It stimulated many manufacturers to increase or start production of solar modules. The conclusion reached at the first Global Demand Conference back in 2007, was that the industry was already heading towards an oversupply situation. That was before the market boom in Spain, which made the industry even more enthusiastic. Production capacity was increased almost blindly as a result, with many believing there would be endless growth. But the solar energy market is still fully dependent on government support programs, and thus related to politics and elections. The new government in Spain halted the costly stimulation of solar PV. The result was a 40% decrease, or more than 2500 MegaWatts, of global market volume in 2009. While many other markets have reported continuous strong growth, none will be able to compensate this amount. Solar module prices are now being pushed downwards for three reasons: an oversupply of industry production, a smaller market in Spain and, on top of this, the global economic and financial crisis. The numerous new thin-film manufacturers that entered the market this year will have a hard time selling their freshly certified products. In the major markets such as Germany and Italy, buyers and investors, and in particular the financing banks, prefer well established product brands. The companies that are expected to remain in business are those with a proven track record and the ability to meet guarantees. Several of the new players see offering a low price as the best strategy to survive, and gain some market share. This will put even greater pressure on module prices. This phase in the market’s development will cause a few casualties among the numerous manufacturers, and lead to industry consolidation; but a stronger solar industry will emerge.
And there is light at the end of the tunnel. Module and system prices have decreased by more than 10% over the last few months - sufficient to compensate the reduced German feed-in tariff this year. Investment in solar energy in Germany became more attractive in 2009 compared to 2008. The German market is therefore likely to grow, and there is no doubt that it will become the world's largest market again in 2009.The market volume could reach 1900 to 2000 MegaWatts of newly installed power this year. And if module prices continue to decrease, the volume could be even higher as solar is one of the few safe investment alternatives sure to deliver a decent return on investment. The global solar industry will therefore remain highly dependent on development of the German market, where parliament elections take place later this year. The solar industry should be thankful to German tax-payers for keeping the industry alive right now. Continued government support will be required only for a limited number of years, however. The industry needs market volume to bring down costs, and for prices to reach 'grid parity' in several markets. At that moment, when the cost of solar energy equals the cost of electricity from the grid, government incentives will no longer be needed, and an endless road of growth opportunities will lie ahead.
Several governments recognize the importance of market stimulation, and have announced incentive programs. The most important ones are in the USA, Greece and China. There are also good signals coming from India. With a permanent power shortage, and the world's highest irradiation levels, India’s potential for solar energy, as in these other countries, is unprecedented. If module prices decrease further this year, and all indications are that they will, these markets will start to see a difference in sales volumes from 2010 and beyond. These few more years of necessary government support will be less than it would take to develop and build a nuclear power plant. Strong market drivers will then support further growth in a world longing for more, but climate-friendly, energy solutions. Solar PV can provide this solution, delivering independence and security in energy supply from an inexhaustible energy source. In a few years, conditions will have improved, with an expected recovery of economies, and a consolidated PV industry with strong survivors working on further technology improvements. If oil and gas prices increase once more, and the introduction of electric cars spurs the need for solar power even further, we will be close to the start of a solar revolution. At that point, tax payers and governments will start to be repaid with endless new business opportunities, jobs, and sustainable energy. All this could happen this decade. The solar future is closer than most people think.
SolarPlaza is organizing a top-level conference - "The Solar Future " - on 26 May 2009 at the Kempinski Four Seasons in Munich. CEOs and experts from the world's leading PV companies (such as Q-Cells, Suntech Power and Akeena Solar) and leading experts from industry and finance will be discussing the topics above.
SolarPlaza, based in Rotterdam, the Netherlands (www.Solarplaza.com) is the independent global platform for knowledge, trade and events for the photovoltaic solar energy (PV) industry.