Here’s an interesting take on what’s going on in the solar industry. According to Credit Suisse: “Stable, but much lower [polysilicon] pricing from [the second quarter of 2010] will pull in the mythical grid parity in several global markets to [the second half of next year], triggering demand elasticity.”
In non-analyst speak, that means tumbling polysilicon prices next year, coupled with an oversupply of other solar materials, could bring prices roughly inline with conventional energy sources, such as coal and natural gas. That’s already the case in certain regional markets, and could lead to growing demand from utilities/end-consumers looking for cheap renewable options.
Yet before we call the bottom of the solar market, researcher iSuppli reckons the massive oversupply of solar materials, particularly panels, won’t be corrected until 2012. An Aug. 10 report says:
“Total solar panel production in 2009 will grow by 14.3% to 7.5 Gigawatts (GW), up from 6.5GW in 2008. However, only 3.9 GW-worth of installations will take place this year. That means almost one out of every two panels produced in 2009 will not be installed but stored in inventory.”
And according to iSuppli’s Henning Wicht: “This inventory glut will have a long-term impact on the solar business, with panels set to remain in a state of oversupply until 2012.”
So how should to interpret the reports? First, the cost of solar will likely drop significantly in the short- to mid-term. An oversupply of materials and buyers’ apprehension, despite tumbling prices, should dampen costs in major markets, like the U.S. and Germany.
Second, the price correction could lead to a shake-up in the industry. Consolidation already has begun, with companies moving up and/or down the supply chain to protect against violent price swings. If volatility continues, expect large, well-funded firms (particularly those from/based in China) to profit over smaller rivals.