The fact that the solar module market has tipped, or is about to tip, into an oversupply situation – with more megawatts (MW) worth of modules produced than the market has demand for – has rapidly become conventional wisdom (even the canonical arbiters of conventional wisdom in the U.S. media, USA Today, and U.S News & World Report, have gotten into the act). This development isn’t news to Lux Research clients, however – we saw oversupply coming a year ago, in the report “Solar State of the Market Q1 2008,” writing that “Today’s shortage of solar modules will end in 2009.” More recently, the report “Solar State of the Market Q3 2008” noted that our updated projections showed that “oversupply at the module level hits earlier in 2009,” and “module oversupply in 2009 is more drastic,” as capacity ramps sped up and government subsidies were set to decline – both predictions that look to be playing out now.
The results for the solar industry have been predictable: module average selling prices (ASPs) have plummeted, the bubble in solar venture capital has popped, and weaker players are already beginning to drop out (see “The Great Solar Shakeout begins” from the January 15, 2009 Lux Research Solar Journal). While times are tough in the solar industry in the near term, falling module prices in particular will help to make solar energy more competitive, helping to drive costs closer to grid parity, and setting the stage for strong long-term growth. In the meantime, companies that have the capital to do so can buy in on the cheap – positioning themselves for success if they choose wisely. For more on where the best opportunities will lie, and how the global economic is exacerbating oversupply, look for an upcoming report from the Lux Solar Intelligence team.
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