State of the Market
While lower fossil fuel prices, surplus electricity (outside the Middle East!), and weak financing markets would argue against renewables fundamentals, this is not the case in many markets.
a) China added almost 13 GW of wind power in 2009, and is on track for somewhat higher installations in 2010. However, of 25 GW in place at the end of last year, only 65% is connected to the grid.
b) Major wind power projects are in advanced planning throughout the Middle East and North Africa. In addition to oil and plenty of sun, the forecast utilization of wind turbines in the Sahara and Northern Africa is an unheard of 60+% (30% average in US, 40% offshore). European project developers, already working on long term plans to develop solar projects all over that area, for transmission to Europe, are part of several wind power plants.
c) In 2009, 100 countries had some form of renewable energy policies, including subsidies, compared to 55 in 2005.
d) Most investors are concerned about the continued pressure on key European subsidy programs, particularly Germany and Italy next year. However, several Chinese module manufacturers have added take or pay commitments to acquire polysilicon for 2011 (and beyond) delivery. Spot prices have slowly risen to the mid $50s per kilogram, well above analyst forecasts for 2H 2010.
e) So far, forecasts for 2011 solar module demand are only modestly above a robust 2010 — 14-15 GW versus 12.3 this year (up from 8 in January and 10 in April), as one cannot ignore concerns about changes in the German subsidy program (over half of 2010 market) and the global economic environment. However, US estimates are moving higher — installations may double or more next year, to 1.5-2 GW as renewable portfolio standards and generous subsidies spark significant new project activity in both utility and residential markets. 2011 could experience slower growth, on the way to a resumption of much stronger demand in 2012.
f) It appears, from reading daily anecdotes from around the world, that many countries have decided that, more than committing to deploying renewable energy projects, they want to buy locally. Like China, which started as a key wind turbine market for Gamesa and Vestas, but now sources 75% of its market from independent, local firms, France, Germany, Abu Dhabi, all seem even more committed to attracting outsiders to manufacture locally, while also fostering their own research and development efforts. This seems obvious as a strategy, but also reflects the belief that the sector can be a significant source of employment over time.
g) First Solar — I knew they were working on something beyond Cd-Te (cadmium telluride, the material of construction for their existing product line), but it now appears that they are heavily into a CIGs (copper indium gallium arsenide) development – a new, more complicated, thin film coating structure, using very similar equipment and processes, but offering 50% higher efficiencies with similar (per area) costs, i.e. 35% lower per watt costs. CIGs has been a graveyard for venture capital interests over the past decade, but FSLR is the largest, most capitalized, and probably most experienced practitioner of thin film art, and stands a good chance of commercializing the technology. Stay tuned.