The price of main components of photovoltaic (PV) modules, especially polysilicon and microinverters, has dropped precipitously since the beginning of the year, forcing major makers of solar products to accept thinner margins. This drop in price, however, seems to be coming to an end as demand for PV once again rises.
The price of multi-crystalline silicon, or polysilicon, the main raw material of solar cells, dropped by 33% over the past year, according to Bloomberg. The drop in the price of polysilicon coincided with a drop in the price of microinverters, another main component of a solar PV module, which dropped to under €0.20/Watt, a 20% fall of factory-gate prices, according to Solar Industry Magazine.
The result of this drop has been a fall in company profits. Other situations proved more serious as several significant players filed for bankruptcy because they could not repay the debt they owed creditors. Both SpectraWatt, Inc, a solar cell maker and spin-off of Intel Corp., and Evergreen Solar Inc. have filed for bankruptcy since the beginning of August. According to another article on Bloomberg, the companies cited increasing competition from Chinese rivals and deteriorating prices in the solar industry; in fact, their "non-competitive production" resulted from manufacturing prices that could not compete with the low-cost manufacturing of its Chinese rivals who receive government and financial support.
The fall in the price of both polysilicon and microinverters is a result of the introduction of low-cost Chinese manufacturing companies and a fall in demand for solar panels in key markets such as Germany and Italy. In the face of economic difficulties, the Italian and German governments cut financial incentives to install solar panels, dramatically reducing demand for PV systems.
In addition, ninety thousand tons of polysilicon production capacity entered the market only in 2011; this expanding supplier base in the face of weakening demand forced companies to lower their product prices in order to stay competitive, according to FuelFix. The reduction in product price led to a reduction in profits that was too large for certain companies such as SpectraWatt.
There is, however, a bright side to the price drop. Reuters reports that Solar Millenium AG, the company behind what will be the world's largest solar power plant, recently said it would use solar PV technology instead of solar thermal in the power plant because of the reduction in the price of solar panels. The first 500 MW of the 1,000 MW of the power plant, which will be constructed in the Mojave Desert, will be converted to PV because the California market now favors PV modules to solar thermal systems. In particular, the price of PV modules has dropped by half since 2008, including a 25% drop since the beginning of 2011. The technology used for the second half of the project will be decided at a later date, according to the Reuters' report.
This is the first evidence of a solar rebound. The price of solar modules has fallen to levels that once again make it economical to install panels, according to the Bloomberg report. The microinverter industry has reported an increase in inverter shipments by more than 40% since the first quarter of 2011, and SMA Solar Technology, the market leader, has increased its share by 8% in the second quarter, says the Solar Industry Magazine. The price of polysilicon rose for the first time this year in August, curbing the price drop in 2011 to 33%; from $51.17/kg in July, the price rose to $51.96/kg in August, according to Bloomberg.
The demand for solar modules has turned around, reflected by a rebound in the stocks of solar manufacturers. According to the Bloomberg article, Meyer Burger, for instance, gained 16% since the beginning of August and SMA Solar Technology CEO Pierre-Pascal Urbon predicts a stabilization of system costs by the end of the year. The pressure on prices for both inverters and polysilicon will likely continue to be felt, but the renewed demand for solar modules marks a turnaround in industry fortunes.