The Global Solar Scenario

Solar power is seeing a boom in demand, after a vicious two year downturn in which massive overcapacity in China drove down the panel prices by almost 75%, throwing all solar manufacturers into losses. The industry saw hundreds of bankruptcies, with some of the top players exiting the industry after racking billions of dollars in losses. However, the cycle is changing once again with solar industry growing by 15-20%, with supply going down. Many of the Tier 2 solar players have shut down their plants, after their balance sheet got severely strained due to losses. Only the Tier 1 players have survived and most of them still have high debt on their balance sheets. So a return to the supply expansion craziness looks unlikely. Most of the capacity expansion these days are coming from buying the capacity of Tier 2 companies at a cheap price. Trina Solar and Jinko Solar have both capitalized on the desperation of the tier 2 solar companies to get assets on the cheap.

Read on GWI Solar Demand in 2014.

Solar is expected to grow to 40-50 GW in 2014, with almost 50% of the capacity being generated by only 2 countries – Japan and China. These countries are installing solar panels at an unprecedented pace. Japan saw an 800% growth in solar power in one year, as a generous solar feed in tariff led to a huge boom in installations. China too has seen massive growth becoming the first country to install 10 GW of solar power in one year. BNEF is estimating that China installed almost 14 GW of power in 2013, with solar developers rushing to commissioning solar farms before the subsidy of 1 Rmb/KWh is reduced. Old stalwarts like Germany saw a 50% decline in demand in 2013, but other countries such as India and USA are easily picking up the slack. Besides Russia, there is no major country which does not have a big solar installation target.

Risk of Global Solar Demand

The biggest short term risk to global solar demand comes from the transmission capability in Japan and China. The massive solar farms are generally built in low population density, high insolation areas which do not have a lot of local electricity consumption potential. The transmission grids are not built to transmit large amounts of power. Building new lines takes time and large investments which are difficult to fund. China already has faced the issue of orphan wind farms, while Japan too is facing power grid transport issues. I am pretty confident that Japan and China will surmount these issues as both have large resources. But the growth in solar installations might outstrip the growth in power transmission capacity, which has happened in case of solar supply exceeding solar demand in the past.