Inflection Point for U.S. PV Manufacturing
Area Development Research Desk
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The global PV (photovoltaic) industry is entering a period of dramatic transformation brought about by cyclical overcapacity, roiling capital markets, plummeting prices, and rapidly evolving business models. Add to this a supportive federal administration, growing utility interest in deployment, and gigawatts of pent-up solar demand, and the United States appears ready for growth in this sector.
To date, however, most of the discussion between policymakers, market participants, and industry observers has focused on the growth of domestic end-markets, with little attention paid to domestic production. Historically, only a small handful of crystalline silicon-based facilities have been producing at commercial production levels. And although the ramp up of thin-film production in the United States has lent the domestic manufacturing scene higher visibility in recent years, this pales in comparison to the expansive build-out of capacity in Germany, China, and Taiwan.
However, all this may be about to change. The prospects of the U.S. market and the threat of "Buy American" provisions in the ARRA (American Recovery and Reinvestment Act) have prompted a stream of announcements from manufacturers - both established foreign players as well as new domestic entrants - about setting up production facilities in the United States. Helping to fuel this growth are the numerous manufacturing incentives enacted within the past year and the generous packages received by solar companies that have chosen to manufacture domestically. At the same time, venture-funded thin-film companies with large cash cushions have been largely undeterred by existing market conditions and have made steady progress in bringing their products to market.
A new report from GTM Research/Greentech Media entitled PV Manufacturing in the United States: Market Outlook, Incentives, and Supply Chain Opportunities takes a closer look at 33 U.S.-based PV wafer, cell, and module producers as well as detailed information on future U.S. PV manufacturing facilities; provides a comprehensive listing of all federal, state, and company-specific subsidies available to U.S. PV manufacturers; and includes an assessment of the impact of the ARRA on U.S. PV manufacturing activity. Also provided is a quantitative analysis of each state's viability for U.S. PV manufacturing, taking into account state incentives, tax burdens, utility rates, proximity to end-demand, and labor resources.
Among the report's key findings are the following:
• U.S. cell and module capacity are estimated to grow at an annualized rate of 50 percent and 45 percent, respectively, from 2008 to 2012. Thin-film will continue to occupy a majority of production share in the United States, comprising 67 percent, of cell and module capacity by 2012.
• More plants were announced in the first half of 2009 than in the previous three years combined, which serves as evidence of the gathering momentum for increasing PV plant construction in the United States and points to recent political and policy-related developments as a catalyst. European and Asian firms will own a number of these plants, indicating growing interest from foreign manufacturers in entering the U.S. manufacturing market.
• The West Coast states of Oregon and California will emerge as major PV manufacturing centers over the next few years, together comprising 28 percent of producible supply by 2012.
• The passage of the ARRA has introduced significant incentives for PV manufacturers at the federal level via the Advanced Energy Tax Credit, which is a 30 percent tax credit on the capital cost of equipment; this is set to be converted to a direct cash payment. At present, 18 U.S. states offer some form of incentive for PV manufacturing. There is a high degree of overlap between those states that offer PV manufacturing incentives and those that currently house or will be housing production facilities.
• The growth in domestic PV production should provide meaningful opportunities for their many suppliers by fueling sizeable growth in material requirements, including feedstocks, glass, and encapsulants, as well as in manufacturing equipment.
• Among the factors that will influence the location of future manufacturing facilities are state incentives, power prices, the cost and availability of skilled labor, proximity to end-demand, and tax burdens. Oregon, Ohio, Michigan, and Pennsylvania emerge as having the best overall collection of characteristics, and there is a high correlation between a state's overall performance on the above metrics and its existing manufacturing presence.
• While the U.S. is attracting new PV manufacturing, there has been a strong recent trend among a number of established American and European firms to shift production to Asia, through in-house manufacturing, tolling arrangements, or contract manufacturing firms. For Asia-based producers with highly competitive cost structures but limited access to the U.S. market, module assembly facilities in the United States make the most sense, while European and U.S. firms with highly sub-optimal cost structures are likely to shift wafer and cell production to low-cost locations. For companies between these two extremes, incentive packages will play a critical role leveling the playing field, and only states offering deals that can meaningfully close the cost gap between U.S. and Asian production will come into contention.
Information was supplied by GTM Research/Greentech Media. The full report is available for purchase at www.greentechmedia.com.