Solar-Power Equipment Prices Drop

REBECCA SMITH / Wall Street Journal 18feb2009

Prices for solar-power equipment are plummeting in response to an oversupply of modules and components from the more than 250 global manufacturers, providing a potential boon for local governments, utilities and others trying to roll out new solar-power projects.

A report by Lux Research Inc., a New York-based energy research firm, says global spending on solar power is expected to shrink by nearly 20% to $29 billion from $36 billion, this year over last. But the amount installed will decline only slightly, reflecting more favorable pricing for buyers. Juiced by government spending, such as the just-signed economic stimulus package, the solar-power market is expected to grow to $70 billion in annual investing by 2013.

Many major solar-power installations are moving forward and the drop in prices means that backers of these projects could get more for less. Los Angeles voters, for example, will decide on March 3 whether to approve a ballot measure that would authorize the city-owned utility to fund 400 megawatts of solar projects during the next five years. California has a goal of installing 1,750 megawatts of photovoltaic projects by 2017 and has already installed 322 megawatts through 2008.

Manufacturers of solar cells and modules have ramped up capacity recently as high energy prices have refocused attention on renewable energy. That has allowed some manufacturers to benefit from an economy of scale, which has also helped reduce prices.

However, manufacturers are expected to roll out more than twice the amount of solar productive capacity — an estimated 10.4 gigawatts — than the estimated market demand of 5.3 gigawatts, according to the Lux analysis.

The Lux analysis, titled "Finding the Solar Market's Nadir," concluded that cell and module prices have dropped by 25% lately and price cuts are radiating back up the supply chain due to excess inventory of finished goods. "Capacity additions among suppliers have created a version of mutually assured destruction for the solar industry," said Ted Sullivan, an author of the report. Many expect consolidation among the numerous manufacturers of solar-powered equipment that have sprung up recently. Eventually, he expects demand to soak up excess capacity, a trend hastened by price cutting.

Separately, an analysis of some 37,000 solar projects constructed in the U.S. between 1998 and 2007 found that costs dropped from $10.50 per watt of capacity in 1998 to $7.60 per watt of capacity in 2007. Most of that 28% decline was due to falling costs for components, like inverters, and labor but not for modules.

That's expected to change this year. Researchers at the federally funded Lawrence Berkeley National Laboratory, who wrote the report titled "Tracking the Sun," think module costs could plummet.

"It looks as though the next couple of years will have steep price declines for modules due to growing oversupply," said Galen Barbose, a research associate at the federal lab.

source: 19feb2009

Lux Research Predictions of
Solar Oversupply Become Reality

The Lux Research Analyst Blog 4feb2009

The fact that the solar module market has tipped, or is about to tip, into an oversupply situation - with more megawatts (MW) worth of modules produced than the market has demand for - has rapidly become conventional wisdom (even the canonical arbiters of conventional wisdom in the U.S. media, USA Today, and U.S News & World Report, have gotten into the act). This development isn’t news to Lux Research clients, however - we saw oversupply coming a year ago, in the report “Solar State of the Market Q1 2008,” writing that “Today’s shortage of solar modules will end in 2009.” More recently, the report “Solar State of the Market Q3 2008” noted that our updated projections showed that “oversupply at the module level hits earlier in 2009,” and “module oversupply in 2009 is more drastic,” as capacity ramps sped up and government subsidies were set to decline - both predictions that look to be playing out now.

The results for the solar industry have been predictable: module average selling prices (ASPs) have plummeted, the bubble in solar venture capital has popped, and weaker players are already beginning to drop out (see “The Great Solar Shakeout begins” from the January 15, 2009 Lux Research Solar Journal). While times are tough in the solar industry in the near term, falling module prices in particular will help to make solar energy more competitive, helping to drive costs closer to grid parity, and setting the stage for strong long-term growth. In the meantime, companies that have the capital to do so can buy in on the cheap - positioning themselves for success if they choose wisely. For more on where the best opportunities will lie, and how the global economic is exacerbating oversupply, look for an upcoming report from the Lux Solar Intelligence team.

source: 19feb2009