Dr. Robert N. Castellano, The Information Network
NEW TRIPOLI, USA: The speculators (in my opinion) are at it again in the oil market. The world economies are inching up out of the quagmire and oil is at an 18 month high. I don’t get it! Nevertheless, this is going to have big implications on the solar industry. High oil prices will be an impetus for solar energy and other renewable energies to replace traditional energy.
As the readers of this column are aware, I have been down on the solar industry for some time, primarily because of the excess capacity of the solar manufacturers and the fact that governments are broke and subsidies are lacking.
I am particularly negative about the amorphous silicon solar cell manufacturers. I pointed out in a February 16 article on TheStreet.com that many are in trouble. After much bashing of Applied Materials and its amorphous silicon program by Greentech Media, German thin-film solar company Sunfilm has filed for insolvency, affecting some 300 workers at its production lines in Grossroehrsdorf and Thalheim.
Applied Materials had intended to capitalize on the rise of the thin-film segment with its SunFab production line, which Sunfilm uses at its production line in Grossroehrsdorf.
Sunfilm claims its business plans have been crippled by Germany’s plans to sharply reduce its solar feed-in tariff, as well as by the emerging dominance of US-based cadmium telluride thin-film maker First Solar.
With polysilicon so cheap, why would someone want to purchase amorphous silicon panels with efficiencies half that of polycrystalline panels, which can now be purchased from China for $1.65 per watt. Solar start-ups a few years ago that purchased turn-key equipment have no IP and every other customer of the equipment suppliers became an instant competitor selling the same product using the same process and equipment. Companies need to differentiate themselves.
Inventory levels have risen significantly within the solar panel industry even though many marginal and smaller companies exiting the market. Supply clearly still exceeds demand, and will continue to grow from an average of 71 days in 2008 to 90 days in 2009 (see chart).Source: The Information Network, USA
In 2009, our research shows that 5,963 MW of solar power was consumed but plants worldwide had a capacity of 17,397 MW, bringing utilization levels to 34 percent. The additional capacity equated to lower profits for the solar panel manufacturers because revenues were expended to build or lease large facilities and purchase more equipment.
Other than that, companies don’t have to make the product and under ideal conditions only make what they can sell. That worked fine during the salad days of the past few years, with inventory averaging 71 days in 2008, up from 63 days in 2007. In fact, inventory escalated in Q4 2008 with the downturn in the economy.
Along with the worldwide Great Recession came a drop in demand for solar panels. For 2010, we forecast an increase in solar panel consumption to 7,572 MW. At the same time, new additional capacity will be brought on board, to levels of 23,366 MW. This will bring capacity utilization to 32.4 percent and reduce inventory to 96 days on average for all of 2010.
Solar power production will reach 19.3 GW in 2012, a CAGR of 40.7 percent between 2003 and 2012.
Forecast of Solar Module Installation in Megawatts (MW)Source: The Information Network, USA
If solar is the place to be, material and chemical suppliers to solar manufacturers will see really positive results.
I'm flying to Shanghai in a few weeks to meet with Chinese Solar Cell manufacturers interested in utilizing my nanocoating that improves solar efficiency by 10 percent, developed by my company SolarPA.
Many of you readers know that US chemical and materials suppliers have not had the greatest enthusiasm for the product, succumbing to the NIH (not invented here) syndrome. On the contrary, Chinese manufacturers, who are eating everyone's lunch already, are extremely impressed, which will only serve to make them more competitive against US and European manufacturers.