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Photovoltaic on the Way from a Few Lead Markets to a World Market
a report by
Winfried Hoffmann
President, European Photovoltaic Industry Association (EPIA)
The global photovoltaic (PV) sector has been
growing significantly for the past eight years at a
rate, on average, of over 40%. In the 1960s and
1970s the market developed on niche segments such
as space solar cells. In the 1980s and 1990s several
national R&D programmes, mainly in Japan,
Germany and US, allowed some market
development for off-grid and consumer appliances.
Since the 2000s the PV sector has entered a
‘transition phase’ towards competitiveness in all
market segments and in particular grid-connected
applications, thanks to the development of market
support programmes. Germany, Japan and the US
(representing two-thirds of the global market) have
enabled this transition. Due to the increased
awareness in the public and political commitment in
these three countries, renewable energies are
supported by policy-driven programmes. Local
content and a large amount of the value added is
needed to legitimate these politics.
It is expected that, by 2020, PV will become a
global source of energy capable of contributing to
the global electricity demand. With adequate
policies in the transition phase and increasing prices
of conventional electricity production, it is
estimated that PV, in 2040, could represent 25% of
the global electricity consumption.
Reaching Competitiveness
One of the key challenges of the PV sector is to
reduce the cost of PV modules to reach
competitiveness. Until 2003, the prices of PV
modules were decreasing by 20% each time the
cumulative capacity installed doubled, given the past
growth rate; this represented a 5% annual price
decrease on average. PV will become competitive
with peak power prices in the next few years. In
actual fact, during the day, electricity prices are
usually higher at peak power time, which happens to
be generally around midday. At this time, electricity
can reach peaks that make it very expensive.
Coincidently, this is the moment when PV naturally
has the biggest output as the sun is fully shining. We
expect that in countries such as Spain, Italy or
EUROPEAN RENEWABLE ENERGY REVIEW 2006
Solar Power
Greece, solar electricity can be competitive with
peak power prices within the next ten years
(northern EU countries in the next decade). The
same timescale applies in the US, Japan and South-
East Asia.
Support Mechanisms are Necessary in
the Transitional Period
Today, solar electricity cannot compete successfully
with conventional energy sources, as it requires, as
we have seen before, a reduction in the cost of PV
modules. In order to acheive a reduction in cost,
the existence of mass markets is necessary. To
enable this reduction, support mechanisms are
necessary to initiate these markets. Energy markets
are not ruled like a standard industrial sector;
conventional energy sources are heavily subsidized.
That is why renewable energy sources, in order to
reduce costs, if not initiated by market support
programmes, cannot expect to become a new
source of electricity generation.
The most effective support mechanism that exists
today is the one in place in Germany – the feed-in
tariff system. The principle of this mechanism is that
it offers the individual investor in solar electricity
systems an attractive price for selling the produced
electricity to the utility grid and rewards them for
choosing to be supplied by clean solar electricity.
The tariff is set high enough to enable a positive
return on investment and a reasonable pay-back
time (e.g. 10 years). Usually, the tariff is paid for
a long period of time, 20 years, enabling a long-term
visibility and, thus, stability for the investor. This
system, in place since 2000, was renewed and
improved in 2003, enabling an impressive market
take-off in Germany (over 100% market growth
in 2004).
Germany’s experience has convinced more
European governments to adopt similar systems to
develop solar electricity. Fortunately these
countries are from south Europe where the sun
shines stronger. These are Spain since 2004, Italy in
2005, Greece in June 2006 and very soon France.
Winfried Hoffmann is President of
the European Photovoltaic Industry
Association (EPIA) and of the
German Solar Economy Association
(BSW) and member of the Scientific
Board of Fraunhofer institute solar
energy (FhG-ISE) and member of
the Supervisory Board of the
institute for solar energy research
in Hameln (ISFH). He is a Member
of the Management Committee of
SCHOTT Solar GmbH in Alzenau,
Germany, and Chairman of the
Board of Directors, SCHOTT Solar
Inc. He joined the just formed
photovoltaic R&D group for thin
film solar cells of NUKEM in 1979
and took over its leadership in
1985. He initiated the joint venture
in the photovoltaic field between
NUKEM and Daimler-Benz Aerospace
to form Angewandte Solarenergie –
ASE GmbH in 1994, where he
served as Managing Director. In the
same year the acquisition of 100%
shares of Mobil Solar as a
subsidiary company took place, and
where he still serves as Chairman
of the Board of Directors. In
October 2002 the joint venture
between RWE Solutions and SCHOTT
Glas, the RWE SCHOTT Solar GmbH,
was formed, where he served as
Chairman of the Board. Effective in
2005 SCHOTT acquired the shares
of RWE Solutions and the company
was renamed SCHOTT Solar GmbH,
where he is Member of the
Management Committee. Dr
Hoffmann graduated in physics and
did his PhD thesis in biophysics.
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Figure 1 but also balance of system producers (inverters, cabling

devices) and, on top of the chain, silicon producers.
PV Power installed per year in TW/a
1,000
Today our sector is facing a temporary shortage of solar
grade silicon because the chemical industry did not
900
anticipate such a growth in the PV sector, a sector that
800 relies essentially on politics to have a decisive impact on
700 market development. For many years, the PV industry
has been a marginal client for the chemical industry and
600
8% the raw material provided was rather considered as a
500 (5) way for this sector to get rid of its production surplus.
400 Today, the PV sector has turned out to be one of the
300
main and new attractive clients of the chemical
(4)
23% industry as well as the equipment suppliers of
200 (3) semiconductors. It is estimated that to reach expected
(2)
100 market targets by 2010, current solar grade silicon
(1)
0 production must be doubled from current levels to
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
reach an annual output of 30,000 tons. The
Row market off-grid GW/a Row market on-grid GW/a USA market on-grid GW/a photovoltaic sector is becoming an attractive business
and able to reboot some sectors which are facing
JP market on-grid GW/a EU market on-grid GW/a
market slow down.
Source: Hoffman W, Schott Solar, 2006 IEEE WCPEC Hawaii, 8 May 2006.

A Solution to Poverty Eradication

These countries are launching a decisive trend
toward sustained markets development. Demand is More than two billion people live without
growing and should not remain unsatisfied That is electricity today. Because of the fast-growing
why the industry has to prepare itself to answer the population in remote rural areas this figure will
consumers’ needs. increase, even if many electrification programmes
are completed successfully. For decentralised power
We have seen how adapted support mechanisms needs, PV solar electricity is best. Following the
could enable the sustainable development of markets continuing price decline, in the next decade PV
in Europe and globally. will be cost-efficient and affordable enough to be
able to close the energy gap in the new world.
The European Photovoltaic Industry Association Accordingly, the rest of world market off-grid

The global photovoltaic sector has been growing significantly

for the past eight years at a rate, on average, of over 40%.

(EPIA) estimates that in 2010 the annual global applications will start to overtake other markets by
market could reach 5.4GWp approximately the mid 2020s and will have the largest share after
20GWp cumulative installed capacity globally could 2030. Allocating local content in these future
be achieved, which could provide electricity to markets will be a major topic in the coming years.
over 20 million people around the globe. The Today’s leading EU on-grid market will be almost
industry must prepare itself over the entire value saturated by that time as well as the Japanese and US
chain to answer market development with adequate markets. To prepare for this future, changes in the
production capacity. PV industry have to be put in place today.

If we are going to reach an annual market of 5.4GWp A Sector with High Business and
manufacturers have to adapt their production capacity Job Creation Potential
across the entire value chain. Not only do PV cell and
module producers have to up-scale production outputs Not only does PV electricity have high potential in

32 EUROPEAN RENEWABLE ENERGY REVIEW 2006

EPIA_ad.qxp 8/7/06 1:54 pm Page 33

Our mission…

“Deliver a distinct and valuable service driven from the

Strength of a Single European Photovoltaic Voice”

Our priorities…

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• Innovation
• Quality
• Promotion

Our target…

Provide clean solar electricity to 7 million

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The Strength of a Single Photovoltaic Voice

www.epia.org
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Solar Power

Figure 2: Policy-driven Scenario – Annual Worldwide Market (MWp) driving directions: competitiveness, innovation,
quality and promotion. Competitiveness is key to
6,000
5.425 competing soon with peak power in the
conventional electricity market. To fulfil the
5,000 demand created by new political support
programmes in Europe and worldwide, the
3.750
4,000 industry is up-scaling its production capacities to
reach the critical mass and realise economies of
3,000
scale. Innovation is critical to making the
2.666
difference among other technologies. Adapting
1.971 products to consumers’ needs is also crucial. This
2,000 1.581 requires closer work with research centres to adapt
1.057 1.150 production processes and technologies. A quick
1,000 0.595 transfer of laboratory results, to piloting and
production processes in the industry is necessary.
0
2003 2004 2004 2006 2007 2008 2009 2010
As far as quality is concerned, PV can be considered
Source: Hoffman W, Schott Solar, 2006 IEEE WCPEC Hawaii, 8 May 2006.
as a clean source of energy as long as it is sustainable.
PV must be reliable to be able to meet customers’
the long term to meet electricity needs but it will also expectations. The sector has already developed a full
become a leading business. Today, the PV industry life-cycle analysis for each adequate solution,
generates a turnover of over €5 billion per year. It is including proven recycling technology.
estimated that in 2040 it will be €500 billion.
Promotion is indispensable to raising awareness for
Today, over 40,000 people already work for PV in renewable energies and in particular PV.
Europe. Solely in terms of job creation, in order to Promotion towards decision-makers at national,
meet the 2020 market forecast, it is estimated that European and global level is key to getting
PV could employ two million people worldwide. necessary interim policies until competitiveness is
reached. This should take place within five to ten
EPIA, the Strength of a Single years at peak power prices on Southern European
Photovoltaic Voice electricity markets and in the next decade in
Northern Europe. A constant dialogue must be
EPIA represents over 95% of the European PV undertaken with all involved stakeholders
industry and globally 80% of the manufacturers. It (architects, utilities, construction sector).

Today, over 40,000 people already work for PV in Europe.

Solely in terms of job creation, in order to meet the 2020
market forecast, it is estimated that PV could employ two
million people worldwide.

exists to deliver a distinct and valuable service driven
from the strength of a single PV voice. The role of
EPIA is to accompany the industry through the
expected market growth, on the one side by ensuring
political support and the adoption of adequate support
mechanism to ensure demand and on the other side by
working together with all the stakeholders
to ensure that the industry can actually meet the
demand created.
This will be achieved by following four main
EPIA has chosen to develop its strategy along these
four pillars through the development of partnerships.
The key for success to undertake this action plan is to
work with the right partner such as professional
associations, local governments, research institutes or
media. Preparing reports or position papers, or
organising seminars or promotional campaigns
requires transparency and working in close
collaboration with the right stakeholders. This is
fundamental to obtaining reliable, credible and wide-
accepted results. n

34 EUROPEAN RENEWABLE ENERGY REVIEW 2006

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