Solar Market Update

a guest post by Ken Whiteside, Director of Business Development at ONTILITY, LLC.

Solar Market Update

Whether or not the past year or two has looked like a slump in the solar energy industry depends on where you are in the supply chain. If you are a contractor, system integrator or distributor, business has been good. Dramatically lower solar panel prices helped drive demand. If you are a panel manufacturer, on the other hand, it’s been a different experience – one that’s important to observe.

Since 2008 solar panel prices have dropped from around $4/Watt to around $0.70 today. One of the forces behind that drop was a global oversupply. The module manufacturers had ramped up to meet an enormous demand in Europe. Then there was a recession – remember that? Solar in Europe took a deep dive. Solar panels piled up. At one point there was about 7GWatts worth of panels sitting around and an estimated 3.5Gwatts of demand. Something had to give – prices fell off the edge of the earth and that was all the U.S. market needed. There was pent-up demand, but price had been a barrier. With that removed, our solar market took off, in spite of that pesky recession.

And those ramped-up module makers? Well they started falling by the wayside. Plant closures, layoffs and bankruptcies. In 2012 alone there were more than two dozen bankruptcies among solar manufacturers, and there may still be a few more before this shakeout is over. Now, as we approach the end of 2013, with the help of some $205 billion invested in clean-energy projects in the past year, the oversupply has been mostly absorbed. According to Jenny Chase, lead solar analyst at Bloomberg New Energy Finance (a point of view echoed by other industry analysts), "The worst is probably behind us. We’ve just gone through a big trough in solar supply."

As evidence of both the downturn and the rebound, the benchmark BI Global Large Solar Energy Index of 15 manufacturers slumped 87 percent from a peak in February 2011 through November 2012. It has since regained 55 percent of its value.

With the absorption of the oversupply, prices have stabilized and even risen a bit lately. Panel makers are starting to talk about ramping up capacity again to meet anticipated demand. And price stabilization has made analysts more optimistic about solar shares in recent months. Thus, investors have rushed back into shares of the biggest panel makers even before they’ve returned to profit.

What does all this mean to those of us downstream from manufacturing? First, the shakeout eliminated many of the less well-run companies. Next, stable prices at a level where everyone makes a reasonable profit is healthy. Businesses can more accurately and reliably plan. Project budgets can be depended upon. As a result, business and property owners are more comfortable making investments because they see a more certain future. Will volatility go away entirely? Not likely. This is the energy business after all, but regardless of your perspective, 2014 looks like a very good year for solar.

Ken Whiteside photo Ken Whiteside has been a fan of solar energy for decades. His first hands-on experience was installing solar on off-grid houses around Telluride, Colorado in the 1990’s (summer in the San Juan Mtns. - somebody had to do it). From his home in Austin, Ken writes and works for widespread adoption of solar electricity, smart energy production and use, and sustainability.

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