While today Germany and Spain are by far the largest markets for solar installations, the United States is expected to take on that role within the next few years. Some of the main U.S. market-drivers have been relatively generous incentives schemes and high electricity prices, especially in California, where solar power is already competitive with electricity from the grid at peak hours of the day. As a result, California currently makes up about 85 percent of the entire U.S. solar market. However, other states have also introduced public support schemes and solar electricity generation is increasingly viable in less sunny climates. This is largely due to the growing economies of scale in manufacturing of solar panels, which the industry has been observing over the past few years.
The production of solar photovoltaic (PV) modules and components is now an industry with an annual market volume of more than $20 billion (2008). Manufacturing is no longer dominated by small start-ups and university spin-offs. Instead industry leaders with global standing, such as Q-Cells, REC, or First Solar have emerged. Additionally, established large corporations like GE, Sharp, and Intel are increasingly active in the field or have recently entered into this highly attractive business.
Given the strong medium- and long-term fundamentals of the solar industry, companies will continue to expand their capacities, invest in new production sites, and establish a truly global footprint. This results in excellent prospects for individual regions to position themselves as manufacturing locations of choice.
Leading companies have started to establish manufacturing locations in each of the three current main regions - America, Asia-Pacific, and Europe - to fully cover the global market and optimize their cost structure as the industry becomes more and more competitive.
Challenges for PV Manufacturers
PV manufacturers are currently faced with an increasing geographical diversification of their industry: Dependency on a small number of (heavily subsidized) core markets is decreasing, and market growth is taking place on an ever-wider scale. This means companies will have to choose their locations in a geographically fragmented market, with many centers of growth in almost all parts of the world.
Like sales markets, companies themselves are also changing. Founder-managed companies are turning into medium-sized enterprises, and established market participants are going public. This naturally influences the decision-making process and the formulation of corporate strategy. In addition, the scale of investment projects in photovoltaics is also constantly increasing. Whereas, until recently, the manufacturing process was fragmented into the various steps in the value chain (silicon, wafers, cells, modules), and corresponding investment amounts for each individual project were relatively small, the industry is quickly turning to a more and more integrated production process, with larger volumes and projects now easily reaching several hundred millions of dollars in investment and the creation of at least a few hundred jobs.