Solar industry to gain from rising demand: Bank Sarasin study

Over the past two years the solar industry has shown itself to be incredibly resilient to the general economic crisis. This is the conclusion reached in the latest study published by Bank Sarasin’s Sustainability Research department entitled “Solar industry: entering new dimensions”.

The Sarasin Group is incorporated in India as Sarasin Alpen India Private Limited which is a Non Fund Based Non Banking Financial Company” (NF-NBFC) with offices in Mumbai and New Delhi. The entity provides financial advisory and consultancy services to wealthy private clients in India and distribute select prime third-party products such as mutual funds.

Supported by cost-cutting and efficiency improvements, the photovoltaic’s (PV) industry has managed to achieve a growth rate of 87% of newly installed capacity in 2010. The average global growth rate for the period up to 2015 is estimated at 33% per year. The sharp fall in PV module prices has left its mark on the profit & loss account and the negative stock market performance of solar energy companies. The profitability of the PV industry has dropped off significantly in the past few years. Furthermore, the industry’s rapid expansion has put pressure on feed-in tariffs. Germany and Italy are still two of the most attractive PV markets.

Global solar energy capacity has now passed the 30 GW mark. This is enough to supply 10 million households with clean electricity. The amount of newly installed capacity this year in many markets comes as a positive surprise: a total of 13.8 GW. In its new report, Bank Sarasin forecasts average annual growth of 33% worldwide up to 2015, albeit with significant variations in the rates achieved by different countries from one year to the next. Over the next two years a number of markets will drive the industry’s expansion, with newly installed PV capacity exceeding 500 MW p.a. These include France, Italy, Spain, the USA, Canada, China, India and Japan. In general, the non-European markets with plenty of sunshine will tend to grow more rapidly up to 2020, as they have more ground to make up in the area of solar energy.

India an increasingly attractive market

India installed around 30 MW of photovoltaic (PV) capacity in 2009. It also passed a solar energy law at the start of the year. The combined goal of this Jawaharlal Nehru National Solar Mission (NSM for short) is the installation of 20 GW of PV and concentrating solar power (CSP) capacity by 2022. During an initial phase running until 2013, a feed-in tariff of 17.91 INR/kWh will apply. The maximum installation level for 2011 is set at 150 MW, and at 350 MW from 2012 to 2013. Project size is limited to 5 MW. If the maximum capacity is exceeded, those projects which offer the greatest rebate on the feed-in tariff are selected by means of a reverse bidding process. Applications for three times the capacity have already been received by the government for 2010. The Indian authorities must now demonstrate that they can organise the various administrative processes in a rapid and trouble-free manner. For 2010 Bank Sarasin forecasts a newly installed capacity of 80 MW, a growth rate of 166%. On average the Indian PV installations will grow by 76% annually in the period of 2009 to 2015.

Brief description of three main solar technologies

Photovoltaics (PV): Electricity generated from sunshine. In solar cells, made mainly from silicon, sunlight releases a charge (photoelectric effect) to create electricity which can be stored in batteries or fed into the public mains grid.

Solar collectors: In a solar thermal system, absorbers coated in black and located within collectors are heated up by the sun’s rays. This heat is then collected in solar storage media and used to provide hot water for domestic use.

Concentrating Solar Power (CSP): these systems use sunlight converted into heat to generate electricity. The sun’s rays are concentrated by a system of mirrors and the collected heat is used to generate steam. This steam is fed through a turbine to produce electricity, similar to a conventional power station.

Adjustments to feed-in tariffs

There is growing criticism from political circles and consumer pressure groups about the size and rising costs of feed-in tariffs for solar power. By making steeper reductions in tariffs for ground mounted systems or providing additional incentives for roof-integrated systems, policymakers are setting clear signals. In the current year many governments have already adjusted and implemented reductions in their state subsidy programmes for photovoltaics, as well as announcing further cuts for 2011. These changes affect important markets such as the Czech Republic, Germany, France, Italy and Spain.

Sustainable solar initiative

Bank Sarasin has always assessed PV companies using extensive sustainability criteria. There are now a handful of PV companies that provide comprehensive corporate social responsibility (CSR) reporting. To improve this transparency and depth of information in other solar companies, Bank Sarasin supports the “Sustainable Solar Initiative” of Henderson Global Investors. With invested assets of USD 1 500 billion, this initiative has sufficient weight to exert suitable pressure on solar companies.

Positive outlook for thin-film PV

In 2010 thin-film PV (TFPV) modules will account for 18% of total PV production volumes. This quota will increase to 30% by 2012, a much faster rate of growth than the market as a whole. Within the TFPV technologies, copper-indium-gallium-diselenide (CIGS) technology is set to enjoy superior growth of around 100% p.a.

CSP plants: a promising future

Newly installed capacity in concentrating solar power (CSP) plants has reached a level of 1.35 GW both in 2009 and this year. Last year eight power plants with a total capacity of 350 MW came on stream. Algeria, Italy and Mexico each had one new plant, while the rest were built in Spain. This year should see around 18 plants come into service with a total capacity of around 1 000 MW. CSP plants are capital-intensive projects and the supply chain also requires an expensive infrastructure. This is why financially strong companies such as Chevron, Alstom, Areva and Siemens are increasingly entering the market. The CSP industry has an ambitious cost-cutting programme. Furthermore, solar thermal electricity (STE) can provide a better quality of electricity for utilities because it is easier to store and dispatch, and is also suitable for use in hybrid power plants.

Source: Business Standard