ABB Ltd., the world’s largest builder of power grids, said growth in the solar industry will become steadier as falling installation costs and the need to conserve oil help replace the fading subsidies that kick-started the market in Europe.
“We are not in this business because we believe it’s subsidy-driven,” said Maxine Ghavi, the head of ABB’s solar initiative. “The market is still volatile, fragmented and in its infancy. In the mid-to-long-term, it will stabilize. We will see more steady growth.”
The cost of producing solar power has fallen over the last five years, leading to cuts in the subsidies awarded to installations. Some markets, including China, will continue to have incentives in the short to medium-term, Ghavi said.
ABB bet $1 billion on growth in solar with the acquisition of inverter-maker Power One Inc. earlier this year that made it the world No. 2 for solar inverter-equipment. By contrast, Siemens AG is closing its unit offering solar-thermal power technology following losses of $1 billion in two years.
SMA Solar Technology AG, the Niestetal, Germany-based market leader for solar inverters, expects sales to improve by 10 percent to 45 percent next year even as price pressure accelerates amid subsidy cuts in Europe. The price of inverters for residential solar power plunged 42 percent to 20 U.S. cents a watt in the three years through November 2013, according to data from Bloomberg Industries.
The European Photovoltaic Industry Association forecasts cumulative global solar installations could double in the three years through 2015 to 197.6 gigawatts, spurred by growth across Europe, China and the U.S.. ABB is budgeting for the solar-inverter market to be worth as much as $7 billion this year, Ghavi said.
Solar subsidies, which helped nurture growth in Europe’s solar market, are now retreating as technology costs fall and governments focus on cutting debts.
Ghavi, who was hired to lead ABB’s solar initiative in 2011 after a management role at OC Oerlikon AG’s competing unit, said the decreasing cost of producing solar energy relative to fossil fuels and the need to conserve oil will provide a more steady support to demand.
Saudi Arabia, the world’s leading crude-oil exporter, continues to burn petroleum for electricity to meet summer surges in air conditioning usage. Growing global energy demand and the need to diversify the supply mix away from traditional sources will also support the country’s growth of solar power, she said.
“Instead of selling oil at $100 a barrel, they are subsidizing for domestic use at $5 to $10 a barrel,” said Ghavi. “There are economical reasons why they should implement solar and preserve the oil for export as a source of revenue.”