Henning Wicht, iSuppli’s senior director and principal analyst for photovoltaics market research, has become increasingly bearish on the photovoltaics industry due to the severe overcapacity throughout the supply chain. In a new report, Wicht projects that PV module production–which is still expanding–will reach a capacity of 7.5GW in 2009, however installations will only reach 3.9GW. This means that nearly half of all solar panels produced in 2009 will remain unsold and a massive inventory build will persist until 2012.
“The solar industry in 2009 has been undermined by collapse in demand due to the decision by Spain—which accounted for 50% of worldwide installations in 2008—to change its feed-in-tariff policies,” noted Wicht. “This demand drop led to a massive buildup of inventory throughout the supply chain, from the raw material polysilicon, to photovoltaic cells, to complete solar systems. Despite this, solar panel makers have continued to increase capacity and production, exacerbating the inventory build-up.”
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Module price declines have been more severe in the first half of the year than many PV manufacturers and observers had predicted. Many expected a decline in prices of between 10 and 15%, due to FiT changes in Germany and as a result of polysilicon price declines as overcapacity became apparent in the second half of 2008. Module prices could yet decline 25% for the year, should the inventory build continue, putting further pressure on pricing.
The long harsh winter in Europe and continued limited availability of credit to fund large-scale solar projects have further contributed to a period of weaker-than-expected demand in the major markets for solar. With the collapse of the Spanish market last year, coupled to the U.S. market growth not expected until 2010, the PV market is expected to decline in 2009.
Such is the level of overcapacity that Wicht does not expect the inventory to return to normal conditions until 2012. This will be helped by an eventual slowdown in PV module expansion plans. iSuppli’s updated forecast shows supplier production flattening for the years from 2011 through 2013, compared to its previous forecast.
The biggest change in production projections is in 2009. iSuppli previously projected production would reach 11GW, however, the cutbacks will see production reach only 7.5GW. Even so, this being forecasted shows a significant gap between supply and actual demand.
“Even in the face of the downturn, many panel and cell producers have continued to ramp up their capacities as if a recession had never occurred,” Wicht said. “Most companies are doing this in order to maintain their share in the market.”
The continued production expansion plans would seem to be primarily coming from Chinese-based producers. iSuppli said that they expect Suntech to become the number-one producer of crystalline cells in 2009, overtaking Q-Cells, which has reduced production plans because of the weak market conditions.
