Growing Gap Between Supply and Demand Means Solar Industry May Hit Hard Times

The growing gap between supply and demand anticipated over the next few months could hit the solar industry hard. Since the solar industry is still largely dependent on government support and/or incentive schemes, demand is extremely vulnerable to changes in these schemes.

The Spanish government is still having discussions about a new feed-in tariff for 2009-2010, based on proposals for a cap on new installed power of 300 MWp. This would reduce the installed power in 2008 by at least 75%. In Germany the feed-in tariff will decrease by 9%. The US market is still waiting for the tax credit to be continued in 2009. With no certainty about incentives, growth in system sales could slow down at the end of 2008. Markets with a solid feed-in tariff structure, like Italy, France and Greece, are growing rapidly. The installed power in Italy is increasing exponentially, and figures for France and Greece will also be excellent over the coming years.

But are these relatively new and small markets capable alone of offsetting the slowdown in demand from Spain?

These dynamics will have a substantial impact on the solar industry. To remain competitive, manufacturers will have to lower their prices. It appears that this price drop could be possible in the medium term, as the UK-based New Energy Finance forecasts that contract silicon prices could fall 67% by 2013. But will manufacturers be able to drop their prices in the short term? Which companies will survive the oversupply situation and which companies won't? And, more importantly, which are the biggest potential growth markets in the short term and what is the best strategy for tackling the imminent situation?

Additional background information on market demand can be found in a free market report recently released by Solarplaza.

To further analyze the market situation, and discuss how to benefit from it, Solarplaza is organizing an international solar expert conference, "Demand Dynamics in the Major PV Markets: Where Do All the Modules Go?". This one-day event will take place on 2 September in Valencia (Spain), during the 23rd European Photovoltaic Solar Energy Conference and Exhibition (1–4 September 2008).