Huge inventory glut will hurt solar industry

Despite rapidly decreasing demand, solar panel and cell makers continue to ramp up production capacity, which has resulted in a huge oversupply of inventory, say two leading market research companies.

Nearly half of all solar panels made this year won’t be sold in 2009 and the huge oversupply will continue into 2012, predicts iSuppli Corp. The market researcher has also reduced its forecast for solar panel production out to 2013.

Total solar panel production in 2009 will grow by 14.3 percent to 7.5 gigawatts (GW), up from 6.5 GW in 2008, however, only 3.9 GW worth of installations will take place this year, according to iSuppli’s latest report. Upshot: Almost one out of every two panels produced in 2009 will not be installed but stored in inventory.

iSuppli blames Spain’s decision, which accounted for 50 percent of worldwide installations in 2008, to change its feed-in-tariff policies.

“This demand drop led to a massive buildup of inventory throughout the supply chain, from the raw material polysilicon, to photovoltaic (PV) cells, to complete solar systems,” said Henning Wicht, senior director and principal analyst for photovoltaics at iSuppli, in a statement. Despite this, solar panel makers have continued to increase capacity and
production, exacerbating the inventory buildup.”

“This inventory glut will have a long-term impact on the solar business, with panels set to remain in a state of oversupply until 2012,” Wicht stated. “After that year, fast-growing demand for solar installations will be able to absorb global panel production and inventory.”


Wicht also notes that most of the leading producers of solar panels such as Suntech, Sharp and JA Solar have no intention of slowing production of cells and panels, despite a global economic recession, in order to maintain market share.

As a result, those suppliers — Q-Cells, SunPower and BP Solar — that have reduced or made adjustments to their production of cells and panels because of softening demand have seen their short- and mid-term strategies falter, said Wicht.

DisplaySearch recently released its third quarter 2009 report that projects that solar cell manufacturing capacity will grow 56 percent in 2009 to 17 GW, despite decreased demand. Ramped capacity, which was only 2.3 GW in 2005, is forecast to grow at a compound annual growth rate of 49 percent to more than 42 GW in 2013, according to DisplaySearch’s Quarterly PV Cell Capacity Database & Trends Report.

“With demand and capacity moving in different directions, the PV industry is currently experiencing an enormous oversupply that is causing rapid price erosion and potentially setting the stage for the failure of multiple cell manufacturers, particularly companies pursuing a-Si thin film solar cells,” said Charles Annis, DisplaySearch vice president of manufacturing research, in a statement.

About 11.4 GW of new solar cell capacity was installed at fabs globally between January 2008 and July 2009, which is the reason why capacity is still continuing to grow despite falling demand, said DisplaySearch. “The PV industry will begin working through this excess capacity as demand recovers next year and takes off in 2011 and beyond,” said Annis.

Another key finding of the report shows that thin-film solar cells will account for more than 20 percent of the solar-cell manufacturing capacity in 2009, up from 5 percent in 2005. By 2013, thin-film technologies are forecast to account for as much as 30 percent of the total capacity.

DisplaySearch expects First Solar, Q-Cells and Suntech together with JA Solar, Motech, REC, SunPower, Yingli, Showa Shell Solar and Sharp to be the top 10 makers, with more than 16 GW or 38 percent of 2013 capacity.