Only 5 days ago, I posted a comment on a web site story looking at the costs and profits of PV manufacturers around the world.
In the article on GreenTech Media, citing research by GTM, the prognosis was that 21GW of PV manufacturing capacity would have to be shuttered because there was simply not enough forecast demand to absorb it. The prospect of many more company collapses was front of mind.
I posted the comment “A question on China; is it not likely and plausible that the Chinese Government could offer protection against collapse by ramping up internal demand through programs? My understanding is that they are willing to let Tier 3 players fade away and that acquisition by Tier1/2 players makes sense if the assets are right, but failing that they could soak up excess with stimulus, right?”
Although I didn’t get a response on the web site, I was blown away to read about an announcement today by Renewable Energy World that China intends to lift its targets for PV by 5 times; making their 2015 target 21GW – exactly the excess capacity that GTM were speculating would need to be shuttered. SolarBuzz were quoted as suggesting they thought 30GW was more likely.
To put that in perspective, it means in just 3 years time China will install roughly the same amount of PV in one year, as the ENTIRE WORLD DID IN 2011.
Or put in the local context its equivalent to between 40% and 60% of all the stationary generation in Australia today.
This is the first time we have seen a big jump in forward forecasts for some time; with most pundits seeing a cooling of demand as the market contracts from the extraordinary growth rates of the past few years.
I also posted a story on this topic commenting on how forecasts for the PV industry are so difficult and how industry (myself included) are consistently low on their predictions – 10 x lower looking back in time on average. So it seems China is at least keeping us consistent.
The ramifications of this are highly, highly significant for the world of PV, not only because we are now likely to see around 60GW installed in 2015.
The real ripples “in the mill pond” on this announcement are going to be for PV manufacturers who are unable to take advantage of this new demand and ramp up scale.
Profitability is at a precarious level right now, right across the value chain. The expected exits and consolidation in the industry (before this announcement) were expected to result in less significant price declines in the near term while some profit was recovered.
This has happened before in our world; price have even gone up in the past. It never ceases to amaze me that so many people think that prices will perpetually decline and companies will just keep on making billion dollar losses, year after year and not put their prices up; there comes a time when profit has to rule over growth.
So for those who can get a slice of that China Pie; scale and cost reductions are more secure which should help keep prices down – or at minimum lift margins up.
For those who are on the sidelines and cant sustain the losses and or reduce their costs to compete; well, they are facing a whole world of life threatening, ugly, blistering pain.