German Solar Installations Undergo End-of-Year Resurgence, Straining Supply Chain

El Segundo, Calif., October 3, 2011—After slumping in July and August, Germany’s orders for new photovoltaic (PV) solar systems are set to soar in October and November, generating a surge in demand that may be difficult for major suppliers to accommodate, according to the IHS iSuppli Photovoltaic Service from information and analysis provider IHS (NYSE: IHS).

The boom in orders in Germany, the world’s largest PV installation market, is being driven by the looming drop in the country’s feed-in-tariff (FIT) in January of next year. The FIT acts as a major incentive for PV installations. Investors and homeowners are rushing to place orders for solar systems before this incentive decreases.

The spike in demand had been expected since July. However, decreasing PV module prices compelled buyers to delay their orders until cost conditions were more favorable. Furthermore, many buyers in Germany were on vacation in July and August, also delaying orders.

The rapid rise in demand is presenting challenges for the leading solar suppliers, which are based in China.

“Given the sluggish demand in the third quarter, the major Chinese suppliers reduced their factory utilization levels in the third quarter,” said Dr. Henning Wicht, senior director and principal analyst for IHS. “Because of this, some Chinese suppliers may not be able to ramp up production in time to capitalize on the demand surge in Germany. With delivery time of six weeks, these suppliers have a short window of opportunity to get their products shipped to Germany.”

First- and second-tier module manufacturers closely linked to wholesalers in Germany should be able to react to the rise in demand quickly and fulfill the additional business. However, less known module companies selling on the spot market may face difficulties in meeting orders.

Even with the fourth-quarter increase in orders, Germany’s solar installations are expected to decrease for the full year of 2011 compared to 2010. This is because of weak sales earlier in the year.

German PV installations in 2011 are forecasted to amount to 5.9 gigawatts (GW), down 20.4 percent from 7.4 GW in 2010, as presented in the figure below. Installations in 2012 will decline another 15.3 percent to 5.0 GW.

Despite the shrinking PV markets in Germany and other European countries, global PV installations will rise 21.7 percent in 2011 and 13.7 percent in 2012.

The year 2012 will see consolidation on the supply side before demand in emerging countries accelerates in 2013.