Industry-wide solar crisis coming next year –- Thank you China!
The solar industry is at a critical stage and 50 percent of theexisting solar manufacturers may not survive 2010 according to thereport: Opportunities in The Solar Market For Crystalline and Thin Film Solar Cells, published by The Information Network.
“Iwrote only a month ago that massive inventory buildup and hugeovercapacity were having a serious impact on the solar panel industryand its manufacturers,” noted Dr. Robert Castellano, president of TheInformation Network. “To reiterate, inventory is averaging 122 days in2009 versus 71 days in 2008. Capacity utilization (amount of productioncapacity actually produced) dropped to 27.9 percent in 2009 from 48percent in 2008.”
For 2010, I “cautiously” anticipated that nonew additional capacity will be brought on board, maintaining 2009levels of 17,551 MW. This would bring capacity utilization to 35.4percent and reduce inventory to 96 days on average for all of 2010.That ideal scenario is represented in the table below.Source: The Information Network
Ifsolar manufactures went ahead and installed all the capacity plannedfor 2010, it would even worsen the outcome of the solar industry –- theutilization would decrease further to 26.8 percent and days ofinventory would increase to 127 days, as shown in the table.
Now,I am hearing that small solar panel manufacturers in China are planningto bring an additional 1 GW of panels to the market by the end of 2009,which we have learned based on manufacturing equipment purchases. Whileit represents an increase of less than 5 percent of the plannedcapacity, there are several implications.
1. China’s solarpanel manufacturers, exasperating the situation by adding morecapacity, are already dropping prices to $1.80 per watt forpolysilicon-based products, which is lower than the $1.85 level weprojected back in March for the end of 2009. By way of comparison, theaverage selling price in Q3 2008 was $4.05 per watt.
2. Becauseof economies of scale, whereby the more solar panels manufactured, thelower the cost to make them, other manufacturers will increase capacityto their planned 2010 levels in order to compete against the Chinese.We will now reach the last column in the table –- 25.7 percent capacityutilization and 133 days inventory.
3. Average selling prices could drop below $1 per watt in 2010 and $0.50 in 2011.
4.As many as 50 percent of the more than 200 solar manufacturers, miredin red ink with current selling prices above $2.00 per watt, may notsurvive.
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