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Make Solar, Not War

AsiaMaking the headlines recently has been China’s assertion of a no-fly zone over large parts of the East China Sea. The no-fly zone is a direct provocation towards Japan over a territorial dispute of a group of islands in a body of water shared by both countries. What’s flying under the radar of these headlines is what China and Japan are doing together: installing more solar capacity than the rest of the world.

In 2013, both Japan and China surpassed 10 gigawatts (GW) of solar capacity. They join three other countries, Germany, Italy, and the US, as the only countries to surpass the 10 GW threshold. This milestone not only signifies the joining of a select group of countries by Japan and China, but also a shift in the global solar photovoltaic (PV) market.

From 2006 to 2011 the majority of global solar PV demand originated in Europe and was as high as 80% in many years. However, as the chart below indicates, European demand began waning and at the end of 2012 demand from the Asia-Pacific (APAC) region overtook demand from Europe. Approximately 50% of the global demand for solar PV in 2014 is expected to come from the APAC region.

Percentage of annual photovoltaic demand

Reasons Behind Shift From Europe to APAC

In 2010, the German, Spanish, and French governments unexpectedly cut subsidies to renewable energy, and the demand for solar PV in Europe began to fall. The negative and still sluggish growth of the European economy from the fallout of the 2008 financial crisis did not help the growth of solar either. The onset of a trade dispute with China over the illegal dumping of solar panels at below cost on the European market also created an atmosphere of policy uncertainty that prevented many projects from receiving the green light.

At the same time as uncertain policy and tough economic times in Europe caused a drop in demand, policies were implemented in China and Japan that accelerated the demand for solar PV. In 2009, the Chinese government announced a $3 billion initiative called the Golden Sun that is subsidizing hundreds of solar projects across the country. In addition, in 2011 China began using a feed-in tariff to bolster its domestic solar market. In Japan, the meltdown of the Fukushima nuclear reactor created a new focus on developing solar energy. In 2012 one the highest feed-in tariffs in the world was approved in Japan, leading to an increase in demand of solar PV of 150% year over year with 5 GW in the pipeline through the end of the second quarter of 2014.

The result: China now has the highest demand for solar PV in the world and Japan has the second highest.

Clear Skies Ahead For Eurasian Solar PV Demand

2013 is on pace for 35 GW of global solar installations, an all-time high. IHS Solar PV Demand tracker predicts another record year in 2014 with installations increasing approximately 15% to 40-42 GW. NPD Solarbuzz has a more optimistic forecast of solar installations increasing to 45-55 GW in 2014 with 24-32 GW coming from the APAC region. The good news in Europe is that the demand for solar PV is expected to stabilize to 2.5 GW per quarter in 2014 with the demand driven by Germany, Italy, the U.K., and France. The solar panel dumping trade dispute between Europe and China was also resolved this week and the certainty of its finality could provide a tailwind for demand.

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Boyd Arnold is a member of Mosaic’s business development team.  Prior to working at Mosaic, Boyd worked in investment consulting and has experience starting businesses.  He graduated from the University of Colorado and has completed all three levels of the CFA.  Boyd enjoys cycling, brewing beer, and baseball. Follow him on twitter @boydarnold.

 

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