Vishal Shah joined Barclays Capital in September 2008 as head of the Cleantech equity research team. Formerly, he was the lead Cleantech equity analyst at Lehman Brothers, covering U.S. and China-based solar stocks. Vishal has been an equity analyst covering the solar and semiconductor equipment sectors since 2002 at firms such as Lehman Brothers, Needham & Company, and Morgan Stanley. In 2009, his team received top recognition in the Greenwich Associates survey. Before joining Wall Street, Vishal worked at Applied Materials in the semiconductor equipment industry. Vishal earned a B.Tech degree in Chemical Engineering from the Indian Institute of Technology, Bombay and an MBA from INSEAD, France.
What are your expectations for development in the global PV market in 2009?
We forecast a market of 4.5 gigawatts of shipments in 2009. This would mean a 25% decline compared with the market size in 2008. We expect the US market to be flat this year compared to 2008, while we will see only limited growth in Germany due to a poor Q1. The German market may recover some growth in Q3 and Q4, but we do not see this leading to serious growth.
What is your view of market development over the next three years? Do you expect Germany to remain the biggest PV market?
We are reasonably optimistic about the world market over the next three years. We forecast a 50% growth in 2010 to 7 GW of volume, continuing towards 10 GW in 2011 (+40%) and 14 GW in 2012, again 40% growth. In our view, Germany will remain the world's biggest market in 2010, but in 2011 the US market could catch up and realize more than 2 GW. With the German market expected to grow at around 20% per year, the US and German markets could be in competition, with Germany becoming the biggest market in 2012, and both markets reporting volumes of around 3.5 GW.
What is your view of developments in the Indian and Chinese PV markets over the next two years? Could they surpass the US market in volume?
China and India both have the potential to become the world's biggest PV market. Much will depend on the details of government policies. I expect that after 2012, the US market will take the lead as the world's biggest market, but there is upside potential in both Asian countries. We believe China will be around 2 GW in size in 2012 and India around 400 MW. For now, it looks as if the Chinese market will be bigger, with two programs already in place. However, if the details of the new Indian policy work out well, India may surpass China.
What will be the impact of the ongoing module price decreases on the growth in various markets? Is demand elastic to price or are administrative procedures in major markets determining growth figures?
We see that module price elasticity is relatively small. I expect prices will continue to decline over the next three years. Firstly, there are the revisions in government programs forcing system prices to follow lower incentives. Secondly, we might see a shift in the big markets towards large scale PV projects (power plants) in the US, China and India, which will drive prices down. These price declines will not automatically lead to much higher volumes, since government programs cap markets, either by incentive caps or through procedural issues.
It seems Chinese companies will have to lower their module prices drastically, and maybe even below cost price, in order to gain market share. What is your view of that? Is it dangerous because government might apply protective measures, or is this all part of a maturing market?
I think that the downward price trend is caused by companies looking for more sales volume. There is a new reality now, in which new markets and greater sales volume will be needed to keep production going and cover increasing operational costs. More money is required for growth, such as for marketing, distribution channels and downstream business development. With declining prices and margin compression, more sales volume is needed to continue on the path of further revenue growth.
What will the global solar energy market look like in five years from now?
In five years, markets will depend on government policies to enable growth post grid parity. In feed-in-tariff markets, for example, utilities companies may be mandated to procure solar power to facilitate rapid growth post grid parity. What might be different in the coming five years is the focus of these policies. An important question is whether the emphasis will be on distributed power generation, such as residential PV applications, or will the focus on central PV power plants be more dominant? This is particularly the question for the new, leading markets like China and the USA, where a growing number of initiatives are being introduced. Central PV power stations will need large, bankable, vertically integrated downstream players to serve this segment - companies that have the experience in large scale project development to work with the utilities as their customer. Policy schemes focusing on PV power plant development will enhance the watershed between the big companies that are likely to survive the current consolidation phase and those that have little chance.
Vishal Shah will be a keynote speaker at the Third Global PV Demand Conference in Hamburg on 22 September.