North American PV market may double

Caught between strong utility-scale project demand, declining solar incentives in distributed generation applications, module oversupply and significant policy uncertainty, the North American photovoltaic market is at a crossroads, according to the conclusions of the recently released NPD Solarbuzz North America PV Markets Quarterly report.

“PV is now positioned to take significant market share from other energy sources as it approaches grid parity in some regions. Downstream companies are facing enormous challenges to adapt to rapidly changing channel structure and business models to participate in that opportunity,” said Craig Stevens, president of NPD Solarbuzz.

In Q4’11, the North America photovoltaic market was forecast to grow 33% Q/Q and 101% Y/Y. Q4’11 installations of more than 0.8 GW of PV capacity were expected, resulting in a total demand of over 2.2 GW in 2011.

The US was expected to account for 84% of North American demand in Q4’11; Canada, dominated by Ontario, had the remaining 16%. When viewed at a state or provincial level, California remained the largest single market in Q4’11, with 21% of market share. Ontario is forecast to become the second-largest region (16%), followed by New Jersey (11%). Demand in the US has spread to many states beyond California, but in Canada, Ontario is 99% of the national market, which creates significant policy risk.

The primary driver in Ontario has been the feed-in tariff, while American states have been driven by a combination of policies and regulations at both state and federal levels. More recently, the US federal government played a critical role in the US solar market, providing investment tax credits, cash grants, depreciation bonuses and loan guarantees as vehicles to make PV more financially attractive. By the end of Q3’11, the federal government cumulatively awarded over $1.4 billion in cash grants for solar systems, which is equivalent to 800 MW of installed capacity.

The California Solar Initiative, the largest state-level incentive program in the US, has supported over 650 MW since its inception in 2007.

In Q3’11, the US PV market grew by 32% from Q2’11 and could reach 1.9 GW for the year, which would mean that the market has doubled in size for the second consecutive year.

The next four quarters carry more downstream uncertainty than normal. The SolarWorld Chinese anti-dumping petition has split the US PV industry, with clear evidence that some Chinese manufacturers and project developers have already started to delay shipments and installations.

Taken together with the expiration of the US federal cash grant, deferral of module supplies awaiting a price bottom will slow 2012 growth. The North American market, however, is still forecast to triple in size by 2015, with the ground-mount installations securing the largest market share of 42%.