How Government Killed Solar

It looks like the solar bubble is about to burst.

Bringing an end to eight consecutive years of growth, global revenue for photovoltaic (PV) panels is expected to drop by nearly 20 per cent in 2009, as a massive oversupply causes prices to decline.

Worldwide revenue from shipments of panels will decline to $12.9 billion in 2009, down 19.1 per cent from $15.9 billion in 2008, according to iSuppli Corp. A drop of this magnitude has not occurred in the last 10 years and likely has not happened in the entire history of the solar industry.

Now here is where the story gets good.

"Supply and demand were already unbalanced in 2008 with 100 per cent more modules produced than installed," said Dr. Henning Wicht, senior director and principal analyst, photovoltaics for iSuppli. "The short-term boost in demand from Spain and Germany kept installation companies busy and solar orders and module prices high. But this boom is over. In 2009, average prices for panels for new installation contracts will collapse to the $2.50 to $2.75 per watt range by the end of 2009, down from the current level of $4.20 per watt. The average price for the year will be $3.10 per watt."

Ironically, the oversupply and resulting pricing and revenue declines are the consequence of the overwhelming success of the solar industry.

"Due to the political impetus to save fossil energy resources, both for carbon dioxide emissions and to prepare the future energy infrastructure, solar demand has been booming,"

Get that? Solar is not an energy market. It is a political market. And once the political capital is gone the money dries up. The only way to make solar a real market is to get the cost below that of alternatives or provide advantages that outweigh the extra cost. Take solar garden lights. Their advantage even if they cost more than the alternative is ease of installation. But to move massive quantities of solar they are going to have to come down to the $1 a watt range - installed. That means cells costing 50¢ a watt. We have a ways to go for that. The nice thing is that we are now in striking distance, in the home stretch. It is no longer several orders of magnitude of cost reductions required. Just a factor of four or five. We will probably cover that ground in 5 to 15 years. Depending on whether we have to grind out improvements or we get lucky.

Ah. But all is not lost. Maybe an American politician will come to the rescue.

U.S. President Barack Obama on Wednesday (Jan. 28) met with business leaders to discuss the economic stimulus bill.

One member of the group, Mike Splinter, president and CEO of Applied Materials Inc., urged Obama to move full speed ahead on a push towards a ''green economy.'' This includes incentives for solar energy adoption as a way to create new jobs as the new administration seeks to jumpstart the slumping U.S. economy.

The $825 billion stimulus bill is expected to move ahead in the House, but Republican support is unclear. Applied is urging quick action on Obama's American Recovery and Reinvestment Act, especially in clean technology. Applied is the world's largest supplier of fab gear, but it is seeing huge growth in the solar segment.

I think he should have said "saw". With production better than 2 1/2 times demand I can't see the need for a lot of new production capacity at this time. And why does the government need to pour money into this technology? Because at current prices it is an unsustainable industry.

Cross Posted at Classical Values

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