Affected by the wait-and-see stance among European clients and the concern for high inventory, PV demand began to slacken at the beginning of the second quarter and the pressure of sluggish business seems to begin haunting what is traditionally a busy season. The worst spot is the solar-cell sector, especially in view of its excessive capacity expansion, as evidenced by output reduction and price cut in the sector. But the earthquake in Japan seems to bring some hope for improvement.
Fast capacity expansion among solar-cell manufacturers in Taiwan and China starting from the second half of 2010 has led to concerns of excessive supply. But at the time manufacturers remained unfazed, believing that large orders from major international contract manufacturers would be sufficient to fill the expanded capacities. With contribution also coming from own-branded sales, they were confident of maintaining high capacity utilization rate.
However, buyers began to embrace a wait-and-see attitude, due to uncertainty in Europe's new PV policy. Some major international contract manufacturers abruptly suspended placement of new orders and demanded their subcontractors in Taiwan and China to hold shipment.
The phenomenon spread quickly, triggering a domino effect, prompting solar-cell makers to vie for new orders to fill their capacity or cut down high inventory. For many PV firms, international contract-production orders underline market trend and decline in such orders overshadows their outlook for business in April.
The suspension of shipments requested by major international contract manufacturers has caused solar-cell manufacturers in Taiwan and China, mostly first-tier ones, to suffer major decline in shipmenta, leading to inventory buildup. PV firms noted that those first-tier firms started to scramble for orders by slashing prices, driving down average quotes for solar-cell to US$1.17-1.18 in early April, down 2.5% from US$1.2 in late March.
At the beginning of the second quarter, scramble for orders among solar-cell manufacturers in Taiwan and CHina became increasingly evident, leading to confusion in quotes on the solar-cell market. With better grasp of orders, some manufacturers still maintain their existing quotes but may have to give in later.
Faced with decline in demand, some Taiwan solar-cell manufacturers started to plan output reduction at the beginning of the second quarter, which may be put into practice in April. The scale of reduction can reach up to 30% for some.
The March 11 earthquake in Japan, however, has stimulated interest in renewable energy again, which may benefit PV industry.
Reportedly, the Japanese government may earmark new budgets for supporting the establishment of a 1,000MW PV system in the northeastern region. Although details of the plan have yet to be publicized, it has given manufacturers in Taiwan and China a shot in the arm.
Meanwhile, the nuclear incident in Japan has prompted the Chinese government to suspend the approval of new nuclear power projects. Should China scale down its nuclear power plan, the targeted output for the 12th Five-year Plan and 2020 for renewal energy, including wind power, solar energy, and hydraulic power, may be doubled.
As such, the targeted installed capacity of PV power by 2015 may be doubled to 10MW and further to 100MW by 2020, up from the original target of 20MW. The targeted installed capacity for wind power may be raised to 100MW, from 70MW originally, and further to 200MW by 2020, double the original level. Installed capacity for hydraulic power will also be boosted. However, there have yet to be concrete programs to reach those targets.
The Germany government has quikcly closed down seven nuclear power plants built before 1980 for overall safety check, increased subsidy for renewable energy, especially offshore wind power, to fill the supply gap, and strengthened connection of PV output to the grid.
Meanwhile, Germany's Green Party won a major victory with its anti-nuclear platform during a municipal election recently, posing a major threat to Chancellor Angela Merkel's reelection campaign, and highlighting the appeal of renewable energy policy to voters. The development may affect Germany's new PV subsidy policy in July.
In addition, in the wake of Japan's nuclear power crisis, many European nations, including Germany, Australia, the Czech Republic, and Poland have raised their electricity rates. Germany, for instance, will hike its electricity rates by 1.3 percentage points and coal prices by 2 percentage points in 2012. The main reason is that Germany has closed down seven nuclear power plants for overall safety check, which is boosting demand for fossil fuel-based energy.
Austria and the Czech Republic will also raise their electricity rates. Poland will resort to a plebiscite to decide the fate two nuclear power projects, which are likely to be canceled in response to public opinion polls. Calls for eliminating nuclear power are also mounting in the Czech Republic, whose electricity rate may also rise, following Germany.
Adjustment of power rates in Europe will narrow their gap with PV power, which is favorable to the long-term development of the PV industry. Italy is going to publicize new subsidy rates for PV power. So long as the Italian government does not cap the installed capacity for subsidy, the increasingly mature PV industry can adjust its rates to bolster declining investment returns and enhance demand.