenes and efficiency to generously stimulate solar as RE source over alternatives like wind or biomass.
Why has the German market been sustainable? What definitely helped was its stable economy and well designed incentive regulation. But what makes a difference is the realistic return on investment. The government always aimed at around 7-8%. High enough to convince investors and low enough to prevent the boom-to-burst scenario.

Booming markets burst sooner (Spain, Czech Republic). Gradually growing markets (Germany) are more sustainable.
There is a risk that a gold-rush in the UK market will lead to serious adjustments sooner than 2012 as announced in April.
What the solar industry needs, are sustainable markets, the more the better.
What the industry does not need, are hit and run markets, booming one year and bursting the next year. Where adjustments to the incentive system come suddenly and are uncertain. Investors will back off, because in the end, they do not like uncertainty at all.

Let's hope the UK market will be able to grow steadily to become a sustainable market that will help the solar industry grow. That will help to bring cost and system prices down. And in the end that will help to create markets where incentives are no longer necessary.

It takes at least three years to develop a solar pv market

Feed-in tariffs in more and more markets will help the industry become subsidy independent

The best examples are the current leading markets Germany, Italy, Belgium and the story of Spain. It took these markets at least three years to arrive at a level of more than 100 MW of newly installed PV power annually.

By nature, sales people tend to be very optimistic once an incentive scheme is announced in a new market. “This market will be booming and huge, we heard of a pipeline of more than 1 GigaWatt”. Haven’t we heard these lines in the past, soon after their new feed-in tariff was introduced in Spain, Italy, Bulgaria, etc.?

The realistic market growth curves

The facts show how reality works. In Spain, after the introduction of one of the most attractive feed-in tariff regimes ever, and in an overwhelmingly sunny country, the first year 'only' 11 MW were installed. The second year, the market boomed to a 'staggering' 23 MW, exploding to a 96 MW in its third
year of existence. Why did it take 'so long'?

PV better than Madoff?
Let’s face the facts: most people on this planet still don’t know what a solar panel is. “Where will the hot water come out? And where do I find the battery?”. How can you expect a banker to believe that your project with blue panels, yes, without water connection, will generate electricity, and is a reliable bankable project because the government is paying you a guaranteed 20 year 15% ROI? Sure baby, my neighbour also believed Madoff offered a good investment opportunity...
For the same reason, why should private and business customers and roof owners be smarter than bankers? (ok, admitted, bankers haven’t shown much intelligence in the last years)

Educating your grandmother
It takes time to introduce new technologies in a market. Certainly if these are only related to a commodity (electricity) and only attractive if they come with new, sometimes complex government regulation, like a ‘feed-in tariff system (FiT)’. Try to explain that to your grandmother!. And let’s not forget the local permitting processes and interconnection agreements with big and usually fast institutions like energy utilities.

The development of the global PV market is all about education. Education of a whole new business infrastructure to develop supply chain and education of customers. And every country or market has its own particularities.
The experiences in Germany, Italy, Spain, Belgium and all these other markets show it again: after 3 years party time really starts. So, have patience, but trust, that markets like the UK, Ontario, Bulgaria, etc will definitely provide substantial market volume in a few years (if the FiT will remain in place).

Party time after three years
It is likely that in time, more and more people will have learned about ‘blue panels’ producing electricity and giving good financial returns. Plus, well experienced and educated bigger solar pv companies with a track record in for instance Germany, will expand their activities in more and more countries. Helping local companies to educate their market quicker. The good thing is also, that more and more countries have started with feed-in tariff regimes. The number of emerging markets is growing rapidly. Most of them still in their infancy, but give them a few years and they will really start to boom. And with so many new markets joining, the best of the global PV market growth party is yet to come!

Will governments keep the faith?
The worst what could happen is that governments start to loose faith in the feed-in tariff model, because of what is happening now in Germany and happened in Spain. Once the business infrastructure is in place and the story goes around (after 3 years), it is a challenge to control the market growth engine. Markets keep on booming. Spain showed that a resolute break will have a disastrous effect on the domestic business infrastructure. The money invested to build up a market and business infrastructure can be thrown away in one year.

More anniversary parties will help the market become independent
A well designed annual FiT degression in pre announced steps helps. Sudden and panicked interim cut backs usually have a contra-productive effect. People take a run ‘on the last high tariffs before they are further reduced’.
The Feed-in tariff has proven to be the best incentive scheme to develop a domestic PV market and business infrastructure. With well built in annual reductions of the tariffs, the FiT model is still the ideal way to bridge the limited number of years this financial support is still necessary. With the PV industry expanding and developing rapidly and cost coming down quickly, solar PV is on track to stay on its own feet, without the need for any financial support. In many major markets, this is only a few years away... Germany is already celebrating its 10th anniversary with their FiT. If other markets follow this example and Germany pushes the right buttons, the global PV market and industry will see a further continuous growth and subsidy independence within a decade for the major market segments like residential applications.

The solar future in inevitable and the best is yet to come. Let’s educate!

The German PV market in 2011

What will happen in the German PV market in 2011? It presently looks like this year will show record figures for newly installed PV power, like last year. Customers want to make use of the current feed-in tariff, before this incentive will be reduced at the beginning of 2011. Since the government announced additional reductions of the tariffs in 2009, sales rocketed. It looks like the further feed-in tariffs are cut back, the faster the market is growing...With another reduction following on January first 2011, this is likely to boost sales till the end of this year. So, what will happen next year? Will the government be surprised when they see record numbers at the end of this year and decide that another feed-in tariff reduction will be necessary in 2011? Will they get scared that the public, their voters, will no longer accept the premium they pay on their energy bill to subsidize the feed-in tariffs?

Consolidation
One could conclude that the subsidies are still too generous. They could think that a further feed-in tariff reduction will cool down the spectacular growth....But, will that happen? Well, the global solar industry can certainly not survive without the German market, which takes more than half of the world market. So, in order to survive and keep their market share, the industry will have to reduce module and system prices. This will reduce their margins and profit. But, it is better to lose part of your profit than being forced out of business. This is what we call the 'consolidation'; survival of the fittest. Only the companies able to bring down cost and accept lower margins will stay in business.

Further feed-in tariff reductions will cause the market to grow faster
So, let's imagine, the German government will further reduce the feed-in tariffs in 2011, in order to 'cool-down' the market growth. My feeling is that this measure will be counterproductive. The faster it will reduce the tariffs, the more urgency the customers will feel to 'buy their own solar system', before this incentive gets reduced even further...And the industry will consolidate even faster. Cost and prices will need to be adjusted. This means acceptance of lower margins, or grow faster in order to reduce cost of production. This could help to hold and expand their market share in the fast growing German market.

Can the growth be cooled down?
Does the German government have any other solution to cool down a fast market growth? Frankly, I do not know how. Introducing a market cap for its feed-in tariffs will lead to a run on this incentive as well, and will force companies out of business, because there are no sales after, say 'May, since the cap has been reached'.

Too big to fail
Germany has chosen for renewables and the people and customers like it so much, there is simply no way back. Does it matter? No, Germany will lead the way in photovoltaics in the future. It has simply grown too big. It can't be ignored anymore. Not by the government, not willing to stop this job-machine, not by its population, which embraced solar PV and not by the global PV industry, because the market is simply too big to lose. Yes, it will cost the German energy user money and slightly raise their energy bill for many years. But energy bills will be raised anyway, due to increasing cost of conventional energy sources like coal (carbon taxes) and oil (scarcity). In the long term, these same customers and voters only benefit from more solar and renewables. For example with more predictable and stable energy prices. Germany will build up a large and still growing share of clean and sustainable energy supply. And, let's be honest, who would not prefer such a country to live in and leave that for your children?

Germany and solar pv is like Google
Germany sets the trend in renewables and is market leader. As technology innovators, Germans will always be able to make money on solar. German industries, investors and entrepreneurs can be found everywhere around the world. They have the knowledge, experience, industrial and innovative power, people and money to maintain world leaders. I think, that the German market will keep on growing. In 2011 and onwards. And fast as well. At this speed, it might even become the first market reaching grid-parity, when the cost of solar power equals the retail cost of conventional electricity. This will speed up the market even more and create more business opportunities around the world. Germany, and its solar industry infrastructure, could become a Google in solar pv. Too big and important to fail. Leading the way with forward thinking. And Google is still not doing too bad...