General Information on the PV Market
According to Photon Consulting’s 2006 Solar Annual report, which includes interviews from over 400 solar executives, fund managers, and policy makers, production growth in the solar power industry is strong and demand should significantly exceed supply through 2010. Currently, the global demand for solar energy is approximately 5 GW and Photon Consulting expects underlying demand to reach 8 to 10 GW by 2008, a 530% growth increase from 2005. Detailed economic analyses and estimates of the future market for solar energy are also available from the US Department of Energy (DOE). In the past, the photovoltaic industry has relied on the semiconductor industry as a source of high-purity silicon. Semiconductors, e.g. transistors and integrated circuits, require ultra-high purity silicon (99.99999%, 7N+ or more purity). Scrap and off-spec silicon from semiconductor manufacturers is often of sufficient purity (99.9999%, 6N+ or more) to be used in photovoltaic cells. The PV industry’s reliance on the semiconductor industry, however, leads to high volatility, cyclical exposure, and overall increased market risk. For example, a down-turn in the semiconductor market in the late 1990’s and early 2000’s resulted in a reduction of new ultra-high purity silicon manufacturing capacity being brought online. The reduced capacity combined, with a recent up-turn in the semiconductor market and more efficient processes have resulted in a high price for scrap silicon used by photovoltaic cell manufacturers. Even as demand for solar power grows, the dependent relationship on the semiconductor industry has become a limiting factor for PV supply.
Global Manufacturing
Worldwide, the PV industry sold over $15 billion of new product in 2005, continuing a five-year trend of 30%+ annual market growth. Thanks to national R&D programs and major capital investments in manufacturing, solar PV costs 1/10 what it did in the 1980s. Each doubling in cumulative manufacturing has brought prices down by ca.18%. With electric rates and natural gas prices skyrocketing nationwide, if manufacturing continues to scale up and significant R&D commitments are made, continued progress will bring rooftop solar costs below retail electricity rates in the US.
However, while worldwide production of PV cells increased by 45%, the United States – once the global leader in PV manufacturing – fell in market share from 11 percent in 2004 to less than 9 percent. The surging player in the industry was China, which increased production from 51.8 MW in 2004 (4.1% market share) to 150.7 MW (8.3%) and now trails the US by the slimmest of margins. Japan remains the dominant country in PV manufacturing.
Government Policy as a Market Driver
Germany and Japan have taken the lead in solar manufacturing and installations because of long-term national incentive policies designed to make solar power mainstream. Germany incentivizes solar installations by paying 3 – 4 times retail electric rates for the electricity generated from PV systems, while Japan instituted a carefully designed rebate program that phased out over the last ten years.
The United States, on the other hand, offers a patchwork of more than 50 distinct markets, each with its own interconnection and net metering rules, and until 2006 had no incentives for individual installations of solar. Yet, states have increasingly invested in solar power development; in the past decade, the number of states with solar rebates has risen from just one to 26, and the number of states with net metering increased from 11 to 36.
Federal solar tax credits enacted in the Energy Policy Act of 2005 have taken effect and SEIA member companies are reporting a 10- to 20-fold increase in consumer interest thus far. In 2006 and 2007, spending on eligible solar property may qualify businesses and homeowners for a tax credit worth 30% of system costs (for homeowners, the cap is $2,000).
California is the dominant PV market in the US and the fifth largest market for PV in the world. More than 15,000 systems have been installed on homes and small businesses connected to the electric grid as of December 2005 under the California Energy Commission’s rebate program. The California Public Utilities Commission recently created an 11-year, $3.2 billion program to provide homeowners and businesses with rebates for installing grid-connected PV. Within three years, the annual PV market in California will exceed the entire US market in 2005.
Another state with a highly successful program is New Jersey, which provides a $5.10 per watt rebate and an exemption from the sales tax. Owners of PV systems receive a solar renewable energy certificate (SREC) for each megawatt-hour of solar electricity produced by their system, which they can sell to utilities or middleman brokers on the open market. The SRECs are used by NJ utilities to meet a state renewable portfolio standard (RPS), which requires an increasing amount of the power they provide to come from renewable energy. Nineteen states and the District of Columbia have passed RPS; Colorado, Nevada, New Jersey, Pennsylvania and DC all feature solar requirements within their RPS.
The Northeast market (outside of New Jersey and California) is the third largest market for PV. Massachusetts, Connecticut, and New York "Times New Roman" offer substantial rebates on PV consumers and the cost of retail electricity is significantly higher in the Northeast than in southern states; for example, the average price in Massachusetts in 2005 was 40 percent higher than in Florida, according to the Energy Information Administration.
The Global demand for solar purity silicon has, for the past decade, experienced a 35% annual growth rate. The growth rate is projected to continue at a compounded annual 35% growth rate for the next decade.
Markets and Opportunities
The worldwide demand for solar-grade silicon is currently 18 MM kg/yr and growing 35% to 40% annually. By the time the first 5 MM kg/year RSI facility comes on-line, demand for solar grade silicon is expected to exceed 24 MM kg/year of which no more than 8 MM kg/year is foreseen to be available from non-Solar Sciences sources. While a number of new plants have been announced careful review shows that the preponderance are producing electronic grade for chip manufacturers with small allocations to the solar industry. Consequently, the solar industry will continue to compete with the electronics industry for highly-refined silicon feedstock; and spot prices will remain high; currently US $100-300 per kilo.According to Photon Consulting’s 2006 Solar Annual report, which includes interviews from over 400 solar executives, fund managers, and policy makers, production growth in the solar power industry is strong and demand should significantly exceed supply through 2010. Currently, the global demand for solar energy is approximately 5 GW and Photon Consulting expects underlying demand to reach 8 to 10 GW by 2008, a 530% growth increase from 2005. Detailed economic analyses and estimates of the future market for solar energy are also available from the US Department of Energy (DOE). In the past, the photovoltaic industry has relied on the semiconductor industry as a source of high-purity silicon. Semiconductors, e.g. transistors and integrated circuits, require ultra-high purity silicon (99.99999%, 7N+ or more purity). Scrap and off-spec silicon from semiconductor manufacturers is often of sufficient purity (99.9999%, 6N+ or more) to be used in photovoltaic cells. The PV industry’s reliance on the semiconductor industry, however, leads to high volatility, cyclical exposure, and overall increased market risk. For example, a down-turn in the semiconductor market in the late 1990’s and early 2000’s resulted in a reduction of new ultra-high purity silicon manufacturing capacity being brought online. The reduced capacity combined, with a recent up-turn in the semiconductor market and more efficient processes have resulted in a high price for scrap silicon used by photovoltaic cell manufacturers. Even as demand for solar power grows, the dependent relationship on the semiconductor industry has become a limiting factor for PV supply.
Global Manufacturing
Worldwide, the PV industry sold over $15 billion of new product in 2005, continuing a five-year trend of 30%+ annual market growth. Thanks to national R&D programs and major capital investments in manufacturing, solar PV costs 1/10 what it did in the 1980s. Each doubling in cumulative manufacturing has brought prices down by ca.18%. With electric rates and natural gas prices skyrocketing nationwide, if manufacturing continues to scale up and significant R&D commitments are made, continued progress will bring rooftop solar costs below retail electricity rates in the US.
However, while worldwide production of PV cells increased by 45%, the United States – once the global leader in PV manufacturing – fell in market share from 11 percent in 2004 to less than 9 percent. The surging player in the industry was China, which increased production from 51.8 MW in 2004 (4.1% market share) to 150.7 MW (8.3%) and now trails the US by the slimmest of margins. Japan remains the dominant country in PV manufacturing.
Government Policy as a Market Driver
Germany and Japan have taken the lead in solar manufacturing and installations because of long-term national incentive policies designed to make solar power mainstream. Germany incentivizes solar installations by paying 3 – 4 times retail electric rates for the electricity generated from PV systems, while Japan instituted a carefully designed rebate program that phased out over the last ten years.
The United States, on the other hand, offers a patchwork of more than 50 distinct markets, each with its own interconnection and net metering rules, and until 2006 had no incentives for individual installations of solar. Yet, states have increasingly invested in solar power development; in the past decade, the number of states with solar rebates has risen from just one to 26, and the number of states with net metering increased from 11 to 36.
Federal solar tax credits enacted in the Energy Policy Act of 2005 have taken effect and SEIA member companies are reporting a 10- to 20-fold increase in consumer interest thus far. In 2006 and 2007, spending on eligible solar property may qualify businesses and homeowners for a tax credit worth 30% of system costs (for homeowners, the cap is $2,000).
California is the dominant PV market in the US and the fifth largest market for PV in the world. More than 15,000 systems have been installed on homes and small businesses connected to the electric grid as of December 2005 under the California Energy Commission’s rebate program. The California Public Utilities Commission recently created an 11-year, $3.2 billion program to provide homeowners and businesses with rebates for installing grid-connected PV. Within three years, the annual PV market in California will exceed the entire US market in 2005.
Another state with a highly successful program is New Jersey, which provides a $5.10 per watt rebate and an exemption from the sales tax. Owners of PV systems receive a solar renewable energy certificate (SREC) for each megawatt-hour of solar electricity produced by their system, which they can sell to utilities or middleman brokers on the open market. The SRECs are used by NJ utilities to meet a state renewable portfolio standard (RPS), which requires an increasing amount of the power they provide to come from renewable energy. Nineteen states and the District of Columbia have passed RPS; Colorado, Nevada, New Jersey, Pennsylvania and DC all feature solar requirements within their RPS.
The Northeast market (outside of New Jersey and California) is the third largest market for PV. Massachusetts, Connecticut, and New York "Times New Roman" offer substantial rebates on PV consumers and the cost of retail electricity is significantly higher in the Northeast than in southern states; for example, the average price in Massachusetts in 2005 was 40 percent higher than in Florida, according to the Energy Information Administration.
The Global demand for solar purity silicon has, for the past decade, experienced a 35% annual growth rate. The growth rate is projected to continue at a compounded annual 35% growth rate for the next decade.