Market Analysis December 2014 - The European photovoltaics market continues its downward trend. New concepts are making new inroads but slower than expected

Dwindling demand in Europe has kept module prices under pressure. Nearly every product across the board, regardless of origin or brand, has fallen by a couple of percentage points over last month's prices.

Although there were hopeful signs in early November that the downward trend may be coming to an end, the figures continued their fall – mostly at the cost of already paltry margins.

In Germany, 2014 was the saddest year for PV since the introduction of the German Renewable Energy Act. Never before has there been such a slow fourth quarter in Germany. In November, a further decrease of new installed capacity reported to the German Federal Network Agency [Bundesnetzagentur] in comparison with the months before is expected. But Germany is not the only country affected. Apart from the UK, all of Europe has seen an unheard of crippling of the market. PV as an investment model is apparently dead in Europe, and establishing new concepts takes time.

In principle there are two approaches the industry could take to jumpstart business in Germany: build PV plants with little dependence on the Renewable Energy Act and ensure the financial feasibility of the plants in other ways, or build PV plants that are profitable, despite the current feed-in tariff. The latter approach depends on low construction and other costs, as well as very inexpensive components. This generally necessitates the use of low-quality products with limited guarantees and/or ambiguous origin. Used equipment and first or second generation thin-film modules are in high demand for low-cost concepts. That raises the question, however, of how long such an installation can last. Such doubts lead to the failure of many projects because investors get cold feet at the last minute before construction begins.

The other approach, which relies on generating additional benefits or helping the operator of the plant achieve independence from future energy price developments by maximizing self-consumption, appears to be much more worthy of investor confidence and is more future oriented. However, this approach requires more technical understanding and a higher level of consulting expertise. A previously very simple business model (an investment model with a return of x percent) based on simple plant technology, suddenly becomes a highly complex system which has to strike a balance between the energy supply, utility network requirements, and consumption behavior and in the best case reduces to a minimum the exchange of energy between the utility company and the plant operator through the use of modern storage technologies. It is obvious that this stage of evolution, this rethinking and relearning for all those involved, cannot take place overnight.

Many companies saw this paradigm shift coming and the changes it would bring. All that is lacking are opportunities and endurance. There is little or no historical data for the numerous promising technical approaches, most of which are in the trial phase, on which to build a solid business. Many installers, wholesalers and some manufacturers have scaled back their business in the industry over the years, and others have been forced out entirely. But many small, flexible and highly innovative companies have remained and had the courage to tap new markets with reworked concepts and take advantage of the huge potential which doubtless remains in PV 2.0. It will be exciting to see which companies and products emerge as the stars of 2015.