Has the Solar Market Finally Bottomed Out?

Posted by: Mark Scott on June 8, 2009

Predictions about when markets will rebound are notoriously prone to failure. But with that forewarning in mind, I want to pose a question: has the solar market finally bottomed out?

My answer would be no, but we’re getting close. Here’s why. On June 8, analysts over at Barclays Capital increased their estimates for global polysilicon production — the base material used in solar panels. They now expect 2009 levels to hit 90,359 metric tons, an 8.4% increase over previous estimates. Next year, BarCap now predicts production to top 138,563 metric tons, a 13.1% jump from earlier predictions.

The analysts also released global polysilicon demand forecasts, a key measure of market sentiment. A continued lack of short-term project financing means things still don’t look good: In 2009, demand will fall 25% annually to 4,454 MW worldwide. But next year, the figures are expected to rebound to 6,837 MW — a 54% increase over 2009, and well above last year’s number of 5,950 MW, which had been an all-time high.

So what’s leading the protracted resurgence in solar energy?

For one, demand in the world's major markets, particularly Germany and the U.S., is finally starting to pick up. Government backing for green energy has begun to open up project financing. Market participants anecdotally say banks now are willing to stump up cash for the most secure solar energy projects (those with the best sites and most efficient technology).

Another is the latent demand for polysilicon. When the market was at its peak, companies fell over themselves to investment in polysilicon production to tap soaring commodity prices. When the market tanked, prices tumbled -- bad news for polysilicon producers, but good news for companies that could take advantage of cheap polysilicon prices to make their solar equipment less costly. That, combined with technology improvements to increase efficiency, has made solar increasingly cost competitive with the likes of wind. As it has become more competitive, demand from customers also has picked up.

For sure, we're not out of the woods yet. Only last month, European solar companies Q-Cells and Solon both announced first quarter net losses, and made bearish projections for short-term demand.

But after solar energy stocks took a beating last year, appetite for the sector is returning. The share price of First Solar, the Tempe (Ariz.)-based solar energy company, has jumped 20% in the last six months, compared to a 45% drop between June and December, 2008. Even the decline in Q-Cells' stock has slowed since the beginning of the year.

So to the $64 million question: is the worst now behind the solar market? In the short-term (ie: into the third quarter of 2009), demand looks likely to remain subdued. But come the end of the year, the sun (Ed. -- forgive the pun) may finally return to the solar energy sector.

Reader Comments

Monica from ACCCE

June 8, 2009 3:46 PM

Why not consider clean coal technology?

A lot of people don’t know exactly what clean coal technology is, so I’ll fill you in: it refers not to any one technology, but to an entire suite of advanced technologies.

During the America’s Power Factuality Tour, we’ve been traveling around the country talking to the people who are behind the production of cleaner electricity from coal – including a stop at the Pleasant Prairie Power Plant in Wisconsin. They’ve installed a retrofit system that has reduced nitrogen oxide emissions by 90 percent and sulfur dioxide emissions by 95 percent.

In addition, through a pilot project in partnership with Alstom Power, they’re developing the latest in carbon capture technology. Check out http://sn.im/factuality5 to get the facts on clean coal technology once and for all.

Mike Sanderson

June 9, 2009 7:55 AM

Thanks for that relevant post Monica, its in no way an advertisement and addresses the article's main question directly.

Now... equally on point...

That is incredible news on the nitrogen oxide and sulfur dioxide emissions. That means that coal, through gassification or otherwise, now only produces infinitely more emissions than Solar. At least it keeps American subscription to the Coal unions high.

I agree that the US has a great resource in its coal reserves, with several states having more energy in the form of coal under their feet than does Saudi Arabi in Oil, however, coal's time has passed. The US also has a far greater resource - talented scientists and researchers who are now supported by an administration willing to invest in alternative energy.

Energy independence may un-handcuff the US from the Middle East but Energy Independence through investment and leadership in alternative energy technology is the only viable way for the US to return to its early 1900s position as a global energy leader.

Mark Scott -- BusinessWeek

June 9, 2009 8:17 AM

Monica's posting doesn't directly answer the question, but it does raise the eternal question about where energy investment should be targeted: on making mainstream resources more efficient/eco-friendly or on new technologies that still can't compete economically with the likes of coal/gas/nuclear.

As in all debates, there's no clearcut solution. Energy diversity, be that through renewables, clean coal, nuclear, or some other form of energy generation, seems to be the only way forward.

For sure, investment in solar, wind, tidal, and other green energy sources remains central to cutting global CO2 output and increasing energy independence. But other forms of generation -- particularly coal for the U.S., followed by natural gas and nuclear -- are still in contention. That's partly down to their size. The average coal plant, for instance, weighs in at over 800 Megawatts, compared to the average onshore windfarm at 200-300 MW, at a maximum. For now, conventional generation can more easily power the world's growing energy needs, but that may change once the likes of offshore wind become more cost effective.

Would be interested in getting people's thoughts: is it a case of picking renewables or coal/gas/nuclear? Can we pay for have both? Is there enough money to go around?

-- Mark Scott, BusinessWeek

Jordan

June 9, 2009 12:30 PM

I skimmed the article looking for a mention of NanoSolar, and didn't see one. I mention NanoSolar because its cost per kilowatt hour is cheaper than coal. Its a private company and it technology is not based off of silicon construction. Its the future.

sam

June 9, 2009 5:43 PM

You dont hear of Nanosolar because it is a sham. in the tech industry parlance, nanosolar is vaporware.

scott

June 10, 2009 9:57 AM

Solar and other clean technologies won't be cost effective until we are able to correctly value clean air, water and land....good luck on that.
You see "Free" markets all think clean air, water and land....are just that "free". If there was a cost attached to the after effects of "dirty" fuels, including the cost of defending Oil Pipelines, ill-will caused by alienating local populations by supporting Oil exporting dictators...oh I could go on, but what's the point. There is no "free" market for energy, it's all government, quasi government controlled to provide stability at the cost of freedom.
The REAL benifit of alternative energy is the lack of control by government and companies...individuals can create their own energy...and that is why we will never see it....it is not profitable for a big corporation, and it will be kept that way by economic ideas that refuse to value basic human necessities such as air, land and water.
Thanks for the space to rant my radical conspiracy theories.

Jonathan TE

June 10, 2009 5:13 PM

Monica from ACCCE: indeed, why not consider time travel technology? We could time-port CO2 to the far distant future and stop worrying about it!

Mark: my snark to Monica aside, you're right that it's not easy to identify a silver bullet, so some kinds of difficult decisions will need to be made. Still, the costs of retrofitting fossil fuel generation for carbon capture and sequestration are, as far as I know (which might not be nearly far enough!) so high that an equivalent amount of money invested in conservation, cogeneration, wind, solar, wave, and geothermal would get us much more bang for the buck. Really, it's quite possibly going to become a moot debate. If decent cap-and-trade legislation passes -- with a real cap that really decreases -- we should relatively soon find out what's more economical by happenstance. I'm sure industrial players will still endeavor to tweak policy here and there to promote their particular interests, but I doubt with even that that clean coal will come out as the winner from 20 years hindsight.

Sinan

June 11, 2009 4:41 AM

I second here Scott's rants. As he was saying of course, good luck on that!
But hey, that's the way economy functions; we gotta inflate bubbles, make profit, and eventually it bursts. With IT was it that way, now with ET will be the same for sure. So, get ready for the next big thing! My bet is solar, clean, abundant, and yes cheap when you correctly valued the oil and the coal and the nuclear. When the bubble bursts, though, we would have saved the carbon budget of the future generations.
Besides, gas stations are so 20th century, man ! C'mon, let's give a chance to EV and the entrepreneurs like Shai Agassi and may be you would be making tons of money without the shame.

Mark Scott -- BusinessWeek

June 11, 2009 6:09 AM

@ Jonathan TE

Your point about retrofitting is well-taken. I dug up a McKinsey report on CCS, and although it doesn't provide specific figures on how much retrofitting would cost (a lot depends on the size/age/location of a plant), it makes four points worth keeping in mind:

1) Retrofitting, no matter the plant, will be expensive and time consuming.

2) The limited lifespan of old plants makes the investment less cost effective.

3) Retrofitting cuts plants' energy efficiency.

4) The time it would take to upgrade plants would involve months -- if not years -- of lost generation as facilities are taken offline.

All is not lost, though. A lot of coal plants are in the pipeline in the short- to mid-term. It doesn't cost much more to future proof them (ie: prepare them for eventual CCS technology), so many think companies should focus on these plants, not trying to retrofit existing ones. Britain, for instance, plans to build only future-proofed coal plants -- an idea that could easily be copied by others.

Again, CCS isn't the only answer, but coal will probably remain a component of the world's energy mix for the foreseeable future.

Mark Scott -- BusinessWeek

Jonathan TE

June 11, 2009 1:35 PM

Mark: I realize that's how it'll play out with CCS, at least for the near future, but I think it's a bad move and poor policy, and I think it's entirely possible--technologically, economically, and manufacturing-capacity-wise, to pretty much replace coal with renewable generation in 15 years, plus or minus. However, my main sources are from books published by my employer, and I don't want to be an advertising troll, so my assertions will have to remain merely the opinion of just another random commenter off the streets.

Pat

July 20, 2009 9:58 PM

thanks for the article Mr. Scott,

I think you're pretty much right things will slowly trudge along, I expect a 1Q 2010 recovery. In the meantime I'm keeping my fingers on 2 factors. Prices dropping low enough for German projects to get 11% IRR, and Chinese policy towards solar power.
China produces the most PVs in the world but exports something like 90% of their PVs it produces because it doesn't enjoy the same benefits that wind power does. there's been some recent policy about encouraging the BIPV (building integrated PV), but until the National Development and Reform Commission puts it's weight behind solar, things will go the way you say.(those party cadres don't seem convinced yet on the economics of PV solar power).

In the meantime I will continue to bang my head against a wall. People working in green tech and are almost as bad as NGO workers or religious nut jobs. Their passion and beliefs seem to cloud their judgment.

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About

BusinessWeek correspondents John Carey and Mark Scott, cover the green scene, keeping on top of the business aspects of energy, the environment and climate change, as well as the technologies, policies, markets and people that are shaping how the earth's resources will be used in the century ahead.

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