VERONA, Italy (Reuters) - The world's solar power generating capacity will grow by between 200 and 400 percent over the next five years, with Asia and other emerging markets overtaking leadership from Europe, a European industry association said on Monday.
"Europe has dominated the global PV (photovoltaic) market for years but the rest of the world clearly has the biggest potential for growth," the European Photovoltaic Industry Association (EPIA) said in its market outlook until 2016.
The fastest PV capacity growth is expected in China and India, followed by the southeast Asia, Latin America, the Middle East and North Africa in the next five years, said the report distributed at a PV conference in northern Italy.
Global installed PV capacity, which turns sunlight into power, is expected to have risen to between 207.9 gigawatts and 342.8 GW in 2016, depending on the level of political support, from 69.7 GW in 2011, the report said.
This year, the world's total PV capacity is expected to rise to between 90 and 110 GW, EPIA's Secretary General Reinhold Buttgereit told the conference.
"The growth will depend on the support of politicians. It's not only about money, it's also about reducing bureaucracy," Buttgereit told Reuters on the sidelines of the conference.
Germany, the world's biggest PV market, is likely to be the main global driver this year, followed by China, the United States and Japan. The pace of growth will slow in Italy, which was the fastest growing solar market in 2011, he said.
China is expected to add between 3 GW and 5 gw this year with new annual capacity rising to 4.5-10 GW in 2016, while to a total capacity of up to 39.1 GW, while the U.S. total capacity is seen rising up to 37.1 GW in 2016, the report said.
Europe accounted for 75 percent the of new PV installations last year when the global added capacity nearly doubled to 29.7 GW on the back of generous production incentives, the EPIA said.
"Such a rapid growth rate cannot be expected to last forever, however, and the industry is now weathering a period of uncertainty in the short term," the report said.
Depending on the policy support, global PV capacity may add between 20.6 GW and 41.4 GW in 2013 and keep rising by between 38.8 GW and 77.3 GW in 2016, the report said.
Germany and Italy, the two biggest solar markets in the world, have decided to cut production incentives to solar power generation this year to reduce the burden on consumers who pay for subsidies with their power bills.
Incentives such as feed-in tariffs are the industry's lifeblood as long as solar power is more expensive than conventional forms of energy. But prices of solar equipment plunged in 2012 and are falling this year, prompting governments to cut support.
Germany is expected to see a slower but still steady annual capacity growth in the next five years with a total installed capacity rising to between 39.7 GW and 52.7 GW in 2016, while Italy is seen reaching a total of 23-30.8 GW in 2016, the EPIA said.
Despite robust global capacity growth forecasts, western manufacturers of solar power equipment are likely to continue to see margins squeezed by plunging component prices due to oversupply, growing competition from the lower cost Asian rivals and cuts in government support, conference participants said.
Prices along the entire supply chain are expected to fall by 10-15 percent this year after about 60 percent year on year falls registered in the first quarter of 2012, Stephan De Haan, PV analyst at IHS, told the conference.
John Andersen, executive vice president and chief operating officer of Norway's Renewable Energy Corp. (REC.OL) said sharp prices falls for solar equipment could not be sustained after bringing the manufacturing industry to its knees last year.
The crisis brought a wave of bankruptcies in the United States and Germany with Germany's Q-Cell QCEG.DE, once the world's largest maker of solar cells, filing for insolvency in April.
The crisis is expected to push more struggling companies out of business this year and could trigger a wave of mergers among small and mid-size companies willing to keep afloat, the conference participants said.
IHS's De Haan estimated the current manufacturing overcapacity for PV models at about 23 GW, or some 46 percent of the total modules production capacity.
Editing by Greg Mahlich and David Gregorio