A new report on the solar photovoltaic industry from the perspective of semiconductor industry participants has concluded that the rapidly changing balance between supply and demand for high-purity silicon is contributing to a rethinking of priorities in the solar PV sector.

The report, Solar Energy: Growth Opportunities for the Semiconductor Industry comes from IC Insights and forecasts that on a megawatt basis, global installations will drop 22% this year. Meanwhile average selling prices for solar panels is expected to drop 28% as the supply constraint has evaporated and the cost of silicon is coming down significantly.

At the same time, demand for solar installations has plummeted due to the recession and credit crunch, as well as government incentive cutbacks in Europe, IC says, noting that solar panel inventories have built up, and competition has intensified for the reduced available business, driving prices down across the solar PV supply chain.

However, IC Insights expects demand for solar installations to come charging back in 2010 as new government incentives in the U.S., Europe and China gain traction. Installations are forecast to rise 37% to 6.7 GW, with continued growth achieving a compound annual growth rate of 25% over the 2008-2013 forecast period. The price drop of 2009, while not forecast to repeat in 2010-2013, will make solar systems more attractive in more markets even as government incentives supporting installations start to taper off starting four or five years down the road, IC Insights believes.

With the cost of silicon dropping, R&D investments in solar device design and manufacturing technology will back off the push to minimize silicon consumption and centre on new ways to reduce costs and boost device efficiency, the analysis says.