Good news for home and building owners considering installing solar systems: solar module costs are forecast to decline significantly in 2009 and 2010. Supply shortages and rapidly growing demand from the growing number of solar cell manufacturers induced existing and aspiring producers of solar-grade silicon to invest in new capacity in recent years, much of which is due to come on-line in 2009 and 2010, according to industry analysts. That, along with other changes in conditions and the market environment, has them predicting big drops in solar cell and module prices in the US.
The removal of the $2,000 cap and an eight-year extension of the 30% Federal solar tax credit for homeowners that was included in the Federal government’s $700-billion financial industry bailout and stimulus plan is another big factor expected to drive costs down. The growing number of states introducing renewable power standards and other incentives, as well as utilities introducing some form of feed-in tariff, or credits, for home and building owners that feed surplus power into the grid likewise lowers the ultimate, all-in cost of installing a solar power system. Expected drops in demand from homeowners in countries, such as Germany and Spain, that have been growth engines for rooftop solar systems is another contributing factor, as the government’s of both countries are cutting incentives back sharply.
From Shortage to Surfeit
Production of polysilicon solar-PV cells and modules will increase 60-70% this year and next, according to the Prometheus Institute of Sustainable Development’s “Polysilicon: Supply, Demand and Implications for the PV Industry” report. Adding in expected production of thin film PV will add another 10% a year to this growth rate, Prometheus forecasts.
This, along with the impact of the recession, sharp reductions in rebates in the key German and Spanish markets and more incentives in the US, on balance is expected to drive prices significantly lower. Effective prices for rooftop solar systems in the US may fall as much as 50%, according to a USA Today news report.
“The era of extremely expensive (solar) modules is over,” New Energy Finance analyst Nathaniel Bullard was quoted as saying. New Energy Finance forecasts that growing supply will amount to a surplus of solar modules equivalent to nearly 4 gigawatts this year, enough to power some 2.6 million homes.
In states such as California, where homeowners can qualify for state funded solar rebates through the California Solar Initiative, a $32,000, 4-kilowatt solar system that cost $23,000 last year could drop as low as $10,000 or $12,000, according to USA Today’s report.
While the price drop is a good thing for consumers, it’s putting pressure on manufacturers. Globally, the solar-PV cell/module market will grow 48% annually through 2013 and reach 23 GW as compared to 4.9 GW in 2008, Lux Research forecast in its October “Solar State of the Market Q3 2008: The Rocky Road to $100 Billion” report.
Lux expects an overhang of solar module supply totaling 400 megawatts for Q4 2008 and a sharp increase, to 3.9 GW, in 2009. “As solar subsidies diminish over the next year, the current bonanza in which all players are winners will come to an end,” Lux senior analyst Ted Sullivan said.
“We expect module oversupply to occur early in 2009, and the resulting aggressive price reductions to trigger an industry shake-out, with the weakest players being acquired or failing. While falling prices will help stimulate continued demand growth, a booming supply build-out will mean that solar manufacturers will face margin pressures for years to come.”