Solar Market Declines for First Time Ever

By Ucilia Wang

SAN FRANCISCO -- Worldwide demand for solar energy equipment is set to drop about 17 percent in 2009, the first time the market has ever experienced a drop in demand, an analyst said Thursday.

Solar cell and panel makers are likely to sell about 4.6 gigawatts this year, compared with about 5.5 gigawatts in 2008, said Paula Mints, principal analyst at Navigant Consulting, at the Solar Energy Investment and Finance Summit in San Francisco.

Germany has been a bright spot in an otherwise dismal global market this year. With a still lucrative feed-in tariff that guarantees high solar electricity pricing, the country will account for about 56 percent of the demand in 2009, Mints said.

"We've vastly oversold in Germany, and they are not too happy about that," Mints said, adding that it's not healthy to have one country accounting for more than half of the global demand.

The German government had expected to see 1.5 gigawatts of new solar installations between Sept. 30, 2008 and Sept. 30, 2009. The country actually saw about 2.34 gigawatts during that time. The political coalition that won the federal election in September may cut the subsidies to rein in growth next year (see Germany Installs 2.34GW, FIT to Decline 9-11%).

The country has historically been a top market, but it has become a particularly attractive target for manufacturers and developers because they couldn't count on another year of explosive growth in Spain.

Spain, which installed more than 2 gigawatts of solar in 2008, or about 44 percent of the world demand, capped its solar incentive program at 500 megawatts in 2009.

Solar companies and project developers have expressed mixed views about what 2010 will bring. Sino-American Silicon Products in Taiwan told Reuters that its sales should increase about 30 percent in 2010. Applied Materials, which sells solar factory equipment, doesn't see clear signs that demand will rise significantly next year (see Applied Materials: Plans for Layoffs, Cautious Outlook on Solar).

Mints cautioned against overly optimistic forecast, noting that political leaders in Germany haven't said specifically how they might modify the incentive program. Solar companies have pinned their hopes on the United States as the next big market, but growth remains at a slow pace.

Global demand for cells/panels could be flat or grow by 10 percent in 2010, Mints said.

The supply still far exceeds demand, and that won't likely to change any time soon. In general, manufacturers are moving ahead with factory expansion plans despite the recession, particularly those who are betting that the U.S. market will grow quickly. Meanwhile, some companies have used only half of their factory capacities this year.

Companies that have announced plans to build new factories in the U.S. include SunPower (SPWRA), Suntech Power (STP), Clairvoyant Energy, Suniva. The Solar Energy Industries Association is now lobbying federal lawmakers for more tax incentives for manufacturers (see Solar Industry Lobbies for Manufacturing Tax Credit, Cash Grant).

Manufacturers who began planning for new factories before the financial market fell onto hard times last fall have since opened their factories. Those companies include SolarWorld (SRWRF.PK), Schott Solar and Sanyo (SANYY.PK).

"There isn't going to be much of a chance of an undersupply in the next few years," said Nathaniel Bullard, solar associate with New Energy Finance, at the conference.

Some manufacturers have already entered the power plant development market to create sales for their products. First Solar (FSLR) is a good recent example. The Tempe, Ariz.-based company purchased yet-to-be developed projects from OptiSolar for $400 million earlier this year to create demand for its solar panels in the U.S. market.

Comments

[sirfisup:]

What a ridiculous post!

The world economy just about when off a cliff and you have to rehash what most of the world already knows.

What drives me crazy is how dumb the author is in declaring that solar production is below 2008 production.

Its moronic to post such garbage when world financing when into the toilet.

Please find some other subject to write as your feeble attempt to tell all in the solar space that production is off from 2008 levels is just absolutely ridiculous.

Nov 13 08:36 AM

[danielchris...:]

I think the above post is a little over the top. Yes it's fairly obvious that the global economic downturn would have led to a drop in demand for solar, just like it's led to a drop in demand for many things, but a slump of almost 20 percent in a single year is pretty significant.

Knowing just how much the global solar market relies on German demand makes you realize how much needs to be done elsewhere. China firms are pumping out tons of solar equipment and are now looking to open up manufacturing plants in the US, which means America firms need to step up and stimulate demand for domestically produced solar.

It's nice to know companies like First Solar are starting to make progress, and its great to see articles like this giving them recognition.

Nov 13 09:08 AM

[123andy:]

Certainly obvious from the two comments posted that the story is not what they want to hear. Shoot the messanger while most of solar stock are sinking in the market. Wow Similar to the story on ethanol plants.

Nov 13 09:59 AM

[Robert Cast...:]

123andy you're absolutely right. In may Seeking Alpha article back in November 2008 "Six Reasons for Cloudy Skies on the Solar Energy Industry" I got beat up quite a bit by people in denial when I predicted the downturn in solar. No one would believe it.
In September 2009 I noted that as many as 50% of solar manufacturers may not survive in 2010. Again I got beat up. Look with happened this month as a few solar companies went out of business. It's just the beginning. Yet no one believes it.

Nov 13 10:14 AM

[jerrydd:]

Any solar company that can't sell $2/wt retail will die. Big subsidies are about over with just moderate ones that will remain.

But there is a huge market out there in home units. The Solar companies that go after that market with 1kw plug and play modules including panels, inverters and mountings at around $3-3.50/wt will make a fortune. Because no land, transmission line, overhead or stockholder cost and utilities doubling their costs, home/building units have paybacks in 35-40% of the time of solar/wind farms with pure savings after that.

In many locations they will have 1500kwhrs/yr or about $225/yr per peak kw. After 30% tax credit it will pay off in 4 yrs or less, depending on site. Then higher profit for 15+ yrs after that from increased electric rates,/costs/savings/s... profit. This is about 20%/yr+ investment profit. Hard to beat that on any investment.

So invest in your own units rather than a company. A combo of well done solar/wind can give a nice income boost by selling the power with wind running about $1.5k/kw.

Nov 13 01:14 PM

[adari:]

I agree with the posters who said this is mostly a non-story. The recession took it's toll on many industries in 2009. But solar demand is rebounding in the second half of the year. I also find the alarm over solar companies failing to be amusing. Of course a lot of the manufacturers are not going to make it. These are not the companies in which people should be investing. Companies like Trina Solar, for example, have bright futures and are excellent investments. Solar is here to stay - demand may wax and wane relative to supply as the industry matures, but long term it is only going to grow.

Nov 13 02:09 PM

[Road Runner:]

Keep preaching it, jerrydd.

All this talk about the short term troubles of solar, and how solar company consolidation is coming (which is natural when an industry matures) is clouding the fact that the few big solar companies left will have a great market in the coming years.


On Nov 13 01:14 PM jerrydd wrote:

>
> Any solar company that can't sell $2/wt retail will die. Big subsidies
> are about over with just moderate ones that will remain.
>
> But there is a huge market out there in home units. The Solar companies
> that go after that market with 1kw plug and play modules including
> panels, inverters and mountings at around $3-3.50/wt will make a
> fortune. Because no land, transmission line, overhead or stockholder
> cost and utilities doubling their costs, home/building units have
> paybacks in 35-40% of the time of solar/wind farms with pure savings
> after that.
>
> In many locations they will have 1500kwhrs/yr or about $225/yr per
> peak kw. After 30% tax credit it will pay off in 4 yrs or less, depending
> on site. Then higher profit for 15+ yrs after that from increased
> electric rates,/costs/savings/s... profit. This is about 20%/yr+
> investment profit. Hard to beat that on any investment.
>
> So invest in your own units rather than a company. A combo of well
> done solar/wind can give a nice income boost by selling the power
> with wind running about $1.5k/kw.

Nov 13 02:22 PM

[Road Runner:]

Not all solar manufacturers are affected by the world glut in solar product. SunPower will be capacity for the first half of 2010.

Nov 13 02:24 PM

[experienced:]

The views in the article are misleading. Solar depends in part on the price of alternatives. With oil prices on the increase, solar demand also increases.

Solar also depends on financing for the consumers. The arrangement made by SunPower with Wells Fargo, for example, gives SunPower an edge over competitors.

Finally, because solar still costs more than conventional alternatives, a certain amount of subsidy is necessary and justifiable in order to reduce carbon and related emissions. While Germany and Spain may not be interested in the degree of subsidy in earlier years, enough nations, including the U.S. have renewed their subsidies, preserving an adequate growth rate.

Nov 13 04:49 PM

[ldker:]

Ironic, but perhaps this article is a great contrarian indicator:

www.reuters.com/articl...

Nov 14 06:43 AM

[john s. gordon:]

wait & see how the carbon tax & cap&trade battle develops.
there will be an impact on the solar power business.
> jack

Nov 14 09:37 AM

[ART005:]

The never ending faith in residential grid-tie PV amazes me. I don't remember Robert Cast's article but 1.5 yrs ago I was the only one in an SA article saying LDK was not destined from $15 to $26, I suggested $10 for kicks, now I think it's $6. Look at some basic energy numbers: Coal power plants sell commercially at $0.07/kWhr and residentially at $0.085/kWhr. Nuclear costs less than $0.08/kWhr. Solar is still trying to break $0.15/kWhr, jerrydd's numbers are pretty good but he misses the point that the power companys will add to consumer's cost to use grid-tie PV and if you try to use batteries your cost for the batteries alone is over $0.25/kWhr. My residential power bill is $0.085/kWhr but my monthly service fee just went from $5 to $20/mo as a gov. subsidy for wind turbine installation. Wind turbines cost half as much as PV on a $$/kWhr basis. So my 100 kWhr/mo elec. bill is $29. That is almost $0.30/kWhr for power that my company 30 miles away pays $0.07/kWhr!! Basically I am being taxed $15/mo or half my bill to solve the illusion of global warming.

You can not produce grid-tie residential PV from a 3 kWp system at under $0.10/kWhr if the panels were free! Racks, cables, labor, inverter and such alone will break the budget!! Don't suggest hiding the cost in subsidies, it cost what it cost regardless of who is paying for it.

The whole residential grid-tie PV concept is based on lies with more lies. While you're clicking thumbs-down, keep this in mind: I own a solar water heater, geothermal heat pump, 1 kWp turbine, passive solar home, biomass stove and water heater, $4000 30+ mpg car, registered PE, my inventions are saving industry enough energy to run a small town. I live what I'm talking about, those of you getting your info from Google need to wake up to the lies! If you don't think lies on that scale are possible then read the gov.'s proposal for improving health care......

Nov 14 10:09 AM

[Windsun33:]

That is the single most common error in thinking about solar power. It does not displace oil, it displaces coal and to some extent LNG.


On Nov 13 04:49 PM experienced wrote:

> ...the price of alternatives. With oil prices on the increase, solar
> demand also increases.

Nov 15 01:35 PM