The Sun is our most abundant source of energy. A single hour of sunlight shining on the Earth can power the entire world for a year. The challenge has been to efficiently harness this ultimate source of clean, renewable energy and transform it into useful electrical energy.
The solar market has been doubling every two years, due to growing demand for clean sources of electrical energy. This makes solar the world’s fastest growing energy technology, despite the fact that in most cases it is not cost-competitive with grid electricity and requires government subsidies.
Today, solar power supplies less than one percent of the global electricity demand with total panel installation of 9 billion watts (9 gigawatts). This amount is projected to increase to more than 1.8 trillion watts (1.8 terawatts) by 2030, representing approximately 15% of global electricity demand. Green Investor loves this market opportunity.
Yellow Caution Flag
Green Investor believes that the yellow flag is up and that green investors should proceed with caution. The severe downturn in the global photovoltaic (PV) market in 2009 could have a positive outcome for the worldwide solar industry, yielding a more mature and orderly supply chain when growth returns, according to market research firm, iSuppli Corp.
In a press release issued late last week, the firm predicted that worldwide installations of PV systems will decline to 3.5 gigawatts (GW) in 2009, down 32 percent from 5.2 GW in 2008. With the average price per solar watt declining by 12 percent in 2009, global revenue generated by PV system installations will plunge by 40.2 percent to US $18.2 billion, down from $30.5 billion in 2008.
“For years, the PV industry enjoyed vigorous double-digit annual, spurring a wild-west mentality among market participants,” said Dr. Henning Wicht, senior director and principal analyst for iSupply in the press release.
“An ever-rising flood of market participants attempted to capitalize on this growth, all hoping to claim a 10 percent share of market revenue by throwing more production capacity into the market. This overproduction situation, along with a decline in demand, will lead to the sharp, unprecedented fall in PV industry revenue in 2009,” Wicht also said.
Looking Ahead – A Very Bright Future
However, the firm believes that the 2009 PV downturn, like the PC shakeout of the mid 1980s, is likely to change the current market paradigm, cutting down on industry excesses and leading to a more mature market in 2010 and beyond.
After 2010, the company believes that fundamental drivers of PV demand will reassert themselves, bringing a 57.8 percent increase in revenue in 2011 and similar growth rates in 2012 and 2013.
“PV remains attractive because it continues to demonstrate a favorable return on investment (ROI),” Wicht said. “Furthermore, government incentives in the form of above-market feed-in-tariffs and tax breaks will remain in place, making the ROI equations viable through 2012. Cost reductions will lead to attractive ROI and payback periods even without governmental help after 2012.”
Furthermore, lower system prices will open up new markets by lowering incentives and subvention costs. The lower the PV system prices are, the lower the incentives will have to be. Developing regions will be big beneficiaries of these lower prices and thus will grow faster than the global average, the firm believes.
Looking for Winners
In the next post, Green Investor will sort through the public solar companies looking for winners.