The solar energy industry experienced the proverbial “perfect storm” of market-changing events in 2009 that redefined the rules of the game and therefore altered the competitive landscape as well.
Starting in late 2008, the solar power market shifted from supply-constricted to demand-driven within a few quarters due to the plunging price of crystalline silicon cells and modules spurred by falling polysilicon cost, constrained availability of credit, Spain’s dramatic demand decline, and the growth of thin film supply and market share.
According to a new white paper from Pike Research, while solar demand will experience strong growth this year, these events have had a strong influence on which companies will lead the industry in 2010 and beyond and which will face low profit margins and possible consolidation.
“The solar market is now faced with a gross oversupply of modules,” says senior analyst Dave Cavanaugh. “The industry is currently supplied by more than 190 cell and module manufacturers, making consolidation of weaker competitors an inevitable outcome.”
Cavanaugh adds that, in the meantime, overcapacity and intense competition will create downward pressure for module average selling prices (ASPs), which will accelerate grid parity for the cost of solar-produced power to the 2013 timeframe in many markets.
A few of Pike Research’s other key forecasts and findings about the new solar market include the following:
* Pike Research forecasts that worldwide solar demand, driven by lower costs and greater availability of credit, will increase to 10.1 gigawatts (GW) in 2010, a year-over-year increase of almost 43%.
* The cleantech market intelligence firm also anticipates that solar market demand will exceed 19 GW by 2013, a 25% compound annual growth rate (CAGR) from 2010; this growth will be driven by demand from the United States, Italy, and China, in addition to steady demand from Germany and demand growth in a number of smaller countries.
* Excess module supply could easily reach 8.3 GW in 2010, even accounting for reasonable utilization rates and moderate capacity growth.
* In 2010 and beyond, the most important competitive differentiators for successful solar companies will be: (1) low cost per watt, (2) module efficiency, and (3) moving down the supply chain to provide “one-stop shopping”.
Pike Research’s paper, “The New Solar Market”, examines the new competitive differentiators that will determine success for solar companies following the market upheaval of the past two years.
The report analyzes the market dynamics and implications for key companies associated with module oversupply and a large number of competitors, and provides insights on the importance of cost per watt, module efficiency, supply chain integration, and other key factors.
This study also includes detailed quantitative analysis and forecasts of solar market demand and module manufacturing capacity. A full copy of the white paper is available for free download on the firm’s website.
This is the key finding of the report entitled The New Solar Market, published by US Pike Research to look into the international evolution of this industry after the 2009 recession.
According to Pike Research, excess module supply could reach 8,300 MW in 2010, so that it’s inevitable that a consolidation will take place in this industry (weaker companies will by stronger ones), which currently includes approximately 190 cell and module manufacturers.
In order to survive, companies must therefore focus on three differentiators: lower price per watt of modules in order to achieve greater efficiency and creating a good relationship with customers.
Oversupply and strong competition will lower the average selling price of modules which will – already in 2013, according to Pike – reach grid parity in at least 50% of local markets worldwide.
According to Pike’s estimates, lower costs and greater availability of credit will increase worldwide demand this year to 10,100 MW, with a nearly 43% increase compared to 2009. In 2013 the demand will reach 19,000 MW, with an average annual growth rate of 25% over the period.
The markets with the highest growth rates are Italy (+10% in 2010), the US (+8%) and China.