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Comment: Solar PV modules – volume is vanity, profit is sanity

IMS Research

Despite shipments of solar photovoltaic (PV) modules set to grow in 2011, rapid price erosion may see a decline in market revenues next year according to the latest analysis from IMS Research.

A detailed analysis of key industry metrics reveals that although MW shipments of solar PV modules have grown at an average of 60% over the past two years, industry revenues have only grown by 13%.

As the industry prepares to enter a period of softening demand and decreasing prices, solar PV suppliers will need to concentrate on growing revenues and profits and not just focus on who’s shipping the most MWs.

Slowing down?

Solar PV module shipments are forecast to grow by over 65% to more than 16 GW in 2010. However, reductions in incentive schemes in the world’s largest solar PV market, Germany, as well as a correction of the pulled-forward demand seen in 2010, are likely to bring about a slowdown in growth and IMS Research predicts that shipments will increase by less than 20% in 2011.

The slowing of shipment growth, combined with declining prices, means that PV module revenues may in fact decline in 2011, depending on how severe the slowdown is in the first half of the year.

“The PV industry is currently in a period of very high growth, driven by robust demand from almost every area of the market,” says Sam Wilkinson, PV Research Analyst at IMS Research.

“However, the industry has a dangerous tendency to only focus on MWs and GWs or capacity and shipments, rather than revenues and margins. Price declines driven by reductions in incentives and increasingly competitive market conditions mean that whilst the module market may continue to increase in terms of volume, the outlook is quite different when measured in terms of revenues.”

In fact, 2011 is not the only time that the market has performed in this way. 2009 saw solar PV module shipments grow quickly in the second half of the year and overall MW shipments increased by over 50%.

However, rapid price declines throughout a large part of the year meant that industry revenues in fact declined. Whilst the solar PV market may seem on the surface to be a booming market, a closer look at the real bottom line makes solar PV module market growth look far less impressive.

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Photovoltaics (PV)  •  Policy, investment and markets