At the end of 2011, the average price for all technologies to the first buyer is expected to be US $1.25. Within this average are prices as low as $0.50/Wp to >$3.00/Wp. Prices to the second buyer are currently averaging $1.10; this range begins at $0.50/Wp to $1.25/Wp. Reselling of inventory continues and should not be averaged as it clouds the pricing picture. Currently there is significant gossip in the PV industry regarding pricing. The announcement of ever lower price levels, in most cases based on very little data, sends a signal to the market to wait for lower prices and is a self-fulfilling prophecy.

From 2001 through 2003, average global prices were close to production costs, with aggressive pricing at below production costs common. From 2004 through 2008, the EU FiTs stimulated significant demand and, though this acceleration coincided with a polysilicon shortage, technology manufacturers took margin during this period, most (or all) for the first time. In 2009, manufacturers from China and Taiwan, particularly China, began pricing aggressively for share. They increased capacity and market share rapidly while continuing aggressive pricing strategies. In 2011, manufacturers no longer control the pricing function.

In an incentive-driven industry where governments legislate incentive availability, pushing prices to unsustainably low levels is not only unsustainable, it is risky. Table 1 (below) shows regional shipment (supply) shares over time, appropriately depicting the rapid rise of manufacturers in China and Taiwan.

PV Will Go On, But Struggles To Come

The necessary and long-expected correction has finally come. It is uglier than anticipated. Consolidation, bankruptcy and, sadly, slowing of innovation is the short-term reality while manufacturers hunker down to survive. The correction will involve both supply and demand sides of the industry and will be unpleasant. Figure 2 (below) offers a forecast for three scenarios through 2015. The conservative forecast is expected for 2012; however, the reduced incentive forecast is a distinct possibility.

The reality of slower demand at lower prices is lower revenues. With prices held down artificially, sales (shipments) will need to increase significantly (accelerated forecast) for there to be revenue growth. Given current soft demand and low prices, the correction in PV, which is beginning in earnest in 2012, will stay on the conservative track, and this is an optimistic view.

Consider this a cautionary tale similar to that for all commodity industries (and electricity is a commodity industry).

The current pricing situation is also pressuring CSP and CPV manufacturers, which must compete with artificially low prices. Thin-film manufacturers have perhaps the most difficult time as, over time and due to the area penalty, these manufacturers need to price product ~12 percent lower than higher efficiency crystalline product.

Table 2 (below) offers a technology forecast to 2015 for the conservative and accelerated forecasts with a breakout for thin film categories.

At the start of 2012, manufacturers are faced with difficult choices: continue selling at prices that do not allow for positive margins, or shutter production and wait for the current situation to settle down. With significant inventory on the demand side, and expectations for continued low pricing, the correction is likely to be long and painful.