Whenever there is a bubble, there’s always someone eager to pop it. Exhibit A these days is the solar industry.
A recent article in the WSJ painted a pretty dismal view of the industry, noting, with full headline ominousness, “Dark Times Fall on Solar Sector.” The Journal noted, for those who have been on Mars, the well-documented bankruptcies and misguided government subsidies provided to solar equipment manufacturers, from Solyndra to Evergreen and back again. The article suggests the darkest clouds gathering are the falling prices for solar panel and components are a result of a massive supply glut from too many suppliers.
There is no doubt that many of the largest publicly-traded companies in the sector have massive debt loads and falling stock prices, but the truth is there may be a turnaround for the ones that can survive the shakeout.
Shakeouts are a common occurrence in any growing industry and global demand for solar power grew at about an 8 percent in 2011 alone. Growth may not exceed that in 2012, but there is hope in the sight for the industry as many companies find ways to control supply through plant capacity slowdown or by increasing demand of their product through dedicated development arms. The global electricity demand will undeniably be seeking clean options such as solar to fill the voids of upcoming fossil plant retirements as Environmental Protection Agency regulated water and air pollution control measures take effect, requiring capital intensive upgrades. And as solar technology advances and costs drop, government subsidies can roll back and let the market work as intended.
Not all media is buying into the sky-is-falling theories. A recent Bloomberg News article noted that the final quarter of 2011 showed a significant uptick in solar projects in the UK and Germany, and China is on pace for record solar growth in 2012. There is even talk of the German residential market being unable to meet demand, the very opposite of what data just three months earlier showed.
With the solar panel price drops of 51 percent in 2011, installations will escalate in many interested countries looking to ramp up their renewable portfolio. The UK installed 10 times more solar in 2011 than 2010 as prices fell, and now China is looking to double their solar plant capacity by installing 3 GW of solar capacity in 2012. Global Demand for 2012 could reach 30 GW of solar and potentially 40 GW in 2013 if pricing stays as competitive as it is today.
Is the solar industry a sure-bet or one which should be flooded with government investments and unfettered optimism? No. But the current landscape shows that reports of pending doom, gloom and possibly death in the solar industry are entirely premature.
