Economic and Technical Factors Create Winners and Losers in the Solar Cell Market

by: Robert Castellano

Several factors have converged over the past several months that will impact the solar cell market, according to a report Opportunities in The Solar Market For Crystalline and Thin Film Solar Cells, recently published by The Information Network.

We pointed out in a SeekingAlpha article on November 18, 2008 that there were troubling signs that were making the solar energy market cloudy. These included macroeconomic issues such as dropping oil prices, stronger dollar, and reduced foreign incentives and microeconomic factors such as lower silicon prices and excess capacity polysilicon and solar panels.

In the past four months, several additional macroeconomic factors are converging to create a unique opportunity in this market, but at the same time microeconomic factors are creating potentially big losers.

On the macro side:

  • The U.S. stimulus package will create incentives for solar implementation. However we pointed out in a March 18 release that the stimulus package must be used to create jobs in the U.S., not just supply money to U.S. residents to purchase solar cells made in China.

  • China’s stimulus package announced recently is to pay $3 per watt for solar installations, which equated to about 60% of the cost of a solar panel, with priority given for building integrated photovoltaic panels (BIPV).

On the micro side:

  • An oversupply of polysilicon is pushing prices of crystalline wafers below $5 Polysilicon that sold for $450/kilo one year ago has dropped to about $100 by year end and is continuing to drop to $50/kilo in the next 12 months.
  • Capacity utilization (amount of solar panels produced versus capacity is close to 50%).
  • Creative programs have been established to minimize up-front costs to homeowners. Companies such as SolarCity offer leasing programs to mitigate high initial solar rooftop purchases.

On the technical side:

  • Not only are polysilicon wafers getting cheaper, new advancements in ingot sawing from companies like privately held NanoSteel offer the ability to make wafers thinner with less sawing losses (more wafers per ingot).

The winners:

  • Consumers because of lower prices – we may see prices drop from $1.85 per watt this year to less that $0.50 in two years.
  • Chinese solar manufacturers because of subsidies.
  • Suppliers of BIPV because installation costs are lower.

The losers:

  • Polysilicon manufacturers because of excess inventory.
  • Thin film a-Si solar cell manufacturers on rigid substrates because of excess capacity, credit issues, and low efficiency.

Stock position: None.