One in Two Solar Firms Will Fail, Say Analysts

Half of the existing solar manufacturers may not survive through the end of next year, according to the market research firm The Information Network, as reported by DigiTimes.

The piece said Information Network chief Robert Castellano believes “massive inventory buildup and huge overcapacity” are having a serious impact on solar panel manufacturers. The industry is up to 122 days of inventory, from an average 71 days in 2008, he reports. Capacity utilization in the industry is down to 27.9%, from 48% last year.

A key issue, he contends, is increase supply from China.; as they have ramped up, ASPs have dropped to $1.80 per watt, from $4.05 in Q3 2008. And he expects the trend to continue, with more capacity coming on line as manufacturers seek economies of scale. The result, he thinks, will be worse conditions still: he expects inventory to stretch to 133 days next year, with utilization falling to 25.7%. ASPs, he predicts, could drop below $1 a watt next year, and to 50 cents a watt in 2011. If that happens, he says, up to half the more than 200 solar manufacturers won’t survive.

The piece notes that in just the last few weeks, solar companies that have reported losses included Energy Conversion Devices (ENER), JA Solar (JASO), LDK Solar (LDK), Q-Cells (QCSLF.PK), ReneSola (SOL), Solar Power (OTC:SOPW) and Yingli Green Energy (YGE).

Original post

Comments

[Zenfar:]

So getting the price down to grid parity is a bad thing? Still I would agree that not all 200 firms will make it, but for the ones that do, I would expect good things.

Sep 04 04:31 PM

[nolaig:]

20 billion solar subsidy will take a few quarters to work it's way through
the system, larger manufacturers that can produce and manufacture over 500mega watts are going to do well, 50-70% subsidy depending on location so that is going to be $35-40billion in sales.
Electric power plants produced 17,320 terawatt-hours (TWh) in 2005. In 2030, the world is projected to need about 33,264 TWh—nearly double the amount of 2005. (Source: 2008 EIA International Energy Outlook Report.)
so solar is going to be integral part of electricity production in the future and considering the extra amount of electricity needed i only see upside for solar for the future.

Sep 04 09:11 PM

[jerrydd:]

Some writers don't seem to understand either economics or energy.
As Zenfar said, the cost dropping will make huge markets open up for any of them with half way decent marketing departments.
The tipping point is $2/wt retail for panels. Once it gets there PV is viable in many areas except where hydro rules.
The PV makers who make panels/inverter/mountings plug and play for $3-4/wt retail will not only survive but thrive as the market ,1 of every 2-3 buildings/homes in the developed world, and many in the undeveloped world running on generators as it costs less than generator and fuel.

Sep 05 09:37 AM

[SubsidyEye:]

Eric: For future reference, the term is "economiEs of scale", not "economics of scale". (Or maybe it was your spell-checker's fault?)

Sep 05 10:29 AM

[Ferdinand E...:]

I see an upside for solar in the future too, but not the uppside that the
environmentalists claim is on the way. Solar has an important role to play on the energy front, but lets keep it in its place...please.

Sep 05 10:42 AM

[Snitzer:]

I kept FSLR on a watch list for while, but it was, for me, way too over priced. Then it nosedived, I dropped it, and the back stop reasoning is that solar has great future potential but not quite yet. The tech has to grow along with the grid before solar goes deep mainstream. It's time will come, but not for a few years yet, and it is not yet time to invest.

Sep 05 10:52 AM

[Road Runner:]

Please people, Eric is just accurately reporting the news here.

Though I am a big proponent of solar and I think solar is gong to be huge in 5 years plus, solar is going to have a very rough time in the next 1 to 2 years. That's just good analysis.

He gives us valuable information that warns us not to speculate with any of the smaller solar companies at this point, and I appreciate it. Just buy the large, well-run, and profitable ones or else risk getting burned.

Sep 05 11:07 AM

[Road Runner:]

nolaig, yes we all believe that solar is going to be huge several years from now, but what Eric is reporting is that solar is going to have a very tough time in the next 1 to 2 years.

On Sep 04 09:11 PM nolaig wrote:

> 20 billion solar subsidy will take a few quarters to work it's way
> through
> the system, larger manufacturers that can produce and manufacture
> over 500mega watts are going to do well, 50-70% subsidy depending
> on location so that is going to be $35-40billion in sales.
> Electric power plants produced 17,320 terawatt-hours (TWh) in 2005.
> In 2030, the world is projected to need about 33,264 TWh—nearly double
> the amount of 2005. (Source: 2008 EIA International Energy Outlook
> Report.)
> so solar is going to be integral part of electricity production in
> the future and considering the extra amount of electricity needed
> i only see upside for solar for the future.

Sep 05 11:15 AM

[chinooking:]

what is your position ,,do you own or are you short ,or just spouting steam?

Sep 05 11:15 AM

[HerrHansa:]

I would expect a few things to happen in the coming solar market. One which is already happening is cooperative manufacturing agreements between western solar innovators, and Chinese manufacturing facilities. The next thing I would expect is more M&A activity, possibly large energy companies picking up some solar companies, or solar companies combining to gain strength from becoming larger companies. Those solar companies with low cost, carefully controlled expenses, and unique technologies will be the best survivors in this, either as individual companies, or as part of larger companies.

There is also quite a lag from identifying a location, to installation of solar. Very large installations experience bureaucratic and regulatory hurdles. Smaller installations run into cost issues, or need subsidies and tax breaks to spur growth. All of this indicates that implementation of more solar is a very slow process; perhaps slower than some in the stock markets would like.

Disclosure: very long Evergreen Solar (ESLR)

Sep 05 01:30 PM

[rooferguy:]

Solar is an industry with lots of players in the value chain. The fact that there is an oversupply of modules only means that one part of the value chain will suffer (and I agree, the suffering will result in a lot of module manufacturers disappearing). Silicon suppliers may do well. Inverter companies should thrive. As much lower prices make the economics for customers very compelling, installers should do very well. The business is likely to take off when cheap, easy-to-install panels are available to electricians and roofers all over the country.

There is a great deal of price elasticity in consumer behavior. We're likely to see a sustainable boom in solar power installations starting next year when these lower prices filter down to residential and commercial customers.

Sep 05 05:04 PM

[RWCMom:]

Just an FYI. Xantrex, (which makes inverters for Sunpower) was purchased by Schneider Electric. If you want exposure to solar with fewer risks consider some of these multichannel companies. BP & Kyocera in panels. Applied Materials in panel manufacturing equipment, etc.

Disclosure: long on Sunpower

Sep 05 08:46 PM

[Jade Queen:]

Just think if the power delivered in Afghanistan were solar rather than fossil. We would not have had to look at kids with their legs blown off in the news. You take explosives into dangerous situations, and guess what you get? I suppose I'm baiting thumbs-down by saying this, but I can't help it anyway. I'm a confessed do-gooder who does not understand why we don't use our heads to win hearts and minds.

What's more Abu Dhabi still has a few bucks to burn and rather good solar exposure.

I'm long STP and SunPower. I have looked with very covetous eyes on those STP clear panels. So far, the thrifty part of me is winning over the style wanna-be, but my inner stylin' freak keeps jumping up and down and being distracting, so nothing's happened yet.

Sep 06 01:23 AM

[John Bowman:]

If there is an abundance of solar panels in the system, why haven't they dramatically lowered their prices to get rid of their inventory?

Per this link, I am noting a meager 10% drop in prices:
www.solarbuzz.com/Modu...

Sep 06 09:17 AM

[John Bowman:]

If there is an abundance of solar panels in the system, why haven't they dramatically lowered their prices to get rid of their inventory?

Per this link, I am noting a meager 10% drop in prices:
www.solarbuzz.com/Modu...

Sep 06 09:17 AM

[John Bowman:]

I have no idea how the above comment was posted twice.

Sep 06 09:54 AM

[Dopamine:]

Oerlikon OERL. VX , the Swiss Solar stock of choice has my money, give it 3 years and every German home will have solar power.

Sep 06 04:58 PM

[Road Runner:]

This is baffling. According to what I hear in the news, solar panel prices have dropped by 50% over the last year, but solarbuzz.com shows nothing close to that. ???


On Sep 06 09:17 AM John Bowman wrote:
> If there is an abundance of solar panels in the system, why haven't
> they dramatically lowered their prices to get rid of their inventory?
>
>
> Per this link, I am noting a meager 10% drop in prices:
> www.solarbuzz.com/Modu...

Sep 07 10:08 PM

[Mad Hedge F...:]

yuip. The solar industry is suffering some 19th century Darwinian style competition, with Chinese manufacturers Suntech (STP) and Yingli Green Energy Holding (YGE) clearly dumping panels below cost to gain market share. You may laugh, but I watched the Japanese pursue the same strategy in the seventies and eighties to devastating success. They now control half the US automobile market, and the most profitable half at that. As a solar consumer I shouldn’t care, as the 50% price drop has, with Obama’s generous tax subsidies, made new installations cheaper than obtaining electricity from my local power company (PGE) at 12 cents a kilowatt. It’s just a matter of booking the profit in China instead of Phoenix. But the predatory pricing has also kicked my beloved First Solar (FSLR) in the shins, which has dropped from 44% from $205 to $115 since May. Use the move to pick up FSLR on the cheap. The company is using advanced cadmium telluride based thin film semiconductor technology, which has enabled it to match the Chinese price cuts dollar for dollar, and the engineering will allow them to continue to do so. The Chinese, wedded to an older polysilicon product, can’t keep playing this game, unless they want to hemorrhage cash, or face US anti-dumping enforcement. To see more on the current fundamentals of solar, please click here.

Sep 08 11:10 AM