The solar energy industry experienced the proverbial “perfect storm” of market-changing events in 2009 that redefined the rules of the game and therefore altered the competitive landscape as well.
Starting in late 2008, the solar market shifted from supply-constricted to demand-driven within a few quarters due to the plunging price of crystalline silicon cells and modules spurred by falling polysilicon cost, constrained availability of credit, Spain’s dramatic demand decline, and the growth of thin film supply and market share.
According to a new white paper from Pike Research, while solar demand will experience strong growth this year, these events have had a strong influence on which companies will lead the industry in 2010 and beyond and which will face low profit margins and possible consolidation.
“The solar market is now faced with a gross oversupply of modules,” says senior analyst Dave Cavanaugh. “The industry is currently supplied by more than 190 cell and module manufacturers, making consolidation of weaker competitors an inevitable outcome.”
Cavanaugh adds that, in the meantime, overcapacity and intense competition will create downward pressure for module average selling prices (ASPs), which will accelerate grid parity for the cost of solar-produced power to the 2013 timeframe in many markets.
A few of Pike Research’s other key forecasts and findings about the new solar market include the following:
- Worldwide solar demand, driven by lower costs and greater availability of credit, will increase to 10.1 gigawatts (GW) in 2010, a year-over-year increase of almost 43%.
- Solar market demand will exceed 19 GW by 2013, a 25% compound annual growth rate (CAGR) from 2010; this growth will be driven by demand from the United States, Italy, and China, in addition to steady demand from Germany and demand growth in a number of smaller countries.
- Excess module supply could easily reach 8.3 GW in 2010, even accounting for reasonable utilization rates and moderate capacity growth.
- In 2010 and beyond, the most important competitive differentiators for successful solar companies will be: (1) low cost per watt, (2) module efficiency, and (3) moving down the supply chain to provide “one-stop shopping”.
In residential solar, Akeena Solar (Nasdaq: AKNS) has inched farther down the supply chain than any other company, offering its DIY AC panels at Lowe’s stores in California. This week the company announced that it will move these panels–which it says are up to 25% more efficient than direct DC panels–under the well-known brand name of Westinghouse.
But Akeena will be hard-pressed to compete with South Korea’s Samsung and LG, both of which are making a huge push into solar panels and already have name recognition. Similarly, Japan’s Sharp (6753.T) is already manufacturing name-brand panels at low cost per watt.
These three major conglomerates have yet to make a big move into project development, but if/when they do, they are likely to offer tough competition for established solar firms like FirstSolar (Nasdaq: FSLR) and SunPower (Nasdaq: SPWRA) in the US and Q-Cells (QCE.DE) and SolarWorld (SWV.DE) in Germany.
A full copy of the white paper is available for free download on the firm’s website.
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