Shift in Solar Demand to Asian Heavy Weights

Weakened demand for solar power projects in major markets like Europe and the United States as a result of the global credit crunch has resulted in production overcapacity of solar panels, says a new report by analysis firm.

As a consequence of this, says Frost & Sullivan’s Asia Pacific program manager of Energy & Power Systems Practice, Irina Sidneva, “The current financial crisis has lowered the amount of funds available for high-cost solar power projects, forcing many companies to re-evaluate their position in the key solar power markets of Europe and the United States, as well as to re-focus their strategic moves.”

However, according to the company’s Asia Pacific industry analyst, Suchitra Sriram, the recently announced economic stimulus packages across the Asia Pacific region could lead to new waves of demand for solar power projects, resulting in a shift of demand from traditional strong markets of Europe and the United States to the Asian heavy weights such as China, Taiwan, South Korea, India, and Australia.

Sriram says: “These economic packages have strong potential to turn around the solar power industry in the short to medium term. In China, the US$440 billion stimulus package has put solar power as one of the key green energy resources to be developed in the near future. A number of solar power projects are already under construction throughout the country. The upcoming solar power installations have the potential to surpass the original 2020 target of 1.8 GW by up to 10 times, reaching between 10 GW and 20 GW over the next 10 years.”

“In Taiwan, a proposal was passed in April 2009 for around $1.3 billion to support research and development and the installations in green energy technologies,” Sriram continues, “As part of this proposal, the government has highly prioritized the development of solar power projects, including the installation of Asia’s first large-scale solar power plant.”

Until now, most solar panel manufacturing facilities have been set up to satiate the thirst of major markets in Europe and the US. By increasing the proportion of domestic market sales in Asia, many multinational solar power companies with manufacturing plants in the region can effectively deal with the production overcapacity problem faced elsewhere, Frost says.

“Besides, global solar power companies continue to be attracted into setting up their manufacturing facilities in many of these Asian countries because of the low cost of production and easy availability of skilled manpower,” adds Sidneva, concluding: “In the solar industry value chain, the global economic recession has severely impacted small companies with weak cash flows. As a result, large solar power companies are looking at the vertical integration option in order to strengthen their competitive edge as they are currently in a better position to acquire many smaller participants. Consolidation in the solar power industry will help companies to realize the benefits of economies of scale. This, in turn, will provide a major boost to the solar power market in Asia.”

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