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Rainy days ahead for solar market

Posted: 21 Apr 2009     Print Version  Bookmark and Share

Keywords:photovoltaic systems  PV industry  PV installations  PV supply 

A steep drop in sales for solar photovoltaic systems this year will create a shakeout, pruning back an overbuilt industry, according to market research group iSuppli Corp. Reductions in government subsidies in Spain—a big market driver last year—are a primary cause of the downturn, but the company projects a return to strong growth in 2011.

Global annual PV installations

Global annual PV installations (Click to view full image)

Worldwide installations of solar photovoltaic systems will decline to 3.5 gigawatts in 2009, down 32 per cent from 5.2 GW in 2008, according to iSuppli Corp. In addition, average selling prices per solar watt will decline by 12 per cent, leading to a 40.2 per cent plunge to Rs.90,488.93 crore ($18.2 billion) in global revenues for PV installations in 2009, down from Rs.1.52 lakh crore ($30.5 billion) in 2008.

"For years, the PV industry enjoyed vigorous double-digit annual growth in the 40 per cent range, spurring a wild-west mentality among market participants," said Henning Wicht, a principal analyst for iSuppli.

The growth attracted "an ever-rising flood of market participants," some of whom may not survive this year's steep downturn, he added. "The number of new suppliers entering and competing in the PV supply chain will decelerate and the rate of new capacity additions will slow, bringing a better balance between supply and demand in the future," Wicht said.

Earlier this month, an investment banking firm cut its outlook for several leading solar vendors amid falling prices and other issues in the sector.

Spain accounted for a whopping 50 per cent of worldwide PV installations in 2008 as installers tried to cash in on feed-in tariffs before a scheduled reduction in the subsidies. The country now has a cap of 500 megawatts on projects qualifying for the above-market tariff.

New and upgraded incentives for solar installations from nations including the United States and Japan will not compensate for the Spanish pullback, Wicht said. Excess inventory and falling prices for solar cells and systems also will not stimulate the market enough to overcome the downturn, he added.

The current financial crisis is also to blame for the solar downturn.

"Power production investors and commercial entities are at least partially dependent upon debt financing," Wicht noted. "Starting in the first quarter of 2009, many large and medium solar-installation projects went on hold as they awaited a thaw in bank credit flows." The downturn may be short lived. The market watcher predicts a 57.8 per cent increase in revenue in 2011 and similar growth rates in 2012 and 2013.

"PV remains attractive because it continues to demonstrate a favourable return on investment," Wicht said. "Furthermore, government incentives in the form of above-market feed-in-tariffs and tax breaks will remain in place, making the RoI equations viable through 2012.

"Cost reductions will lead to attractive RoI and payback periods even without governmental help after 2012," he added.

Declining system prices will open up new markets in the longer term especially in developing regions, he said. The company's latest report on the PV market is available online.

-Rick Merritt
EE Times

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