Photovoltaic modules, oversupply in 2011


PV Module Capacity growing faster than Demand could spell Trouble for Tier-2 Suppliers says IMS Research


PV Module production capacity increased by nearly 70% over the course of 2010, reaching nearly 30 GW by the end of the year according to IMS Research. It is forecast to continue increasing, despite the growth of PV installations being predicted to slow from over 100% in 2010 to less than 20% in 2011.

Demand for PV modules reached record levels in all regions in 2010, driven by the attractive returns presented by incentive schemes, particularly in European countries like Germany, Italy and Czech Republic – the three largest markets last year. However, like many others, these countries have reduced the rates they offer for electricity generated from PV systems from the start of 2011; and as a result, whilst global PV installations are still set to increase in 2011, they will do so at a far slower rate.

Regardless of slowing installations, most suppliers, many of which remained capacity-constrained throughout 2010, are proceeding with aggressive capacity expansions. IMS Research forecasts that 35 GW of annual capacity will be reached within the first half of 2011, despite installations in the same period being predicted to reach no more than one fifth of that amount. As a result, it is likely that there will be an oversupply of modules this year, leading to tougher competition and decreasing prices from suppliers.

“Leading module suppliers with healthy gross margins, proven products, and large contracted sales for 2011 remain optimistic, and can perhaps afford to be,” commented Sam Wilkinson, Research Analyst at IMS Research. “However, in the short term, there is not sufficient demand to support the whole industry’s planned capacity expansions and IMS Research predicts that many smaller Tier-2 suppliers may face difficult times in 2011.” “These suppliers experienced high demand for their products throughout much of last year and were able to capitalize on many larger companies being sold out.” “This is not likely to be the be the case this year, with demand increasing at a far slower rate and Tier-1 suppliers, who are typically favored by investors, bringing significant new capacity online” Wilkinson continued.