Since the end of 2011, there has been plenty of news about company closing down, production suspension, and production reduction in the photovoltaic industry, with even first-tier enterprises being affected. In January, 2012, however, the photovoltaic industry showed signs of recovery. The inventory of major module manufacturers is reduced, and the supply schedule of main components suppliers is full again. Does this indicate that the market has reached the bottom and begun to rebound? Has the integration of the photovoltaic manufacturing industry been started for real?
Some numbers may answer these questions directly. In 2011, the demand of the global photovoltaic market is merely 20 GW, but the aggregate production capacity worldwide is as high as 40-50 GW, with China possessing 30 GW of this capacity. The supply greatly exceeds the demand. Over capacity is an important cause of this round of slowdown in the photovoltaic industry. At a time like this, industrial integration is unavoidable. People are generally not very optimistic about the market in this year. The signs of recovery in January are considered as more of a short-term fluctuation of the market than overall recovery of the industry. This winter is still long.
As a matter of fact, the photovoltaic manufacturing industry has experienced an extensive integration 3 years ago. China's photovoltaic enterprises started gradually since the beginning of this century, increasing to hundreds in number from the initial dozens. The 2008 international financial recession reduced the number to around 50 at one point. As China's economy recovered and demands in international market went back up, investment returns in the photovoltaic industry remained high, attracting more new capital into the industry, and the number of photovoltaic industry in China again surging to around 500.
Compared to 2008, the conditions of the integration of the industry this time are different.
Demands in international market today can hardly compared to the good old time. European countries such as Germany and Italy are the main markets of photovoltaic application. After years of popularization, the space for the growth of products demands in these European countries has been reduced. What's worse, the deterioration of the European debt crisis in 2011 caused the growth of demands in international market to slow down gradually. In addition, subsidy policies for photovoltaic power in these countries begin to enter a stage of adjustment. Besides continuous reduction of subsidy, another new trend is also worthy of concerns.
According to Li Ying, CEO of Sinosol AG, who is familiar with overseas markets, Italy promulgated a new policy in 2011, in which a subsidy cap is imposed. Once the cap is reached, the excessive part will not be subsidized. Presently, the German government is also discussing about relevant policy about annual installation cap in 2012. Besides, in summer 2012, Germany will promulgate a policy about decreasing price of grid electricity for the second time in the year. All these new policies indicate that European countries are slowing down the growth of new photovoltaic installation.
On the other hand, the price of photovoltaic modules is poised to go down. The end of the high subsidy era and the reality of over capacity have promoted the gradual dawning of the new era of low-price grid connection, which will directly cause module price to continue to go down. The InterSolar 2011 held in June 2011 in Munich is a watershed. Before the event, module price in international market was approximately 1.15/watt, and the price in China was approximately RMB10 to 11 Yuan/watt. During the event, price began to loosen up and slip. At present, the price in international market is about 0.7/watt, and price in China is about RMB6 to 7 Yuan/watt. Li Ying estimates that market price will continue to go down in 2012.
In 2008, industrial integration is achieved by enterprises consolidating to increase production capacity for the purpose of securing better price to win the competition. In 2012 and the two or three years to come, only photovoltaic enterprises that possess high technology, high efficiency, and low cost can survive. In the view of Li Junfeng, secretary of the Renewable Energy Committee of China Association of Resource Comprehensive Utilization, 10 of China's photovoltaic units enterprises are needed at the most; enterprises that will remain after the integration should: innovate continuously, establish solid upstream and downstream relationship, and diversify operation and risks.