Booming industry and high CO2 abatement potential: Solar power will be cheaper than conventional energy in 10 years’ time.
Solar energy’s CO2 abatement costs will sink to almost zero by 2018, making it cheaper than conventional forms of electricity or heat. As Bank Sarasin & Co. Ltd calculates in its latest annual update on the solar industry – the fifth report in the series – solar energy could save approximately three gigatons of carbon dioxide by 2030. At the same time, photovoltaic (PV) cell production continues to boom, up 44% on last year, when performance was already very strong. Bank Sarasin forecasts annual growth rates of 50% for PV for the rest of the decade. To provide investores with access to this attractive growth market, Bank Sarasin launches the new index "Sarasin European Solar Power ".
In its latest report “Solar Energy 2007 – The industry continues to boom”, Bank Sarasin & Co. Ltd, examines the current market situation and outlook for solar energy, focusing on three key applications: PV, solar thermal energy and solar thermal power stations. The author of the report, Dr Matthias Fawer, pays special attention to the key themes of polysilicon supply, price and demand trends, the growth of thin-film technologies, and the globalisation of markets. This annual industry review demonstrates the pioneering role played by Sarasin in the area of sustainable investment and the track record of its own research experts.
High CO2 abatement potential
Given the current debate on global warming, public attention is focusing on the CO2 reduction potential and abatement costs associated with individual solar energy technologies. This year’s Sarasin report addresses this important theme for the first time and shows that solar energy could make a significant contribution to reducing CO2 emissions. “By 2030 we predict that solar energy will be able to prevent 20%, or three gigatons, of the extra 14 gigatons anticipated over that period,” explains Dr Matthias Fawer, highlighting the enormous potential. The bulk of the reductions (50%) can be made from heat generated from solar collectors. CO2 abatement costs for all solar technologies are currently much higher than the prices at which CO2 certificates are being traded (EUR 20 – EUR 40 per ton), but the cost-reduction potential is considerable for all three types of energy. Sarasin projects that by 2018, solar thermal power, followed by PV (2021 onwards), and solar thermal power stations (2025), will no longer incur any CO2 abatement costs.
Market now driven by demand rather than supply: vigorous expansion of production capacities
In 2006 global solar cell production has again increased from 1.74 gigawatts (GW) to more than 2.5 GW (+44%). The PV industry is therefore evolving from a demand-driven to a supply-driven market. Successful companies such as Q-Cells, Suntech Power, First Solar and SunPower will register high growth rates of their respective production capacities this year compared with 2006. The share prices of solar energy companies have matched the growth in PV cell production with the PPVX Index, comprising 30 solar stocks, which has risen by 95% in the first three-quarters of 2007. The prospects for the global solar market have continued to improve now that various obstacles, such as the bottleneck in the silicon supply or the lack of subsidy programmes, have been removed. For 2010 Bank Sarasin predicts newly installed global PV capacity to reach 8.25 GW on the back of annual growth rates of 50%.
Chinese PV producers experience teething problems
Over the last two years we have seen new Chinese companies enter the PV market. Some of them (Suntech, Yingli Green Energy and LDK Solar) were quick to complete IPOs, thereby raising the capital they needed to invest in the latest equipment for capacity expansion. However, none of the Chinese companies finished in the top 10 of Bank Sarasin’s strategic ratings of solar companies yet. The lack of know-how is evident in poor product quality. These companies are therefore not yet able to fully exploit the advantages of their location, and securing a reliable supply of silicon is still a challenge for them. In terms of new PV installations, those countries achieving higher than average growth rates compared with last year include the US, Spain, Italy, and Korea, while the pace of growth has eased in Germany and Japan.
China installs 74% of all solar collectors
In 2006 roughly 24% more solar collectors were installed than in 2005, with a total thermal energy of 17 GW. Around three quarters of this capacity was installed in China. Europe’s solar thermal power market has also developed well, growing by 45% in 2006. The market leaders are currently Germany, Austria, Greece, Italy, Spain, and France. The Swiss market grew 33%, and should finally be able to gather fresh momentum following the parliamentary approval of a feed-in tariff that covers costs for all forms of renewable energy. By 2010 Bank Sarasin predicts global annual growth to reach 25%, driven mainly by China and developing countries.
Attractive investment
To provide investors with a convenient, diversified investment in solar companies, Bank Sarasin has launched the "Sarasin European Solar Power Index". Europe is world leader in solar technology and the index therefore comprises the top eleven European solar companies, each with an equal weighting. The index covers all three application areas for solar energy, i.e. photovoltaics, solar collectors and solar thermal power stations, and embraces the entire value chain for these technologies, from the solar-grade silicon through to the wafers, cells and modules, and the operation of solar energy systems.
(This report was compiled in December 2007)
