Renewable Energy Corporation’s S$2.5 billion integrated Singapore plant – its biggest and most efficient worldwide – remains one of the few bright spots for the Norwegian solar company which is facing a demand slump in Europe on one hand, and stiff competition from Chinese and Taiwanese rivals on the other.
‘Demand has not picked up to the extent we had expected,’ REC’s president and CEO, Ole Enger, reportedly said at the group’s third quarter results presentation last week. ‘Lack of financing availability is the biggest problem we have in the solar industry.’
In Europe, countries like Germany, France and Italy have cut subsidies to cap booming solar installations, while rival Chinese solar makers have expanded output capacity considerably with this causing wafer and cell prices to plummet to ‘dramatically low levels’, the group said.
In Q3 for instance, REC saw a 17 per cent drop in its average selling prices for wafers, with wafer sales volumes plunging 39 per cent from Q2. For polysilicon, Q3 saw it incurring a 8 per cent drop in both sales volumes and also selling prices. Selling prices of its modules fell 13 per cent, although sales volumes remain unchanged.
Whereas REC’s Singapore plant at Tuas, which started operations late last year, ‘is reducing costs at a high rate,’ the group said, adding that it is ‘in a leading position on a cash cost basis’.
‘There is further potential for cost reductions (in Singapore) through technology development, improved sourcing of materials and operations.’
Thus while the group is shutting down some older production units for good in Norway, it said that Q3 production volume in Singapore is up 9 per cent, and the ‘Singapore plant continues to perform well with respect to volumes, yield and cell efficiency’.
The short-term outlook remains grim for solar makers because of excess capacity. For 2012, supply of photo-voltaic cells continues to outgrow demand, REC warned.
Asian players are now dominating the solar industry, the group said, with China and Taiwanese solar cell makers now accounting for 59 per cent of global market share in 2010, up from just 19 per cent in 2006. On the other hand, European makers’ share has fallen from 29 per cent to 12 per cent.
The short-term implications are that there will be continued overcapacity, with market prices close to the cash cost of the marginal producer. There will also be some shake-out and industry consolidation, REC showed.
In summary, the group said that this ‘challenging market is likely to continue for 1-2 years, although REC Silicon and REC Singapore are well-positioned to meet future challenges, both industrially and financially.’
