Analyst: PV firms hurting too, but long-term picture still bright

Photovoltaic solar cell manufacturers are feeling the pinch in these economic times like many other sectors, but recent reports from Gartner suggest the outlook over the next few years is fundamentally the same: growth opportunities, and continued dominance by silicon-based technologies.

Photovoltaic solar cell manufacturers are feeling the pinch in these economic times like many other sectors, but recent reports from Gartner suggest the outlook over the next few years is fundamentally the same: growth opportunities, and continued dominance by silicon-based technologies.

Revenue from several PV makers slipped about 10% sequentially in 4Q08, but was up more than 40% from the prior year, according to Gartner (see table). Not surprisingly, many firms have been lowering their outlooks for the first quarter of 2009 and the full year. Among the factors being cited: decreasing average selling prices (ASPs) for both crystalline silicon (c-Si) and thin-film PV systems, difficulty obtaining credit for PV projects, and a severe winter in Germany.

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In this lousy environment, companies are searching for ways to help drive business, note Gartner analysts Joan Brown and Alfonso Velosa. These include:

Incentive programs in Greece, China, and the US. Government programs are seen as critical to helping solar firms, but their structure “will take a few more months to be resolved and to start a
steady pipeline of projects, and it will be 2010 before they get traction,” the analysts write.

Utility-driven programs show promise. Examples include PG&E’s 500MW solar initiative, and US utilities offering feed-in tariffs on small-scale (1-2MW) projects. These, too, however, won’t see traction until 2010, the analysts say.

Solar energy as a service. Basically the same “on-demand” concept as software-as-a-service (SAAS), SEaaS would provide electricity contracts to commercial and residential customers, providing a way around large capital costs for PV systems. It’s conceivably a big deal — assuming financing issues get ironed out.

Riding out the first PV market cycle

Looking at the broader picture, Gartner still sees the PV market as a “ray of light amid storm clouds.” Revenues will be flat over the next year (down roughly 1% from 2008’s $16B) thanks to ASP declines. “After years of double-digit growth, the modern incarnation of the solar industry has run into its first major market cycle,” write Gartner analysts James Hines and Alfonso Velosa, in another report. “Limited credit, jittery customers and currency fluctuations have hit the PV vendors severely.” Capacity, though, is seen surging 24% to 6.4GW; Gartner sees it reaching 23.4GW by 2013.

The picture gets brighter looking farther out. Overall global sales are expected to swell to $34B by 2013, a 17% compound annual growth rate (CAGR), the analysts say. That’s still a tiny slice of the planet’s overall energy needs, but it’s also why the market is poised for growth — taking advantage of a desire for “green” energy sources and more favorable market economics (PV module prices coming down, thanks to lower manufacturing costs through improved technologies and less-expensive materials).

“Development of clean energy technology is likely to figure prominently in the future growth of the major industrialized economies, and PV solar is well-positioned to capitalize on this trend,” the analysts write. Solar is still dependent on subsidies to be cost-competitive, but anticipated government policies will help spur demand, leading to large-scale industrialization of PV manufacturing, which will eventually drive down manufacturing costs, leading to cheaper modules, and ultimately economic viability without external support.

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