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Just as solar panel producers had ramped up production to meet the coming growth in demand for solar energy, the 2008 recession hit, causing demand to plummet and producers to cut back on production.
Dozens of companies had entered the solar panel market prior to the financial collapse, flooding the market with product in preparation for the coming solar boom; but before the boom could ever hit, regular businesses and utilities were forced to cut back on expenses, putting off solar panel installations, causing solar panels to begin stacking in warehouses.Solar panel producers simply could not turn off production fast enough, resulting in an oversupply of solar panels. The result has been that the price of solar panels has fallen significantly.
The two competing technologies in the solar sector are silicon-based and thin film cells. Silicon-based technology has higher conversion rates; these kinds of solar cells convert a higher percentage of sunlight into electricity, and because of this fact and input costs (silicon pricing), are more expensive than their thin film counterparts.
During the recession, thin film technology companies fared a little better than silicon-based firms because, although thin film converted less sunlight to electricity, the overall cost of their product was more digestible to cash-strapped businesses seeking to get ahead of the carbon-regulation curve. Across the board though, prices of solar panels fell to levels that had analysts wondering if businesses in the sector could turn a profit, but analysts are beginning to reassess that situation. "With the price of solar panels having fallen by between 20-30% this year, demand has picked up in recent months, prompting analysts to shift their forecasts." (businessGreen)
While initial analysis put the end of the solar panel glut somewhere in 2012 (greentechmedia), estimates are beginning to be revised. Quickly changing market conditions have caused the same analysts to now put the end of the glut in solar panels sometime next year. (Reuters)
"Solar-panel installations in Germany began surging to record levels in July as prices for photovoltaic systems plunged." In addition, Italy, France, and China have all seen an uptick in demand in the sector. No doubt, an international agreement in Copenhagen will also give solar panel demand a boost, especially in China. (PhysOrg.com)
"While analyst downgrades of solar stocks were common place through the middle of 2009, we have started seeing the ratio shift clearly to upgrades over the last few weeks." While the oversupply has caused solar panel prices to drop significantly in the past, new global emission regulations as well as an expansion of the solar market into China, India, South Africa, Brazil, and other developing nations, the oversupply is predicted to begin to balance itself with growing global demand. (Solar Feeds)
Until production of silicon-based solar cells increases though, polysilicon manufacturers will continue to see the price of silicon drop and an oversupply in their marketspace develop. "Over the next three quarters, (Soleil analysts) calculate, the amount of polysilicon available to the solar market is going to increase by about 70%. It is true that the poly market became snug in the third quarter due to a jump in seasonal installations, but (Soleil) adds that conditions will change in the 2010 first half as every major producer of polysilicon ramps new capacity.” This however could be good news for silcon cell manufacturers.
It is unclear though, if the ramping up of production will lead to a long-term oversupply in polysilicon. Depending on an agreement in Copenhagen, silicon cell manufacturers could see one of their best years in terms of increase in demand in 2010. Silicon-based solar panel manufacturers should use the first half of 2010 to renegotiate their contract prices, and be able to post substantial gains as demand picks up at the end of 2010 and into 2011.
As businesses recover more fully from the recession in 2010 and companies seek to prepare for the inevitable emission regulations of either the EPA, Congress, or the United Nations, solar installations will most definitely see an uptick. There is no clear indication yet if solar companies will be able to balance production with demand, though. If you add an agreement in Copenhagen, where emissions are capped and then lowered through successive years, then the low prices caused by the current glut of panels and polysilicon will be seized upon quickly. If the global economy recovers and an agreement is reached in Copenhagen, solar companies may find themselves in a position where they once again cannot keep pace with demand.
Regardless, it seems as though the solar industry has passed their most significant test. The conditions whereby the industry ramped up production to historic levels just as the recession hit should have run more companies in the sector into bankruptcy. The fact that many of these companies have held on is testament to maturity of the solar industry and their promise for healthy returns in the future.
