Half of all solar panels made this year won’t be installed in 2009!

EL SEGUNDO, USA: How bad is the solar panel glut?

* So bad that nearly half of all panels made this year won’t be sold in 2009.
* So bad that the present massive oversupply of panels will persist until 2012.
* So bad that iSuppli Corp. is now reducing its forecast for solar panel production out to the year 2013.

“The solar industry in 2009 has been undermined by collapse in demand due to the decision by Spain—which accounted for 50 percent of worldwide installations in 2008—to change its feed-in-tariff policies,” said Henning Wicht, senior director and principal analyst for photovoltaics at iSuppli.

“This demand drop led to a massive buildup of inventory throughout the supply chain, from the raw material polysilicon, to PV cells, to complete solar systems. Despite this, solar panel makers have continued to increase capacity and production, exacerbating the inventory buildup.”

Total solar panel production in 2009 will grow by 14.3 percent to 7.5 Gigawatts (GW), up from 6.5GW in 2008. However, only 3.9 GW worth of installations will take place this year. That means that almost one out of every two panels produced in 2009 will not be installed but stored in inventory.

“This inventory glut will have a long-term impact on the solar business, with panels set to remain in a state of oversupply until 2012,” Wicht said. “After that year, fast-growing demand for solar installations will be able to absorb global panel production and inventory.

iSuppli’s updated forecast now shows supplier production flattening for the years from 2011 through 2013 compared to the old forecast.”

The figure presents iSuppli’s previous and updated forecasts for solar panel production in terms of GW.

iSuppli: Previous and Current Global Solar Panel Production Forecasts in Gigawatts (Crystalline and Thin Film)Source: iSuppli Aug. 2009

Still ramping?
Despite the global economic recession, most of the leading producers of solar panels -— such as Suntech, Sharp and JA Solar -— will continue to grow in concert with the overall PV industry, although they have no intention of slowing production of cells and panels.

“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.”

As a result, Suntech will push Q-Cells aside and become the No.-1 producer of crystalline cells in 2009, iSuppli predicts. Sharp, Yingli and JA Solar also will defend their Top-5 positions this year by not reducing their solar-cell production increases.

Those suppliers that have reduced or made adjustments to their production of cells and panels as a result of the softening demand have seen their short- and mid-term strategies falter. These suppliers include Q-Cells, SunPower and BP Solar.

Q-Cells, in particular, slowed down cell and panel expansion at its plant in Malaysia and has significantly reduced production targets in 2009. Likewise, SunPower has cut back its plans for expansion, while BP Solar has closed its panel production operations in Malaysia and Spain.

So, while some companies are hiking up production in order to maintain their positions in the market, others are forced to undertake short-term production cuts and delay or even cancel long-term expansion projects.