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February 28, 2013

Photovoltaics: 10 Trends to Watch in 2013

2012 Report Card plus my 2013 trends and predictions.

Ed Gunther

20122013[1].png Though I’ll blame my lingering flu, the Photovoltaics: 11 Trends to Watch in 2012 review and 2013 photovoltaic (PV) trends and predictions post has again extended well into February. As usual, I won’t be grading on a curve.

Photovoltaic Market Demand Growth

Last year, I said:

In 2012, I predict at least 25% global PV installation demand growth. I am tempted by the under since the early year Feed-in Tariff (FiT) headwinds seem stronger than ever with serious talk of a 1 GW cap in Germany and PV installations in Italy expected to decline sharply from 2011. Has the German PV market peaked with the estimated 7.5 GW of installations in 2011?

Grade: Fail

For the context of the prediction, both IMS Research and iSuppli believed global 2011 PV installations exceeded 26 GW around this time last year. NPD Solarbuzz now claims photovoltaic (PV) demand for 2012 reached just 29.0 GW (GigaWatt), short of earlier estimates of 30 GW or more. My empirical observation has been prior year demand numbers settle by the end of March, but my prediction is well short of 25% demand growth even using the 26 GW baseline for 2011.

If that’s not enough, the German PV market did not peak in 2011, and eked out a small gain in 2012 PV installations to 7.6 GW.

I wonder if NPD Solarbuzz 2012 PV demand will be revised back upward because of 4Q12 (fourth quarter of 2012) module shipment growth at Yingli Green Energy Holding Co. Ltd. (NYSE:YGE) and JA Solar Holdings Co., Ltd. (NASDAQ:JASO) raising 4Q12 shipment guidance with others maybe to follow?

In the second part of the prediction, I said:

For the US, I’ll prognosticate at least 75% PV installation demand growth buoyed by modules purchased under the expiring 1603 Treasury Grant safe harbor, utility scale solar projects, and residential growth.

Grade: Fail

Per GTM Research, a division of Greentech Media, the US was forecast to install 1.2 GW of PV in 4Q12 and totaling 3.2 GW for 2012. Since the US installed 1.855 GW of PV in 2011 again per GTM Research, that implies about 72.5% growth in 2012, just short of my prediction! Perhaps the final numbers will settle in my favor when the next U.S. Solar Market Insight report is released?

In 2013, I predict near 20% global PV installation demand growth from the 2012 29 GW baseline to almost 35 GW.

For the US, I’ll swing for the fences and prognosticate at least 4 GW of PV installations even though we make things so difficult here for solar. More of these 4 kW (kiloWatt) installations at $2.50 per Watt in Texas would help.

As a bonus, I’ll predict the German PV market will still be larger than the US PV market in 2013. The timing and investor uncertainty caused by proposed amendments to the Renewable Energy Sources Act (EEG) and the national fall elections in Germany will decide this one.

 1603 Treasury Grant and Tax Equity and Solar Finance

I did not make a prediction last year. For 2013, I have a lot of questions.

First, if the US sequester is not avoided, 1603 Treasury Program grants awarded in Fiscal Year 2013 are subject to a 7.6% reduction.

I wonder if US Federal tax reform does happen after the manufactured fiscal cliff and sequester crises pass? How will comprehensive tax reform impact the Investment Tax Credit (ITC) and the chances of the Treasury Grant program being resurrected? If discussions about 2017 and beyond develop, I hope the SEIA (Solar Energy Industries Association) has strategized on an ITC phase out plan much like the AWEA (American Wind Energy Association) proposed for the PTC (Production Tax Credit).

How available is tax equity in 2013 and has the delayed extension of the wind PTC increased the availability for solar?

There are a number of innovative solar finance trends to watch in 2013 including solar leasing, crowdfunding, Real Estate Investment Trusts (REIT), and Master Limited Partnerships (MLPs). Most originated or are developing fastest in the United States.

Of course, solar leasing or so-called third party financing is on fire, and over 70% of residential solar installations in California and other states opted for solar leases in 2012. GTM Research forecasts the residential solar financing market will “rise from $1.3 billion in 2012 to $5.7 billion in 2016” according to the report, “U.S. Residential Solar PV Financing: The Vendor, Installer and Financier Landscape, 2013-2016”.

I’m a bit concerned about the solar lease gold rush and believe the downsides to this model may become apparent by yearend 2013. Much as with car leasing, I expect more regulation in terms of disclosure and proper comparison of lease versus buy options. I was pleased to see a low interest rate loan option being offered to California residents going solar. By the way, “Sunrun Faces Class Action Lawsuit Over Its Marketing” strikes me as frivolous but may be a harbinger of things to come.

On the solar crowdfunding front, I tried SunFunder on the suggestion of Bloomberg New Energy Finance CEO Michael Liebreich at the end of his Energy All-Stars presentation. I found investing in a not for profit SunFunder solar project to be a fun, easy, and rewarding experience. By contrast, I just looked over at the Solar Mosaic website and get the impression I have to sign up just to browse the potential investments. I wonder if Solar Mosaic is targeting certain gross sign up metrics?

I am less enthralled about REITs and MLPs though “Solar REITs: A Better Way to Invest in Solar [Updated]” by Tom Konrad at Forbes has these covered.

As soon as I hear the word securitization in the context of solar, I think of Wall Street and boom, bubble, and bust cycles.

 US solar trade claim against China et al.

Jumping into the trade area, I said:

For political reasons, I’ll go further to argue the imposed tariffs will not be punitive but amount to a slap on the wrist. Indications are China will respond with equivalent retaliation against polysilicon imports from the United States. The message is abundantly clear from a headline just today at DigiTimes: “Four China polysilicon firms demand government start anti-dumping and anti-subsidy investigation against US firms, according to China media”.

 I think the Harmonized Tariff System of the United States (HTSUS) schedule for the complaint subheadings will impose duties in a range from 2.5% to 10% on cells and modules manufactured in China and imported to the US. The duties will be tiered; cells will have a lower tariff than modules to encourage NAFTA (North American Free Trade Agreement) based module assembly.

Grade: Fail

I got a lot wrong here beginning with the countervailing duty (CVD) and antidumping duty (AD) only applying to Chinese photovoltaic cells and not modules. Of course, a recent Coalition for American Solar Manufacturers (CASM) appeal looks to close the PV module/panel loophole.

Global solar trade cases have proliferated since the US China trade case. A European Union (EU) solar trade investigation into Chinese PV manufacturers spearheaded by the SolarWorld AG (FRA:SWV, OTC:SRWRF) led EU ProSun may be decided as early as April 2013 per “EU and China stumble towards solar trade war” by Robin Emmott and Michael Martina for Reuters. Meanwhile, India’s antidumping investigation of China, Malaysia, Taiwan, and US based solar manufacturers has resulted in a US challenge at the WTO (World Trade Organization) concerning domestic content requirements in India’s Jawaharlal Nehru National Solar Mission. The WTO set a precedent on domestic content requirements in the ruling against Ontario, Canada, with regards to their solar Feed-in Tariff program.

Not be left out of the solar trade investigations, the Chinese Ministry of Commerce initiated an anti-dumping investigation of US, EU, and South Korean polysilicon manufacturers last year. US and EU polysilicon manufacturers are also being investigated for countervailing duties. The Chinese decision on the polysilicon investigation is supposed to have been delayed until at least March 2013.

 Polysilicon and solar grade silicon outlook

Regarding polysilicon, I said:

I expect polysilicon spot prices will remain below $38 per kg in 2012 and may briefly dip below $20 per kg at some point later in the year as the largest polysilicon supply versus demand correction since the Internet bubble plays out.

Grade: Fail

In another tough grade, polysilicon spot prices did not dip briefly below $20 per kilogram (kg) but smashed it for an extended period of time. I heard of polysilicon prices as low as $14 per kg for high quality material, and I’m sure a topper will claim a lower price for material of unknown vintage. Reports conflict if these spot prices were for material direct from polysilicon oligarchs or second hand, resold material.

Using the latest data, polysilicon prices appear to have reached an inflection point in February and are on the rise per IHS Inc. (NYSE:IHS) as polysilicon spot market volumes declined to 20% of total sales in December 2012 indicating inventories had been cleared.

On the 2013 polysilicon outlook, Mr. Johannes Bernreuter, head of Bernreuter Research, said:

The global polysilicon industry will return to the path of growth and increase its production by 6.5% in 2013, according to the latest analysis of Bernreuter Research. The polysilicon market research firm projects the global polysilicon net demand – including that of the semiconductor industry, but excluding the consumption of inventories – will amount to approximately 250,000 metric tons (MT) this year. The spot price is predicted to rebound to a level of US$20 to 25/kg by the end of 2013.

Going conservative, I expect polysilicon spot prices will remain below $30 per kg throughout 2013.

 Thin Film Photovoltaics

For thin film PV, I said:

Beyond the Solar Frontier, I’ll be watching Stion and strategic partner TSMC Solar Limited, a subsidiary of Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), along with MiaSolé and the Solibro division of Q-Cells SE (F