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Solar Energy Will Survive, But Faces Some Tough Sliding in the Short Term

The good news is that solar energy will survive and flourish in the long term. The bad news it that it will be tough for many solar energy companies to survive the growing market glut, according to the new report from Lux Research entitled “Solar State of the Market Q3 2008: The Rocky Road to $100 Billion.”

The report on solar energy says the sector is likely to expand dramatically by 2013. On the other hand, a market glut in supply is likely to depress prices in the near term The oversupply problem will transform the solar industry, creating a market where sales grow dramatically, but it is increasingly difficult for companies to profit.

“As solar subsidies diminish over the next year, the current bonanza in which all players are winners will come to an end,” said Ted Sullivan, Senior Analyst at Lux Research. “We expect module over supply to occur early in 2009, and the resulting aggressive price reductions to trigger an industry shake-out, with the weakest players being acquired or failing. While falling prices will help stimulate continued demand growth, a booming supply build-out will mean that solar manufacturers will face margin pressures for years to come.”

To examine the solar market’s growth through 2013, Lux Research analyzed demand for solar installations across twelve key markets, three applications, and five key technologies, with demand driven by detailed economic viability projections for each of the technologies. These demand projections were matched to bottom-up supply estimates based on appropriately discounted announced capacities of all known solar manufacturers globally and new likely entrants. The report concludes that:

• Driven by aggressive capacity expansion and the increasing availability of polysilicon, the solar market will grow 48% annually through 2013, reaching 23 GW (GigaWatts), from 4.9 GW in 2008.
• Cuts to government subsidies and aggressive ramp schedules will push the market into over supply in 2009, when 7.9 GW of modules will be installed.
• Over supply in early 2009 will lead to significant average selling price declines. Thus, revenue will grow at a slower average growth rate of 33%, with the solar market reaching $100.4 billion in 2013, up from $33.4 billion today.
• The Spanish market will be limited by subsidy caps and the markets in France, Italy and Greece, will be slower to develop than expected.
• In Germany, which is the largest solar market today, years of strong investment in renewables such as solar and wind will push the market closer to the limits of grid infrastructure, which can only handle roughly 20% of intermittent renewable sources. As Germany approaches this cap in the next five years, growth will be limited to an average of 16% annually through 2013.