Don't expect solar bloodbath to let up this year

Two solar companies file for bankruptcy, and a new report projects the 2012 solar market to stall. But there's a silver lining in the long view.

This week saw more bad news for solar suppliers, and financial matters aren't expected to brighten this year.

Germany's Q-Cells, once the largest photovoltaic cell maker, earlier this week declared bankruptcy, another in a growing list of insolvent solar manufacturers.

Meanwhile, solar project developer Solar Trust of America also declared bankruptcy, throwing the future of a few large solar power plant projects in California into question.

The culprit is all too familiar to solar industry watchers: the onrush of Chinese of manufacturers in recent years created a glut of polysilicon solar modules, which drove down prices and sapped profits from the market.

Is the bloodbath over? Not quite yet, according to a report released yesterday from Lux Research. In fact, the market will shrink further this year.

Lux forecasts that new installations this year will grow slightly to 26.9 gigawatts worldwide but industry revenues will drop to $92 billion, from last year's $110 billion.

Plummeting module prices isn't the only problem for solar manufacturers. Legislators in Germany, Spain, and other European markets are scaling back financial incentives in the form of feed-in tariffs, reducing demand.

"Broadly, the solar market's oversupply and bleak outlook concerning government incentives leave many questions for the future of the market," the Lux report dryly states.

Rays of hope

From the perspective of the residential consumer, the brutal economics of the solar industry means lower-priced products. Combined with financing products, such as solar leases, that sidestep the upfront cost of solar, residential systems continue to grow. The U.S. market, including both residential and commercial solar, broke the gigawatt barrier last year with 1.14 gigawatts installed and is expected to grow at double-digit rates.

The global market, too, grew at a healthy clip in 2011, which Lux estimates at 10.7 percent rate from 2010 to 2011.

Looking ahead, Lux believes revenue growth, and presumably profits, will return. Even though Europe installations are projected to slow, emerging markets, the Americas, Japan, and the utility segment will lead to a market rebound to 38 gigawatts globally in 2017.

On the technology side, polycrystalline silicon will remain but thin-film technologies, including cadmium telluride and CIGS panels, will compete on price.

In the immediate future, though, expect the story in solar to be more contraction and sliding revenues. Analysts have been saying for some time the industry is on an unsustainable path. Perhaps this time next year we'll see if it's found a more profitable one.

Photo: Ferropolis, Germany. (Q-Cells)

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