Solar industry capital expenditures set to rebound as emerging economies boost production

IHS reports that the solar industry will rise by 30% to $3 billion in 2014 because of increased sales in emerging economies in South America, Africa, and the Middle East.


The sun is finally rising on the global solar business, with growing demand in developing regions helping to ignite the first increase in industrywide capital spending in three years in 2014, according to the PV Manufacturing & Capital Spending Tool from information and analytics provider IHS.

Global capital spending by producers of photovoltaic (PV) modules, cells, ingots, wafers and polysilicon is expected to rise by 30% in 2014 to reach $3.0 billion. This will mark the first time that expenditures have increased since 2011, when they grew 8%, as presented in Figure 1.

The projected growth will bring to an end a two-year period when spending dropped—by a stunning 72% in 2012, and by an anticipated 36% this year in 2013. During this period, PV industry capital spending will plunge by a gut-wrenching total of $10.6 billion, falling to $2.3 billion in 2013, down from $12.9 billion in 2011.

Solar industry players engage in capital spending in order to purchase manufacturing equipment and facilities used to produce PV raw materials or products. Spending has fallen in recent years because of massive overcapacity and oversupply, which has sent prices down throughout the supply chain.

However, a sustained increase in capacity from emerging economies is set to spur the 2014 recovery.

“South America, Africa and the Middle East now are leading the world in solar capacity additions—and they also are leading the capital expenditure segment of the PV business out of its slump,” said Jon Campos, solar analyst at IHS. “The overcapacity in PV production mainly has been concentrated in the developed solar regions of the United States, European Union and China. But as demand expands in new areas, PV manufacturers are gaining interest in producing their wares in these regions, resulting in new factory openings and boosting local capital spending.”

Dawn arrives for solar spending in emerging economies

After going up 23% in 2013, solar capital spending in emerging economies is expected to rise in the low 40% range for every year through 2017. In contrast, following zero growth in 2013, the established markets are expected to shrink by 5% to 10% during every year through 2017, as presented in Figure 2.

Among all the emerging economies, the largest percentage increase in capacity is occurring in South America, Africa and the Middle East.

Emerging markets account for 7.9 GW of the world’s total announced capacity for PV materials and products from ingots through modules, with the potential to climb to nearly 11 GW by 2017. Capital investments for the foreseeable future will largely remain in the areas of crystalline wafer production, cell and module equipment. 

Ending capital punishment   

The expected increase in capital spending comes as a welcome and long-anticipated change from the dismal conditions that have plagued the market in recent years. The solar shakeout has peaked and an inevitable return to reinvestment in equipment and technology is due in the near term.

“Our research is showing a return to market equilibrium with regard to supply and demand,” Campos said. “Overcapacity seems to be correcting itself, and from the last few financial announcements, a handful of solar companies have returned to profitability and widened margins. The last piece of the recovery puzzle is capital spending and investment in high-efficiency technology.” 

Spending spree

Beyond the rise in demand from emerging countries, other factors are contributing to the recovery in capital spending.

PV suppliers are engaging in new technology upgrades in order to enable higher efficiency and lower dollar-per-watt production costs. Equipment is also critical in allowing PV manufacturers to differentiate their products. Such differentiation can improve profitability and margins.

Current and potential trade conflicts concerning Chinese PV products could drive production to other locations, such as South America, Southeast Asia, Africa and the United States. In particular, U.S. states like Mississippi and Michigan are attractive regions for PV production because they provide cheap electricity and affordable land to manufacturers.

Cleverick , Non-US/Not Applicable, Jamaica, 10/11/13 11:11 AM:

Very informative
Consulting-Specifying Engineer's Product of the Year (POY) contest is the premier award for new products in the HVAC, fire, electrical, and...
Consulting-Specifying Engineer magazine is dedicated to encouraging and recognizing the most talented young individuals...
The MEP Giants program lists the top mechanical, electrical, plumbing, and fire protection engineering firms in the United States.
Salary survey: How much are you worth?; Dedicated outdoor air systems; Energy models and lighting
Fire, life safety in schools; Fire protection codes; Detection, suppression, and notification; 2015 Commissioning Giants; Emergency and standby power in hospitals
HVAC and building envelope: Efficient, effective systems; Designing fire sprinkler systems; Wireless controls in buildings; 2015 Product of the Year winners
Designing positive-energy buildings; Ensuring power quality; Complying with NFPA 110; Minimizing arc flash hazards
Implementing microgrids: Controlling campus power generation; Understanding cogeneration systems; Evaluating UPS system efficiency; Driving data center PUE, efficiency
Optimizing genset sizing; How the Internet of Things affects the data center; Increasing transformer efficiency; Standby vs. emergency power in mission critical facilities
As brand protection manager for Eaton’s Electrical Sector, Tom Grace oversees counterfeit awareness...
Amara Rozgus is chief editor and content manager of Consulting-Specifier Engineer magazine.
IEEE power industry experts bring their combined experience in the electrical power industry...
Michael Heinsdorf, P.E., LEED AP, CDT is an Engineering Specification Writer at ARCOM MasterSpec.