maandag 14 februari 2011

The Global Market in 2011: Will the Optimist and Pessimist Meet in the Middle?

The Optimist’s Prediction for the Global PV Market in 2011
According to the optimists in the PV business, the world’s leading and dominant market, Germany, will continue to grow in 2011. Maybe not another 90% like in 2010, but at least a safe 20%. This after an amazing, record-breaking year 2010 with the installation of over 7 gigawatts of PV power. The optimists believe that the industry will be able to decrease its prices, and as such compensate for the German feed-in tariff reductions in January and July. At the same time, these lower (module) prices will lead to explosive growth in other markets with even better feed-in tariff levels, such as those we see in Italy, the UK or Ontario.

This will stimulate the utility scale PV project market in the USA and project development in other robustly-growing markets such as those of Japan, Korea and Belgium. The optimists foresee China and India emerging as voluminous markets driven by new incentives, lower prices and their acute need for more (clean) electricity. And there is more. New markets are popping up simultaneously, starting with new feed-in tariff and incentive schemes such as those in the Philippines or Thailand, or the huge project initiatives in Morocco.
Add up all these forecasted growth markets and the global market could well grow an additional 20-25% as compared to the record breaking year 2010, resulting in a market size of over 18 gigawatts for 2011. And this is without even taking into account the possible positive effects of continuously increasing oil prices.

The Pessimist’s Prediction for the Global PV Market in 2011
The pessimist, on the other hand, foresees the German market shrinking, because the feed-in tariff reductions are too great for the industry, which will not be able to follow with the necessary cost and price reductions needed to keep the system prices attractive for investors. The pessimist foresees too much of a mess in the Italian market. As nobody knows what has actually been installed in 2010, the Government may well interfere in the current incentive scheme. Furthermore, feed-in tariff reductions have been accounted in Italy as well as in other markets. But, how much can we trust this announcement - or indeed, a new Government - in these difficult economic times faced by Italy? The pessimist may also see a Spanish horror scenario looming. Can retroactive measures be excluded? The pessimist also sees the Czech market collapsing in 2011; the Spanish market returning to zero as investors have completely lost faith in the Spanish Government; and the Belgian market facing a difficult second half of the year when strongly reduced module prices will be needed in order to keep investors interested in large-scale projects.

The pessimist foresees that the French market will remain on hold and doesn’t expect to see the introduction of any new incentives to attract investors in large-scale power plants. The pessimist also believes that India and China will not become huge markets in the near future. To develop projects in bureaucratic India will take much more time than expected. Besides, the companies that won the tenders under the National Solar Mission might not be able to build and finance their projects at the accepted low feed-in tariffs. China will focus predominantly on exporting their products rather than on building domestic plants. The UK and Ontario may reconsider their incentive schemes this year, as investors are tending to exhaust the budgets with applications for large-scale ground-based projects, which was not the original intention of the program. The pessimists also see new markets that look promising, but they believe that it will take a few years to develop these into sizeable markets of a few hundred megawatt volume.
If we add up these developments and forecasts, this could mean a global market in 2011 of around 12.5 gigawatts, i.e. 10-15% less than the 2010 figures.

Who Will be Right - the Optimist or the Pessimist? 
No-one could have predicted that a volcano would erupt in Iceland in 2010, any more than they could have predicted the oil well issue faced by BP, or the political changes in Egypt. So, who can predict what will happen in 2011 and how this will impact the PV market? Always expect the unexpected. Will the euro survive? Will the dollar fall? Will the Italian Prime Minister survive? Will oil prices continue to rise? Will inflation and interest rates rise rapidly? Will we see oversupply and solar module prices crashing?
There are simply too many factors influencing the future - so maybe the best approach is to believe neither the optimist nor the pessimist, but rather to opt for a more middle-of-the-road outlook. The scenario we arrive at if we take the mid-point of a 15% global market shrinkage (pessimist view) versus a 25% global market growth (optimist view) is a scenario which presents a 5% increase, or a market of around 16 gigawatts of new installed PV power. Not bad in today’s uncertain global economic climate. But, for sure, the wrong prediction.

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