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PV downturn to shape more mature supply chain

Posted: 23 Apr 2009 ?? ?Print Version ?Bookmark and Share

Keywords:photovoltaic industry? PV market? solar cell? chain supply?

The severe downturn global photovoltaic (PV) market could have a positive outcome for the worldwide solar industry, yielding a more mature and orderly supply chain when growth returns, according to iSuppli Corp.

Worldwide installations of PV systems will decline to 3.5GW in 2009, down 32 percent from 5.2GW in 2008. With the average price per solar watt declining by 12 percent in 2009, global revenue generated by PV system installations will plunge by 40.2 percent to $18.2 billion, down from $30.5 billion in 2008.

"For years, the PV industry enjoyed vigorous double-digit annual growth in the 40 percent range, spurring a wild-west mentality among market participants," said Henning Wicht, senior director and principal analyst for iSuppli. "An ever-rising flood of market participants attempted to capitalize on this growth, all hoping to claim a 10 percent share of market revenue by throwing more production capacity into the market. This overproduction situation, along with a decline in demand, will lead to the sharp, unprecedented fall in PV industry revenue in 2009."

However, the 2009 PV downturn, like the PC shakeout of the mid 1980s, is likely to change the current market paradigm, cutting down on industry excesses and leading to a more mature market in 2010 and beyond.

"The number of new suppliers entering and competing in the PV supply chain will decelerate and the rate of new capacity additions will slow, bringing a better balance between supply and demand in the future," Wicht said.

Spanish backlash
The single event most responsible for the 2009 PV market slowdown was a sharp decline in expected PV installations in Spain. Spain accounted for 50 percent of worldwide installations in 2008. An artificial demand surge had been created in Spain as the time approached when the country's feed-in-tariff rate was set to drop and a new cap of 500MW loomed for projects qualifying for the above-market tariff. This set a well-defined deadline for growth in the Spanish market in 2009 and 2010.

While the Spanish situation is spurring a surge in excess inventory and falling prices for solar cells and systems, this will not stimulate sufficient demand to compensate for the lost sales in 2009. Even new and upgraded incentives for solar installations from nations including the United States and Japanand attractive investment conditions in France, Italy, the Czech Republic, Greece and other countriescannot compensate for the Spanish whiplash in 2009.

The Spanish impact will continue into 2010, restraining global revenue growth to 29.2 percent for the year.

Beyond Spain, the PV market is being adversely impacted by the credit crunch.

"Power production investors and commercial entities are at least partially dependent upon debt financing," Wicht noted. "Starting in the first quarter of 2009, many large and medium solar-installation projects went on hold as they awaited a thaw in bank credit flows."


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