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Solar Panel Prices to Fall by up to 40 Per Cent by Year End
Joe Romm, 25 Feb 09
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The long-awaited drop in prices for solar photovoltaics (PV) appears to be close at hand. Soaring demand for PV and high prices for silicon have kept PV prices up for the past several years, but had two beneficial impacts:

  • Producers ramped up polysilicon production
  • PV companies pursued designs with less silicon.
  • The result is that Business Green reports:

    The price of solar panels could fall by as much as 40 per cent by the end of the year as huge increases in polysilicon supplies lead to a sizable fall in production costs for solar panel manufacturers.

    Analysts have been predicting this price drop for a while [– I had heard this prediction at a climate solutions summit in January 2008].

    If this drop does materialize, it is quite a big deal and will help keep demand on its staggering growth rate with PV becoming one of the largest job-creating industries of the century, projected to grow from a $20 billion two years ago to a $74 billion industry by 2017 (see “Sharp to boost thin film solar capacity 6-fold to 6000 MW by 2014, U.S. hits snooze button“).

    Here’s the rest of the story:

    That is the view of industry analyst New Energy Finance, which is predicting solar module prices could fall by between 30 and 40 per cent as a result of recent investments globally to increase production of silicon.

    Polysilicon prices hit a peak of $400 per kilogram last summer, but as investments to increase capacity have come online, prices have fallen to between $30 and $40 per kilogram and experts are agreed they are likely to continue dropping.

    “A massive increase in silicon supplies is coming through at the moment that will lead to a fall in solar module prices,” predicted Angus McCrone, chief editor at New Energy Finance. “In one way it’s bad news for solar companies because it will put pressure on margins as prices fall, but in another way it will trigger lots more demand from both large solar project developers and consumers as well as from businesses installing rooftop panels.”

    The predictions come as a consortium of China-based solar firms called on the Chinese government to lower the allowance it offers by 75 per cent. The companies said that with the industry benefiting from falling polysilicon and production costs the government should cut the incentives it offers in an attempt to encourage officials to authorise more large-scale solar projects.

    Underlining this bullish outlook, China-based solar panel manufacturer Suntech Power Holdings announced an upbeat outlook for the year, estimating that demand from the US could reach 700MW during 2009 as a result of President Obama’s new stimulus package, and confirmed it was on track to begin shipping thin film panels in the second half of the year.

    The company’s confidence that demand throughout 2009 would continue to expand was echoed by a raft of other developers last week as Sun Well Solar announced it completed its first 40MW thin film solar cell production line ahead of schedule, and T-Solar confirmed it had begun volume production of what it claims is the world’s largest PV panels at its factory in Spain.

    Moreover, US solar panel installation specialist Borrego Solar Systems announced it was to expand its commercial and government sales and installation business in a move that has also seen it sell its residential arm to Vermont-based groSolar.

    However, the outlook for the industry is not entirely rosy with Suntech’s share price slipping two per cent following the release of results showing it posted a net loss of $65.9m during the fourth quarter, while seeing revenue climb just four per cent year-on-year to $414.4m.

    Analyst ThinkEquity Partners downgraded the company’s stock, citing fears that tightening capital conditions and weak demand from Europe would impact overall demand, while any boost from Obama’s stimulus package would take time to be felt.

    McCrone said that SunTech and other solar firms were being impacted by wider stock market concerns. “There are concerns about financing and falling margins for some solar companies, but you also have to remember we are in a bear market, so companies are not getting much reward even when they come up with pretty good results.”

    There were also the first signs that falling polysilicon prices will eventually level off after Chinese polysilicon wafer manufacturer LDK Solar announced it was delaying plans for a new factory until 2010, as a result of plummeting prices.

    This piece originally appeared on Joe Romm's blog, Climate Progress

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    I have to wonder if this is more of a curse than a blessing to the industry and even the movement at large. Unlike wind energy production, solar power has not achieved a stable, global acceptance, remaining a young industry close to the cutting edge. Although a record of new solar power was installed in 2008 it is dwarfed by Wind energy's additions to the grid.

    Aside from a handful of companies (Suntech, First Solar) Solar companies are not known for profitability or incredibly high margins to begin with. While costs for expansion and R&D are high the boom of the market over the past few years helped bring in margins and financing to build support for young companies. Subsidies and high prices might have been a better recipe than crashing prices, tight lending and more federal spending. Some consolidation in the business is healthy, but we can only hope that a turn around can keep this downtrend to a couple of quarters and not force too many small companies into more than they can get out of.

    Posted by: T. Caine on 25 Feb 09

    Even at 2008 prices, PV panels were cost effective for certain applications here in the US WITHOUT any grants, rebates, subsidies, or tax credits. Specifically, manufacturers of solar lighting systems like Sol, Inc (full disclosure - I'm the CEO) enjoyed record growth as Fortune 500 companies, municipalities, outdoor advertisers, and the Federal Gov't purchased lots of solar powered lighting. Why? Primarily for applications where the costs for electrical trenching and/or connections helped make solar lights close to the cost, or in some cases, LESS than the cost of conventially wired lighting. And as PV panel prices fall, I expect that the economics will swing even more in favor of solar lighting for a growing # of applications.

    And that will be a great thing :)

    Posted by: R Schuett on 26 Feb 09

    I have been waiting for panels prices to fall for years so that I can double the number of panels on my roof. However, I am afraid increased demand created by US incentives will keep prices level. It might be argued attractive incentives in Spain and Germany affected prices in the last few years.

    Posted by: V. LeCount on 27 Feb 09

    this can only be good news for the end consumer surely. and as more people install solar, the more the industry will grow

    Posted by: solar man on 27 Feb 09

    I hope folks won't delay new installations and wait around for prices to drop (as one reader suggested he already has -- not that I blame him). Any chance vendors will cut prices proactively? Can we keep this a secret?

    Great site, thanks.

    Posted by: Jim Welke on 8 Mar 09

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