[EXPO Solar/Seoul, Korea] Oct. 15, 2012 -- While the world PV industry was growing into global industry of the scale of staggering 100 billion dollars for a short period of time less than 10 years, the Korean PV industry spread dazzling activities that the sales increased by 13.3 times and export by 26.4 times and jobs by 7 times for the last 3 years (2007~2010). In 2008 once the installation capacity of PV power generation took the world’s 4th place and it was spotlighted as ‘devoted son’ industry which represents Korea.

However, in the dark side of the splendid aspect that enjoys unprecedented growth through the subsidy policy of the government of each of the countries, increase in output of the enterprises and continuous renovation, the chicken game competition at the risk of survival grew the embers of excessive supply and it grew into the fireball of decrease in price hence the industry left the heap of ashes of the structure that loss occurs more for more sale. Representative PV specialty enterprises of Europe and the US including Korean enterprises could not make ends meet due to falling prices of module and eventually they are driven to the crisis of bankruptcy or failure.

However, the fear that this is not the end of problem and unpredictable management environment are catching up with the PV industry. The agony of the enterprises which barely survived is only one. When will the economy of PV be revived?

What is the end of fierce struggle for existence of survived enterprises? 

The experts emphasized that the scale of the world PV power generation exceeded 65GW until 2011 and we should pay attention to the fact that the prices of solar cell is falling down continuously even now in a terrible speed. The price of module which was 4 dollars per Wp in 2008 fell down to 1 dollar getting into January 2012 and the world PV power generation capacity which was 4.5GW in 2005 now increased to 65GW.

Korean PV market is in the same circumstances. In 2008 which was called the best peak season at that time, the asking price of PV module traded in Korea was US$4 and even they could not be sold because there is no stock. However, at the present time of August 2012 they are traded for average price of US$1. The PV power generation capacity was only 21MW in 2006, but with 2012 as the starting point the installation capacity of Korea’s PV power generation is expected to exceed 1GW.

This growth was possible as the government of each of the countries which recognized the necessity of alternative energy development due to environmental issue such as climate change and global warming and depletion of fossil fuel made more consumers use PV through the subsidy. Naturally as the demand increased and the market grew big, the large scale enterprises which had funds crowded the PV industry and the production scale of the entire PV market increased tremendously. However, due to excessive supply, the price fell down steeply. While the rapid fall in prices induced more demand, it came to pressurize the profitability of PV manufacture enterprises.

The global enterprises which enjoyed good season as the PV 1st generation enterprises fell down like fallen leaves. The barely surviving enterprises are all ill at ease like others. Due to global economic crisis, as the subsidies of governments of all countries are continuously decreasing, some people mention the crisis theory of PV industry. By the way, even in this pessimistic situation, the world manufacture and technology enterprises including Samsung SDI and Hanwha of Korea which newly advance to the business as well as existing Chinese enterprises are expected to largely increase the production capability.

The PV industry is now looking forward to the mature season after 2015 going through the early entering stage and suffering terrible growing pains. Irrespective of upstream and downstream of PV value chain, only the enterprises which concentrate on cost cutting with next-generation technology development for low price, high efficiency and thin film through epoch-making technology renovation will be able to taste the sweet fruit of more stable and broader growth after 2015. 

Is ‘reversal’ drama of Korean PV industry possible? 

Though Korea started PV industry as newcomer compared to advanced country of PV power generation such as Japan and Germany it once drew attention of the world with explosive growth owing to the government’s active FIT support policy. As the installation capacity of PV power generation which was only 29MW in 2007 approached 257MW in 2008, it grew by 6 times compared to the previous year and once reached the world 4th largest scale after Spain, Germany and the US.

Especially, because the characteristics of manufacture of solar cell are analogous to that of manufacture technology of semiconductor and LCD, the anticipation for Korean enterprises which retain the world semiconductor manufacture technology was great. Because the PV manufacture infrastructure such as skillful engineer and localization of semiconductor equipment of Samsung and LG is better than any other country in the world, the anticipation for more acceleration of the country’s PV industry development once fell on their shoulder.

However, 4 years after then, the Korean PV industry had to suffer the time of bend. First as the government surprised at the explosive growth in 2008 limited FIT capacity for the reason of insufficient budget the capacity gradually fell down to 170MW in 2009, 131MW in 2010 and at last in 2011 it sharply fell down to 92MW.

The world PV power generation market lurched due to financial crisis from the US in the end of 2008, and due to financial crisis of European countries in 2010, the PV subsidies were reduced and the market had to sag along. To make things worse, excessive supply and fall in prices thronged like tsunami so many enterprises are spending the time of nightmare.

There is no need to go far away, unfortunately the country’s PV 1st generation enterprises properly tasted the bitter taste of PV and had to shut down the business with tears in their eyes. As matters go like this, the card which the government put out is RPS support policy. By virtue of RPS policy which is enforced properly this year through pilot project of last year and the expansion of various propagation businesses, this year though it is assumed value, installation capacity of 279MW is expected to be recorded. Particularly this year is expected to be starting point that total accumulated installation capacity reaches 1GW.  

The government which judged that recently PV market is undergoing short-term financial problems as capital restriction is intensified due to the difficulty such as fall in prices and increase in inventory because of excessive supply is to push ahead early construction adding the PV power generation facilities of the scale of total 260MW for 3 years from now for creation of short-term home market to heighten the rate of operation of the industry and to secure liquidity.

Accordingly, the government is pushing ahead the way to reduce the time of obligatory amount of PV of 1,200MW planned for 5 years (the year 2012 ~ 2016) from now on to 4 years (the year 2012~2015). In other words, by raising the obligatory amount of RPS PV from existing 230MW to 330MW of the next year, it is to create the 100MW PV demand early. 

For now if we put together the response of the industries, this is arranged to be trickery, deception. As the basic reason for the country’s PV policy transferring from FIT to RPS was budgetary deficit, there is no way for getting the non-existing budget suddenly hence it is interpreted to be a temporary expedient to just make anxious market sleep. The industry is demanding some more practical policy change rather than this.

The persons concerned about the industry unanimously mention the uncertainty of REC price which is the foundation of profit as the biggest problem of RPS which is enforced now in the country. As a matter of fact in the situation where RPS obligatory suppliers are restricted, the price mechanism of free competitive market cannot be applied and harmful consequences of the existence of upper price limit and absence of lower price limit should all be taken by PV enterprises after all.

Accordingly, taking the adjacent Japan for instance some are insisting the revival of FIT and others are presenting the opinion that supplementation and improvement of present RPS is urgent, but even these will be publicized after the launching of new government due to presidential election scheduled at the end of this year.   

And if there is what is expected as a favorable factor, it is the public opinion of realization of water-surface PV weight which is recently attracting attention. Presently, PV weight is differentiated as 4 stages from 0.7 to 1.5 following the installation type, category of land and facilities capacity, and for vitalization of PV businesses which are imposed on separate obligatory amount the opinion is that the weight of surface PV facilities which are installed on the surface of dam or reservoir should be materialized.

Due to the difficulties of circumstances which are the limitation and licensing problem of factory roofs on which installation is possible and installation of PV power generation on factory roofs practically, if the weight problem of water-surface PV only is solved, it will become a favorable factor for the country’s PV enterprises. 

Escape of PV industry from recession already started!  

If there is wishful news even in the situation of open door without business of country’s PV manufacture enterprises, it is the news of taking order of domestic and foreign projects of the enterprises which completed vertical affiliation of PV value chain. The news that Europe which was the largest market of PV goes down and the advancing to the US and Japan which are emerging as new markets continues every day.

The country’s top polysilicon enterprise OCI completed vertical affiliation by establishing the US corporate body OCI SolarPower and it obtained the order of PV project of the scale of 400MW in Texas, the US and Nexsolon which is the ingot & wafer manufacture enterprise established the US corporate body Nexsolon America as a part of vertical affiliation and construct cell & module factory of the scale of 200MW in San Antonio. The PV module enterprise S-Energy took the order of PV power station of the scale of 5MW in Malaysia last May and advanced to Southeast Asia PV power generation market.

There is already an enterprise which obtained successful reference for advance to overseas. The PV specialty enterprise SDN has constructed Eastern Europe’s largest PV power plant of the 42MW class in Bulgaria with turn-key system in which 100% Korean PV facilities was grafted on technology such as plant design, financing and construction last 2010 and LSIS which has turn-key construction capability such as PV module and inverter and engineering completed the construction of PV power plant of 14.5MW class in Yambol City Bulgaria and initiated commercial operation and spurs advance to Europe PV market.

Also Hanwha which secured perfect vertical affiliate from upstream to downstream recently obtained the order of PV power plant construction project of the scale of 500MW for Japan Marubeni general trading company including the supply of PV module 5.6MW to Japan Softbank last May. Shinsung Solar Energy which has vertical affiliate with the manufacture of PV module, equipment and construction took the order of PV module supply of the scale of 7 million dollars from Hong Kong S&S Hightech and next it concluded sales contract of the scale of 7 million dollars with the Italy PV module manufacture enterprise Silfab SPA.

This is the proof that the reflective interest due to the anti-dumping suit which the US filed against China made PV module which occurred from the last May has affirmative influence on Korean enterprises. There are the evaluations mixed with anticipation that like this big and small conclusion of overseas supply contract eventually will offer good opportunity to Korean value-chain enterprises too.

One of affirmative news is that the local governments such as Gyeongsangnam-do, Jeollanam-do including Seoul construct PV power plant and there are the booms of construction of PV power plant using idling site such as the roof of schools and filtration plants. Including Seoul which announced the construction of public and private facilities of 320MW by 2014, the local governments such as Gyeongsangnam-do which will construct public institutions of 165MW in the province by 2016 and Jeollanam-do which will construct on-the-sea PV power station of the scale of 100MW at the sea of Shinan-gun by 2015 are competitively coming out for the construction of PV power station.

If the above are the opportunity factors of PV industry for the latter half of this year and the next year, the unfavorable factor and opportunity factor is that the prices of PV apparatus and materials are falling down at this moment of time. It means that the management margin of the enterprises is continuously falling down. The struggle with the time how long who is well enduring is tediously continued. However, the excessive supply is continuously exhausted regardless of the bankruptcy of related enterprises or increase in demand, and unlike until now if only they use well the situation where the speed of fall in prices progresses a little gently, coming out is the analysis that there certainly is turnaround time when they can revive enterprise margin.  

The key of killer application for survival is held by related enterprises. 

It is because only the enterprises which well secure price competitiveness through reduction of prime cost can survive in the time of depression making profit. For instance PV module manufacture enterprises can survive through OEM production of high-efficiency products which have price competitiveness and the PV power station construction company which secures highly qualified personnel will be able to attain their own only grid parity with the method to use the best personnel with minimum cost. 

In conclusion, if we gather the majority opinion of the industry experts, they say that the bottom to go down more is still waiting. We expect that the latter half of this year or the former half of the next year is the lowest point of the bottom and the flare of escaping from depression. Of course, because there are many various variables such as restructuring of the global PV enterprises and change of support policy of the government of each of the countries, it is early for anybody to make a hasty conclusion. However, the apparent fact is that PV industry is suffering growing pains in the process of getting into maturity passing the entry period of initial stage. As the movement of PV manufacture enterprises and equipment enterprises against this is gradually getting faster the behind the scenes work for facilities extension and upgrade are sensed everywhere the race of PV industry to escape from recession already started.

(Source: EXPO Solar 2013 & Solar Today magazine)