Analyst: Solar installations rise, prices sink

PV solar installations are expected to soar in 2010, but erosion in average selling prices (ASP) seen in 2009 will continue to squeeze profits and intensify industry competition, according to an industry analyst’s report.

March 3, 2010 –¬† PV solar installations are expected to soar in 2010, but erosion in average selling prices (ASP) seen in 2009 will continue to squeeze profits and intensify industry competition, according to an industry analyst’s report.

Installations in terms of Watts of PV systems will increase 64% this year to 8.3GW, returning to pre-2008-decline levels as the global recession recedes and demand reemerges in new segments and geographies, writes Henning Wicht, senior director and principal analyst for photovoltaic systems at iSuppli Corp., summarizing a new report. A “newly energized German market” leads the way as it recovers from a sluggish 1H09, though this could stall again by summertime if the feed-in tariff (FIT) gets trimmed by the Merkel government, he says. Growth markets are emerging (e.g. US, Italy, and China, together 50% of the 2010 growth picture), though because of Germany’s overwhelming influence¬† (it accounted for 50% of total worldwide PV installs in 2009, “collective PV demand accruing from other countries will not be sufficient to compensate for a German FIT reduction of 15% if that were imposed in mid-2010,” he notes.

Still, despite a general return to demand this year, rampant price erosion that took hold in 2009 will continue in 2010, according to Wicht’s calculations:




PV average selling prices, in US$/MW. (Source: iSuppli)





2009
2010
Total price decline, 2009-2010*
Crystalline silicon (c-Si)
-37.8%
-20%
-49.8%
Solar wafers
-50%
-18.2%
-40.9%
Polysilicon
-80%
-56.5%
-91.3%



This “freefall of PV prices” will permanently ratcheting down price structures and “change the face of the industry” into a more competitive landscape, Wicht writes. One major implication: cost reductions must accelerate to keep up with the ASP declines and salvage profit margins; once these are back in balance, overall profitability improvement should take hold — but not reaching the black until 4Q10, with a simultaneous 10% quarterly bounce in average ASPs.

Another factor to consider is the market arrival of giants from other industries possessing both technology and manufacturing adroitness, and experience in shifting into new areas of operation. The crop is led by Korean LCD display giants Samsung and LG Electronics, Taiwan chip foundry TSMC, and US engineering giant Bechtel.

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