Growth Spurred by Improved Financing Conditions and a Rush to Beat Feed-in Tariff Cuts in Europe

After a weak start in 2010, Q2'10 global photovoltaic (PV) demand soared to 3.82 GW, up 54% Q/Q, according to a report issued today by Solarbuzz®, an international solar energy market research and consulting company. The PV industry remains on target to deliver over 15 GW installations this year.

"The rush to install in Germany ahead of tariff declines in mid-2010, combined with strong incentive programs across Europe (especially in Italy, France and the Czech Republic) and an improved financing environment, drove the global PV market over three times the level in Q2'09," noted Craig Stevens, President of Solarbuzz.

According to the latest edition of the Solarbuzz® QUARTERLY Report, Q2'10 global market demand was only 2% less than the global market's previous quarterly peak (3.92 GW in Q4'09). As a result of 2010 performance to date, Solarbuzz also raised its five year demand scenario forecasts in the report.

Total industry revenues were approximately $17.2 billion in Q2'10, compared to $12.0 billion in Q1'10 and $6.2 billion in Q2'09.

Figure 1: Global Photovoltaic Market Revenues

Source: Solarbuzz

Germany, at 2.30 GW, accounted for 60% of global demand in Q2'10. The next largest country market was Italy, which grew 127% quarter on quarter, was still just 11% of the size of the German market. France and the US also put in strong performances.

On the supply side, polysilicon, wafer, and cell manufacturers reached capacity utilization rates of between 75% and 87%. Despite an increase of 495 MW in wafer supply over the past quarter, wafer capacity represented the most constrained part of the industry chain. Among cell manufacturer shipments, the Top 5 were represented by First Solar, Suntech Power, JA Solar, Yingli Green Energy and finally Trina Solar. Among the Top 12 cell manufacturers in Q2'10, six Chinese manufacturers accounted for 55% of shipments, up from 43% a year ago.

Both upstream and downstream module inventories in MW terms held almost perfectly steady at the end of Q2compared to the prior quarter end.

After six quarters of declines in factory gate prices, there were modest rises in short term contract prices in Europe. However, weighted average factory gate modules prices are still down 24% in US dollar terms from one year ago . First-tier Chinese cell and module manufacturers that had priced competitively in the first six months of the year moved in to a forward sold position, which, in turn, allowed European factory gate prices to rise 2-4% by the beginning of Q3'10. A strong yen is helping to ensure that Japan remains one of the best markets to place product.

Looking ahead into 2011, the most challenging quarter will undoubtedly be Q1'11. Leading European markets, including Germany, will face large reductions in tariffs at the beginning of the year. Even with careful phasing of projects and price reductions, market demand is projected to be less than 50% of module production. As a result, the analysis forecasts end Q1'11 upstream and downstream module inventory days to increase significantly by the end of that quarter.

"Historically, the PV industry has often exuded over-optimism in the face of uncertain end-markets. However, the recent industry conference in Valencia confirmed two prevailing industry positions, one that emphasizes oversubscribed order books, the other that focuses on the German tariff declines and a demand reduction next year," Stevens concluded.