Solar panels prices have kept marching lower this year, extending steep declines seen in 2011 and keeping pressure on hard-hit manufacturers who have struggled to eke out profits, industry experts said.
Average selling prices for the photovoltaic modules that turn sunlight into electricity have dropped to 80 to 85 cents per watt, a decline of more than 10% from levels recorded at the end of 2011, a year that saw prices fall by about 50%.
Those price drops have helped boost solar sales and made solar power less dependent on subsidies to compete against fossil fuels. But they also have virtually erased profits at the major manufacturers.
Demand to flatten
Global demand for solar panels grew by about 40% last year, but excess manufacturing capacity has created a glut of supplies that forced companies to slash prices.
That glut has come as subsidies have declined in Germany and Italy, the two biggest markets. Analysts have forecast total market demand will be near steady with last year’s levels around 27 GW.
“I think that the difficult period is apt to last for a couple more quarters at least,” said Rob Stone, analyst with Cowen & Co in Boston.
Steady growth in solar panel demand over the last decade has attracted many large conglomerates to the industry, such as Japan’s Kyocera and Korea’s Hanwha Group, which entered the market with the purchase of Solarfun Power in 2010.
Those conglomerates have been hurt by the steep drop in panels, but have strong financial positions and are likely to hold on until the market consolidates around a smaller number of companies, unlike the Chinese players, who are carrying heavy debt loads.”Most of the competitors, these standalone companies, they don’t have any backup,” Hee Cheul Kim, president of Hanwha SolarOne, told reporters on Thursday.
“I don’t think they will survive with the cash-constrained environment for more than three years. That is why I’m expecting restructuring of the industry.”
Earlier this month, Germany’s Q-Cells, once the world’s largest solar maker, filed for insolvency. That followed last year’s demise of Solon AG. Several small U.S. companies have also folded, including Solyndra, whose collapse triggered sharp political criticism of U.S. government support for the industry.
Race to cut costs
The persistent pricing pressure has prompted Chinese solar companies to reverse their strategy of seeking to control production of polysilicon wafers in-house, and instead buy those wafers from lower-cost producers.