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Solar market suffers in the face of lost incentives and the recession

Post Time:Oct 27,2009Classify:Industry NewsView:161

After experiencing a boom during 2004-08, the worldwide solar industry is suffering a downturn in 2009 and will remain soft for several years, according to Paula Mints, principal analyst, Navigant Consulting, PV Services Program, Palo Alto, Calif. Mints delivered the Market Overview seminar Oct. 27 during the first day of the Solar Power International Conference that runs through Oct. 29 at the Anaheim (Calif.) Convention Center.

“Currently, the solar market is very soft, and not just because of the recession and lack of financing. It’s weak because 41 percent of the [2008] solar market—Spain—went away in 2009, because the government capped the market,” Mints said, referring to the Spanish government'ssubsidy limits on solar. “Solar has the problem of being incentive driven. It’s empirically unsteady.”

Between 2004 and 2008, the solar industry experienced a 51 percent compound annual growth rate, an unsustainable pace of growth, Mints said. During 2008, most of the solar supply came from China—close to 40 percent—31 percent from Europe and 7 percent from the United States. Forty-one percent of the demand in 2008 came from Spain, with Germany at 32 percent. With Spain out of the demand market in 2009, Germany captured 56 percent of demand. “In 2009, for the first time we’ll be shrinking as an industry,” she said. “It’s going to be a couple of years before we recover.”

The German governmentis alsoconsidering capping its solar market in 2010, Mints said. “If Germany makes a change, caps its market, other governments will take heed,” she said. “We need to develop new markets. It’s crucial. We don’t have control, the governments do. What will drive us forward is new business models that make creative use of incentives.”

Now that the boom is over, prices have dropped considerably—some as low as 50 percent, but most between 30 and 40 percent. However, Mints doesn’t expect prices to continue to fall, as the industry can’t sustain the prices as they are, with “razor thin” margins.

“During the boom, companies could sell anything at any price. Now when things are bad is a perfect time to establish a premium for high efficiency, technical revenues,” Mints said.

The industry has overbuilt its capacity, Mints said, and in 2009, manufacturers will be running at 49 percent capacity. “Any manufacturer knows, if your capacity is sitting idle, it’s costing you money,” she said.

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