Forecasts difficult in light of the world economic situation. Due to the current financial crisis and its increasing effects on the real economy, a specific outlook on the world economy in 2009 and 2010 entails a major element of uncertainty. However, the economic institutes agree that the gross domestic product (GDP) will stagnate or even decline in most industrialized countries in 2009. Major emerging economies such as China, India, and Brazil, however, are expected to record further growth, albeit at significantly more moderate rates than before. The German Institute for Economic Research (DIW), for instance, expects economic performance to decline by 0.8 per cent in the Eurozone in 2009. Economic activity in the USA is even expected to decrease by 2.0 per cent. In 2010 the economic situation is expected to improve again so that slight growth of 0.5 per cent is expected for the Eurozone. The USA may achieve growth of 1.8 per cent. The German economy is expected to show a similar trend. For 2009, the DIW expects a decline in GDP of minus 1.1 per cent, while the economy is expected to grow again by 1.1 per cent in 2010.
Price volatility on energy market will continue. 2009 and 2010 will also be crucial years for the development of world energy supplies. Crucial factors already influencing the development of energy prices in 2008 will continue to cause strong price volatility on the power market. They include, for example, the increasing shortage of energy resources, capacity bottlenecks in refineries and concerns about potential reductions in oil production volumes by OPEC.
The international attempts to reduce greenhouse gas emissions will strongly influence future investments in the energy sector. The World Climate Conference held in Poznan at the end of 2008 paved the way for future negotiations within the framework of the Climate Conference in Copenhagen at the end of 2009. At that conference, a follow-up agreement on the Kyoto Protocol will be presented for ratification, obliging the international community of states to achieve further reductions in greenhouse gas emissions. Such an agreement will probably have far-reaching consequences for the structure and technological development of worldwide energy supplies. The economic scope of such an agreement is expected to increase with the active participation of the United States in emissions reduction, as announced by the new US President Obama.
Renewable energies accounting for a larger portion of power generation. In the next two years, the market shares of renewable energies as a portion of the international energy mix will grow rapidly, thanks to broader political support and improved technological maturity. The IEA expects renewable energies to replace natural gas in the ranking shortly after 2010, rising to second rank among the most important sources of energy for power generation (figures according to reference scenario). Opportunities Distinguishing between different forms of renewable energies, the IEA expects above all solar and wind energy as well as geothermal power to grow. This evaluation is gaining in importance as, according to a forecast by the Energy Information Administration (EIA), the electricity market will grow more strongly than all other energy sectors and account for almost half the expected growth in worldwide energy consumption. This suggests an enormous market potential for solar power technologies.
2009/2010 will be crucial for the future of the sola relectricity sector. The amendments to the feed-in schemes in the key markets, Germany and Spain, adopted in 2008, establish a decline in feed-in tariffs as of 2009, which will have to be offset by corresponding price cuts of at least eight to ten per cent for solar modules. As a result, the solar industry will focus on reducing manufacturing costs along the entire value chain in the next two years.
Future supply – characterized by rapid capacity expansion. As early as in 2009, the expected mitigation of bottlenecks in the silicon market may produce a cost-cutting effect. According to the Sarasin Bank, global solar silicon capacity will double to 63.5 (2008: 35.9) thousand tonnes with the commissioning of new production plants in the course of the year. Thanks to technological progress, alternative silicon sources such as metallurgical or recycled silicon may increasingly be used and gain market shares in the commodity market. We therefore presume that silicon prices passed their peak in 2008 and will decline again as of 2009. The decline in procurement costs has a positive effect on the cost structure in the industry.
In addition, the sector will optimize materials usage through investments in research and development as well as continuous improvement of production steps. EPIA expects further cuts in average wafer thickness of around twelve per cent to 150 µm and an increase in average cell efficiency to 17.5 per cent by 2010. This would cause a drop in average silicon requirements per watt peak of around ten per cent to 7.5 (2008: 8.5) g/Wp.
Although many companies may experience difficulties in financing this growth (above all in the Asian region), due to the financial crisis and the associated credit crunch, analysts continue to expect investments to be made in capacity expansion at all stages of the value chain. EPIA, for instance, expects investments for the expansion of wafer, cell and module capacity to rise by up to 75 per cent in the year 2009. Analysts of Sarasin Bank forecast an expansion of cell production capacity to around 7.9 GW in 2009, and 13.2 GW in 2010 (2008: 4.2 GW). During the same period, production capacity for alternative solar technologies such as thin layer is to grow to around two GW in 2009 and four GW in 2010 (2008: 1 GW).
The steady expansion of production is expected to create capacity overhangs in the cell and module segments as of 2009. Increasing overcapacity will then cause margins to drop in these segments. Manufacturers will only be able to defend their market positions if they manage to cut costs by means of economies of scale and efficiency leaps. Companies driven out of the market due to this effect will primarily include independent cell and module manufacturers with little bargaining power concerning pricing negotiations with suppliers and customers, but also new market participants who have not been able to build up long-term supplier and customer relationships. Large, established market participants such as SOLARWORLD AG, in contrast, will probably be less strongly affected by this trend – they may even win additional market shares thanks to the consolidation tendencies.
Future demand – sales markets stable. The year 2009 will pose a major challenge for the solar industry. On the one hand, the usual pace of growth in the sector will slow down substantially due to declining feed-in tariffs in various markets and the tightening of access to capital for investors. On the other hand, optimizations of production processes and better supplies of raw materials are to be expected. The best players in the sector should be able to overcome the expected decline in prices through corresponding reductions in production costs. At the same time, this will be a major step forward on the path to grid parity for all players.
The legal framework in the key markets Germany, Spain, and the USA, expected to account for around 60 per cent of worldwide demand (2008: over 70 per cent) in 2009 and 2010, has been amended in 2008. The global market thus shows a solid investment framework for the future.
According to EPIA, market volume will double to € 24 billion to € 30 billion (2008: € 13bn) by 2010. For 2009, market growth of almost 25 per cent to 5.1 GW of newly installed solar power capacity (2008: 4.2 GW) has been forecast. However, sales in the first quarter of 2009 will initially remain weak due to declines in compensation and financial bottlenecks. In some regions this will be exacerbated by the weather not being very conducive to the assembly of our systems. However, demand is expected to pick up again in the course of the year due to price adjustments. According to the forecast for 2010, the installed solar power output is expected to grow by a further 35 per cent to around 7.0 GW.
The challenges for solar companies in 2009 will primarily result from the amendment of the grid feed-in legislation in Spain, fixing an upper limit for the installation of new solar power systems with a total output of 500 MW for this period. The market volume is expected to decline strongly year-on-year in 2009.
The feed-in tariff for solar power will also decline as of 2009 under the new grid feed-in tariff act »Real Decreto 1578/2008«. Since, however, the rates of return for Spanish solar projects will remain very attractive despite the forthcoming reduction in feed-in tariffs, it is to be expected that the planned 500 MW output will be completely realized.
According to the recently published study by the Sarasin Bank (November 2008), the German market is expected to grow by around 25 per cent to 1,870 (2008: 1,500) MW of newly installed power in 2009 and more than 2,240 MW in 2010. Deutsche Bank analysts even expect growth to more than 2,200 MW in 2009 and 2,800 MW in 2010, despite financial crisis.
Additional sales opportunities in Europe are offered by new growth markets such as Italy, France, the Czech Republic, and Belgium. These markets already recorded strong growth in 2008. The solar power market With the experience gained in 2008, approval processes as well as distribution channels and installation processes will have become more efficient, benefiting the entire European market. According to forecasts from the Sarasin Bank, despite the strong declines in sales in Spain, Europe might therefore continue to be an attractive sales market in 2009 and grow by more than 25 per cent year-onyear in 2010 with newly installed solar power capacity of around four GW.
One of the 2009 growth drivers will be the US solar market. The Renewable Energy Tax Credit Act, adopted at the end of 2008, offers private households and industry tax credits of 30 per cent of the investment costs of solar systems. The act extends the previous act which expired at the end of 2008 by a further eight years. What is new is that energy utilities will also be able to benefit from corresponding tax credits, a signal expected to provide strong growth momentum to the US market, in particular since some US regions are already close to achieving grid parity for solar power thanks to high end consumer prices and strong solar radiation. As of 2009, investments in large-scale solar power systems will therefore be a promising business with attractive interest rates for US electricity utilities. Unlike private investors, energy utilities with their traditionally strong liquidity should not have difficulties funding similar largescale projects. The project launched by US President Barack Obama for doubling the share of renewable energies in the US energy mix in the USA is expected to further boost growth in the US solar sector. In the framework of the program to promote economic activity, Obama intends to provide up to 150 billion US dollars for a realignment of energy supplies in the USA over the next ten years.
Above all in US federal states that already operate renewable portfolio standards comprising minimum standards for solar energy, interest in large solar power plants is expected to surge in the next two years. Legal and economic factors of influence For 2009, the Sarasin Bank expects the US solar market to double to around 680 MW of newly installed capacity (2008: 340 MW). In 2010, the USA may break the threshold of 1,000 MW and achieve newly installed power of almost 1,400 MW.
The Asian-Pacific area is also expected to develop into one of the key demand drivers in 2009. Established markets such as South Korea and Japan are expected to show dynamic growth, but new markets such as India and Australia, which adopted acts to promote solar power for the first time in 2008, will also create momentum for the international market. Overall, Sarasin experts expect the Asian region to show growth of more than 65 per cent to around 730 MW in 2009 (2008: 430 MW). By 2010, newly installed power is expected to account for around 1.2 GW.
The closer the solar sector moves towards grid parity, the faster the key sales markets will shift away from Europe towards sunnier regions such as Asia or the USA. Nevertheless, Europe will remain the world’s key sales region in 2010.
Breakdown of market shares by region
Source: Sarasin Bank, 2008
