Solar bubble to burst in 2009 due to excess supply

Long Island Business News, May 9, 2008 by Marie Price

A new study forecasts a slowdown in the worldwide solar-energy industry over the next few years as supply outstrips demand.

A Lux Research review shows that oversupply of solar modules will hit next year.

The industry has been on an upward roll in recent years, fueled at least in part by tax breaks, subsidies and new investment.

Growth will continue to be robust, with revenue growing by 27 percent a year to reach $70.9 billion in 2012 - up from $21.2 billion in 2007 - but the industry will look different a scant two years from now, according to Lux's Solar State of the Market Q1 2008: The End of the Beginning.

Lux senior analyst Ted Sullivan said subsidies in countries such as Japan, Germany and Spain have helped make large-scale solar installations a reality, with annual installations reaching 3.43 gigawatts last year.

"During this period, solar demand has consistently outpaced supply," Sullivan said. "But the market is now approaching a tipping point. We project that the supply of solar modules will exceed demand in 2009, leading to falling prices and a shakeout among companies that aren't prepared to thrive in this new environment."

Sullivan said that is particularly true of crystalline silicon players that have not invested in new thin-film technologies.

Lux determined that in 2009 demand for solar installations will reach 8.96 gigawatts, but supply will overtake and pass it, topping out at 9.57 gigawatts. Researchers predict that supply will spike as the shortage of polysilicon for crystalline silicon photovoltaics begins to relax, inorganic thin-film photovoltaic capacity builds out and new high-concentration photovoltaic and solar thermal technologies gain a foothold.

Authored by Sullivan, the report forecasts that oversupply will persist through 2012, with demand reaching 20.3 gigawatts compared with supply at 21.2 gigawatts.

Lux Research sees a ramping down of government solar subsidies in some countries, with new markets like China and India introducing richer subsidies.

The report also notes that following the explosion of initial public offerings in the solar-power industry beginning in 2005, such IPOs dropped off in 2007, as total funds raised fell 40 percent from the 2006 level of $2.2 billion. About three-fourths of solar IPOs occurred in the last three years.

Lux Research is a technological research and strategy firm based in New York City.

(This article originally appeared in The Journal Record, Oklahoma City, Okla., another Dolan Media publication).