Local Actions Impact Global Solar Cost and Supply

California was an early adopter of solar technologies, supporting widespread solar installations through a combination of favorable rates, rules, and financial incentives. California is the third largest PV market in the world but is relatively small in comparison to Japan and Germany. In addition, other US states, and many countries are increasing their support and installation of solar generation. California installed about 36 MW in 2004 compared to over 900 MW worldwide. Figure 1 shows the annual installed capacity for the three largest programs and the rest of the world in the last six years. The dashed line represents the annual manufacturing capacity of PV modules at the end of each year. While it would appear that manufacturing capacity is increasingly in surplus, in fact installations grew so rapidly during 2004 that capacity was strained during the year, leading to widespread reports of module shortages in California.

Figure 1 - Annual Installed PV Capacity and Manufacturing Capacity

Given the current size and future growth potential of the California solar market, solar incentive policy development must now consider a broad number of factors, including worldwide solar market conditions. Solar policy decisions made in Germany, Japan, and the rest of the world impact global solar costs, supply, and availability, and hence have impacts on California's proposed CSI program. For example, incentive policies in Germany created high demand for PV systems in a very short period, leading to the current supply and demand imbalance, and to increased equipment prices worldwide. In contrast, Japan has successfully grown its PV market gradually over the past decade with minimal market disruptions. Spain recently adopted a program similar to the German model, with mixed results.

The following three sections discuss key elements of each region's solar program below.