CPV: Are component makers set for a leap or a fall?

CPV component manufacturers are gearing up for growth… just at a time when a market analyst is predicting critical oversupply.

These are happy days for CPV component manufacturers. With demand still strong from traditional markets, such as Germany and the US, and new opportunities opening up in regions such as North Africa and Latin America, it appears things have never been better.

“We see growth this year,” said a source at a leading European Germanium wafer maker consulted by PV Insider. “We expect this to continue from now till 2016.”

Up to half this future demand, he added, is expected to come from Asia, with the balance from Europe and the US. And there are reasons to be confident about the outlook.

Last month, for example, Brett Prior of GTM Research asserted CPV had the potential to reach a gigawatt of installed capacity per year within the next few years. Backing his prediction is a string of recent CPV deployment announcements.

San Diego Gas & Electric, for instance, has signed 305 MW in power purchase agreements for projects that will use Soitec technology. Amonix, meanwhile, is providing the concentrating panels for the 30 MW Alamosa Solar Generating Project being developed by Cogentrix.

Elsewhere, SolFocus looks set to ship 20 MW of solar panels this year. Morgan Solar has received USD$16.5m in venture capital funding and Solar Junction is believed to be on the verge of getting almost twice that amount in its fourth round of fundraising.

Buoyant mood

This buoyant mood reflects the optimism being felt in other PV sectors. Henrik Raunkjaer, chief executive officer of Enecsys, which makes solar grid-connected micro inverters for the residential and commercial PV market, says: “We will have a very busy autumn.In Germany, 40% of PV is residential and 40% is commercial. Our target is 50 to 60% of the German market.”

But not everyone sees a rosy future right now. Stefan de Haan, senior analyst at IHS iSuppli, says: “PV supply is growing enormously. Many companies are banking on PV becoming a major energy source in the future, but are ramping up too quickly. We see pronounced oversupply at the module level.”

The problem, he argues, is that one of the keys to success in PV is the ability to reduce costs through economies of scale. “You have 100 companies out there, all chasing 10% of the market. This will result in factories shutting down, and consolidation.”

Heightened competition from new, particularly Asian, entrants will not help things. An iSuppli research note by Greg Sheppard indicates that in 2011 Chinese companies will account for between 38% and 50% of new module production, depending on technology.

String inverters

Raunkjaer says: “Within string inverters, there are apparently 60 brands, but there is a small elite going forward. Chinese and Japanese companies are not successful now; it will take some years.

“They are good at copying, but it will take some time before they have the quality they need, so it is up to us to be innovative and move on with new products and eventually get costs down, which is a volume game.”

De Haan accepts that some European and American components manufacturers may for now have an edge over Asian competitors in terms of quality. The question is whether they will be able to maintain it as increased competition erodes margins.

“Inverters are very important, but it is the same story,” he says. “They are dropping in price. Competition is going on here as well. The leading suppliers are still based in Europe, but increasing competition will help for overall prices to come down.”

And CPV will not be immune to the oversupply problem. “In principle the drivers are the same,” de Haan says. Operators, he adds, are “not competing directly with the module manufacturers, and they claim to be cost-competitive today, so I would not say CPV is going to die.

PV oversupply

“Niches are possible, even in collapsing markets. But overall, the market environment will make it harder for these companies as well. As overall module prices drop, that has an impact on CPV. They compete against all other PV technologies as well. It’s a question of cost per watt.”

The good news is that iSuppli predicts that the PV oversupply problem will be a temporary one, hitting hardest next year and potentially carrying over into 2013. “By 2014, the market should be strong again,” de Haan asserts.

Meanwhile, if iSuppli’s predictions are correct then components manufacturers face a stark choice.

They can be prudent with their forecasts, at the risk of being undercut by higher-volume competitors, or plough ahead with growth plans in the knowledge they may be unable to shift products next year.

De Haan is in little doubt that the outcome of either course of action could be messy. “A few European and American companies will be able to compete,” he says. “But in the end… the smaller European suppliers, I do not see a future for them.”

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Katherine Steiner-Dicks: steinercommunications@yahoo.co.uk