Analyst: PV industry to “mature” thanks to downturn

April 21, 2009 – While the PV industry, along with many others, is handwringing over the current severe downturn, it may in fact be just what is needed — thinning the herd and rebalancing production and capacity to demand, according to a new report from iSuppli.

2009 looks to be ugly for photovoltaics, by iSuppli’s calculations: Worldwide installations of photovoltaic systems are expected to decline 32% to 3.5GW, sales down ~40% to $18.2B, and average price/solar watt down 12% (see figures). That’s after several years of enjoying ~40% annual growth, which had drawn a “flood of market participants” with a “wild-west mentality” of throwing production capacity into the market, according to Henning Wicht, senior director and principal analyst for iSuppli, in a statement.

But in 2009 that bill comes due, in the form of overproduction combined with a decline in demand — Wicht likened the environment to the “PC shakeout of the mid-1980s.” A big culprit is Spain, which accounted for half of worldwide PV installations in 2008, but is set to expire a feed-in tariff and institute a looming new cap of 500MW for PV projects. A surge in excess inventory and falling solar cell/systems prices won’t spur enough demand to make up for lost sales, Wicht says. “Even new and upgraded incentives for solar installations from nations including the United States and Japan — and attractive investment conditions in France, Italy, the Czech Republic, Greece and other countries — cannot compensate for the Spanish whiplash in 2009,” he writes.

Global annual PV installations, 2008-2013. (Source: iSuppli Corp.)

Another obvious scapegoat is the current macroeconomic climate. “Power production investors and commercial entities are at least partially dependent upon debt financing,” he notes. Right now, many larger solar installation projects are going on hold, awaiting a thaw in bank crediting.

But beyond this year, the future looks bright for the global PV market. Fewer new suppliers will pop up, capacity additions will slow, and the PV market will take a big step toward maturity as supply and demand return to balance. Wicht projects a ~58% increase in revenues in 2011, “and similar growth rates in 2012 and 2013.” Government incentives such as above-market feed-in-tariffs and tax breaks will continue to spur demand, and as costs come down ROI for PV systems will become clearer, even without government subsidies. Lower system prices will have the biggest impact in developing regions, he noted.

Global revenues generated by PV installations, 2008-2013. (Source: iSuppli Corp.)


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