Photovoltaics and our Future Energy Supply

By Dr Arnulf Jäger-Waldau
Autumn 2012

Solar energy is the most abundant energy resource on earth today, providing about 10,000 times more energy per year than we actually use. There is a whole family of solar technologies which can deliver heat, cooling, electricity, lighting, and fuels for a variety of applications. One of these technologies is photovoltaics which converts solar energy directly into electricity using semiconductors which exhibit the photovoltaic effect and are called solar cells.

The importance of renewable energy and amongst it solar photovoltaic electricity for mitigating Climate Change was highlighted by a special report of the Intergovernmental Panel for Climate Change (IPCC)1 and recently by the IEA Medium-Term Renewable Energy Market Report2, which forecasts a more than threefold increase of cumulative PV installations in 2017 compared with 2011.

Since 2000, total PV production increased almost by two orders of magnitude, with compound annual growth rates of over 55%3. The most rapid growth in annual cell and module production over the last five years could be observed in Asia, where China and Taiwan together now account for almost 60% of world-wide production. However, looking only at the cell production does not represent the whole picture of the PV value chain. In addition to the manufacturing of solar cells, the whole upstream industry (e.g. materials, polysilicon production, equipment manufacturing), as well as the downstream industry (e.g. inverters, balance of system (BOS) components, system development, installations) has to be looked at as well. It is worthwhile remembering that despite the fact that more than two-thirds of the solar cells which are installed in Germany are not produced there, more than 60% of the added value remains within the German economy.

Production data for the global cell production4 in 2011 vary between 28 GW and 35 GW. The significant uncertainty in the data for 2011 is due to the highly competitive market environment, as well as the fact that some companies report shipment figures, others report sales and again others report production figures. In addition, the difficult economic conditions and increased competition led to a decreased willingness to report confidential company data. The year was characterised by a sluggish first half year and a boom in the fourth quarter of 2011.

The presented data, collected and extrapolated from stock market reports of listed companies and colleagues were compared to various data sources and thus led to an estimate of 33 GW (Fig. 1), representing a increase of 37% compared to 2010.

In 2010 the world-wide photovoltaic market more than doubled, driven by major increases in Europe and despite difficult economic conditions, the market grew again by about 20% in 2011. The continuation of a strong market in Italy and a year end rush in Germany, where in the 4th quarter about 4GW (3 GW in December alone) in conjunction with rapid growing markets outside Europe in China and the USA resulted in a new installed capacity of about 25 GW. This represents mostly the grid-connected photovoltaic market. To what extent the off-grid and consumer product markets are included is not clear, but it is believed that a substantial part of these markets are not accounted for, as it is very difficult to track them. A conservative estimate is that they account for approx. 400 to 800 MW (approx. 1-200 MW off-grid rural, approx. 1-200 MW communication/ signals, approx. 100 MW off-grid commercial and approx. 1-200 MW consumer products).

With a cumulative installed capacity of about 51 GW, the European Union is leading in PV installations with a little more than 70% of the total world-wide 69 GW of solar photovoltaic electricity generation capacity at the end of 2011.

For 2012 analysts expect a moderate market growth, which could lead to a total capacity between 90 and 100 GW by the end of the year. However, there is an increasing pressure on company margins due to the fact that overall manufacturing capacity is still increasing despite that a significant number of manufacturers all over the world terminate or downsize production. Therefore, it is very likely that world-wide production capacity for solar cells will exceed 60 GW at the end of 2012. This indicates that even with the optimistic market growth expectations, the planned capacity increases are way above the market growth. The consequence will be either low utilisation rates or the build up of high inventories resulting in a continued price pressure in an oversupplied market. Such a development will accelerate the consolidation of the photovoltaics industry and spur more mergers and acquisitions.

Various Renewable energy scenarios including the International Energy Agency (IEA) and the European Renewable Energy Council (EREC) have been published over the years. So far the growth and contribution of photovoltaic electricity generation has been underestimated by every scenario compared to the actual development.

The latest scenarios by the IEA9, Greenpeace10 and EREC11 predict shares of photovoltaic electricity between 10 and 18% of the electricity supply worldwide and up to 27% in Europe.

With worldwide about 70 GW cumulative installed photovoltaic electricity generation capacity installed at the end of 2011, photovoltaics is still a small contributor to the electricity supply, but its importance for our future energy mix is finally acknowledged.