The Effects of the Financial Crisis on Photovoltaics: An Analysis of Changes in Market Forecasts

Polysilicon and PV Module Production Forecasts Polysilicon and PV module production are capital-intensive industries, and thus the growth of both sectors is vulnerable to a reduction in available financing.8 Furthermore, a decrease in future demand for PV will diminish the need for greater module production, which in turn will lower the need for additional polysilicon. Polysilicon production is worthy of individual attention, as it is the feedstock for a large majority of photovoltaic modules and has historically experienced large fluctuations in price. Polysilicon Production Forecasts -80 -40 0 40 80 120 160 200 240 280 2006 2007 2008 2009 2010 2011 Year Total Polysilicon Production (kMt) 2008E Production 2009E Production Estimate Change Sources: 1A, 1B, 2A, 2B, 3A, 3B, 4A, 4B, 5A, 5B, 6A, 6B Figure 1. Total polysilicon production Figure 1 shows the forecasts for total polysilicon production and how those forecasts have changed between Q3 2008 and Q1 2009. The median estimates did not change substantially, with the median forecasts for 2010 and 2011 declining by only 5% and 8%, respectively. Despite the effects of the financial crisis, industry analysts still expect polysilicon production to grow from about 64 kMt in 2008 to 179 kMt in 2011, a compound annual growth rate (CAGR) of 41%. However, the range of forecasts narrowed considerably, particularly the spread between the median and high estimates. For 2011, the high estimate decreased from over 253 kMt to less than 184 kMt. As shown in the Estimate Change line, one of the analysts lowered his forecast for 2011 polysilicon production by almost 80 kMt. That the median estimates did not change significantly reflects the two determinants of polysilicon production, utilization and capacity, which cause production to be somewhat insensitive to current market conditions. First, the relatively low marginal costs of production result in high utilization rates, even when polysilicon prices decline.9 Second, the construction of polysilicon plants is time and capital-intensive, resulting in a delay of several years between planned and realized capacity additions. The long duration has the effect that polysilicon production capacity is slow to adjust to current market conditions, as was evident in early 2008 when a shortage of polysilicon resulted in spot market prices of $500 per kilogram.10 Conversely, even though future demand for PV modules (and thus polysilicon) has recently declined, additional polysilicon production capacity in various stages of development will still be coming on line over the next few years,download