In these trying times for solar companies, things are about to get either much better or much worse. Two analyses of the solar industry, by NPD Solarbuzz and GTM research, paint a complex picture of future solar markets. Solarbuzz claims that photovoltaic (PV) supply and demand will equalize in 2012 while GTM believes the solar panel surplus will persist through 2015 with supply at 200% of demand in 2012.
The Solarbuzz study presents an optimistic view of the solar industry, claiming that the days of supply-demand imbalances are coming to an end. The company forecasts that solar module production, supply, and market-demand will come within 8% in 2012. This outlook is largely supported by recent commitments to solar energy in Asia. For Solarbuzz the introduction of feed in tariffs in Japan and the new installation target in China are signs of a large demand expansion that will absorb the surplus of solar panels.
According to the group's recent press release there will be more stability in the solar industry next year, after "two years of turbulent over-capacity, over-supply, and inventory build." Michael Barker, Analyst at NPD Solarbuzz, explained that "confidence in strong market demand during 2H'12, together with prudent capacity utilization, will provide PV market leaders with increased visibility ahead of 2013 strategic planning."
Barker believes that the supply-demand gap will narrow in 2012, but does not predict stable panel prices. Though silicon wafer prices will fall by only 10% in his opinion, non-silicon manufacturing costs will drop by as much a 50%, continuing to push solar panel prices downward. Solarbuzz adds that "leading Chinese c-Si manufacturers are expected to reduce module costs by over 40% during 2012, with upside for further cost reductions in 2013." All in all this implies that solar manufacturers will have to shift their focus from silicon to non-silicon cost reduction in order to stay competitive. As a result retail panel prices are expected to drop between 25% - 40%.
Green Tech Media's report, PV Technology, Production and Cost Outlook: 2012-2016, presents a much more pessimistic view of PV markets. The study predicts that the solar panel surplus will persist until 2015, when 21GW of manufacturing capacity will be retired. Unlike Solarbuzz, GTM does not foresee a narrowing supply-demand gap. The analysts estimate 2012 solar panel supply at 59 GW, which is nearly double the 30GW demanded globally. The view presented in the report is best expressed by Shyam Mehta, author of the report and Senior Analyst at GTM Research: "We are in a transitional time in the history of the market; the training wheels of subsidies are coming off, and the next few years will see the industry's first attempt to ride without support. Consequently, the next three years will be an extremely difficult period."
GTM's analysis agrees with Solarbuzz when it comes to manufacturing costs. Mehta writes that crystalline module manufacturing costs will drop to a minimum of $0.45 per watt by 2015 for Chinese Tier-1 suppliers. Thus both reports agree that price drops will be lead by Chinese companies such as Trina Solar, Yingli Green Energy, Jinko Solar and Hareon Solar. As we have seen recently in the solar energy industry, dropping prices are good for the consumer but also cause severe issues for suppliers. As Mehta said, "Most current PV manufacturers will have to take a long, hard look in the mirror and make tough decisions about their future role in the industry."
On the topic of technological innovation and panel efficiency, GTM's report is more optimistic. Mehta finds that crystalline silicon module efficiency will continue to increase in the coming years. In 2015, The average efficiency in 2016 will be 16.4%, up from the current 14.9%.
The vast difference between the two forecasts demonstrates the uncertainty surrounding the future of the PV industry. We are in a transitional period where any prediction is inherently speculative. Regardless of whether you think things are about to get a lot better or a lot worse for solar energy, the coming years will be a crucial and complicated time for the industry.
