IHS remains cautious in 2014 predictions
Despite several recent viewpoints claiming that the PV installations could reach up to 55 GW in 2014 and will be coupled with supply constraints and major price increases, the latest quarterly update on solar demand from IHS disagrees significantly with these views and expects installations to be in the range of 40-42 GW next year.
The key findings from the latest IHS Solar PV Demand Tracker are that installations will reach 35 GW in 2013 (unchanged since our March 2013 forecast) and we have re-confirmed our earlier prediction that 2014 installations will be ~40 GW - An increase of 15%.
Whilst IHS remains bullish about potential for PV industry and growth in installations, they see several risks and downsides versus other predictive viewpoints that are being put forward.
The company forecasts China will only install around 9.5 GW in 2014, much lower than the 12 GW NDRC target. This is due to a lack of framework to support the move towards distributed generation and away from utility-scale projects. The 12 GW target from the NDRC relies on 8 GW of distributed PV which IHS does not believe is feasible. The relative high cost of building roof-top installations, the lack of installers with roof-top expertise, lack of appropriate and available roof-tops and uncertainties in grid-connections caused by local grid companies will all present barriers to the China market growing substantially in 2014. They expect the NDRC to announce an action plan for distributed PV in China before the end of this year.
The company predicts that a boom-bust cycle in Japan is becoming increasingly likely. Several negative issues have arisen recently. METI announced recently an official review of ground-mount projects due to the very slow development of the huge pipeline of projects "“ we expect that many of these projects will never be built. Secondly the residential FIT program is set to end and there is uncertainty as to whether this will re-open in the next fiscal year due to lack of government support, meanwhile the FIT for non-residential PV is likely to be cut by 20% next year. Finally, the Japanese government's recent U-turn on greenhouse gas emissions further indicates a weakening in support for renewable energy. Whilst it is still very possible that Japan remains a growth market, the IHS view is that this does present the country to be a risk to the overall PV industry in 2014.
Emerging markets do not develop as quickly as many expect. IHS estimates that emerging PV markets added 5.4 GW of capacity and will grow to 7.7 GW in 2014. Many forecasts presented for emerging markets are very bullish and do not fully account for the very different market conditions in each country. Many of these markets do not rely on direct subsidies, but instead tender mechanisms or private PPAs which can take several years from announcement to real installations occurring. The cases of Chile and South Africa show just how long these huge GW pipelines take to progress with just 100 MW and 200 MW installed in 2013 respectively. Brazil is also another good example of the difficulties PV still faces in emerging markets. Despite PV being allowed to compete in the recent bidding process, not a single PV project was selected (as predicted by IHS) due to extremely low prices that were achievable from equivalent wind projects.
Despite the above risks, IHS remains positive about the solar industry with double-digit growth forecast for 2014 and a return to improved profitability for many companies. They expect 40 GW to be achievable (even in light of above risks) but do not expect any possibility of demand reaching 55 GW.
Based on the analysis of more than 100 countries, IHS do not expect that a shortage of PV component supply will occur in 2014, nor does it expect a major increase in prices, in fact a moderate decline in PV module, inverter and BoS prices is forecast."
