Solar Power Independent Equity Research

The solar power market is large, fast growing, intensely competitive, and evolving rapidly. More than 100 companies around the world produce solar modules and panels. Global solar shipments rose from ten giga watts (GW) in 2009, to nearly 14 giga watts in 2010, an increase of 40 percent. World-wide, there is roughly 40 giga watts (GW) of installed solar power, with Germany accounting for roughly 40 percent of the world’s installed capacity. Italy is second, with about 15 percent of the market, followed by Japan and Spain—each with about 10 percent.

After a very strong 2010, and first quarter of 2011, industry demand entered a cyclical downturn. Rampant price pressure and industry over-capacity, coupled with a reduction in government incentives pulled the rug out from under many industry participants. Falling prices of polysilicon—a raw material used by virtually all industry manufacturers—became another catalyst for price reductions. The ability of many Chinese solar manufacturers to obtain debt financing from state-owned banks upped the ante for all industry participants. The high profile bankruptcies of Evergreen Solar and Solyndra—both of which received US government loans and grants—cast a further cloud of uncertainty over the industry.

Yet, there are some favorable developments on the horizon: the desire to reduce carbon dioxide emissions appears to be shared by most world governments. The high profile nuclear disaster in Japan caused by its Tsunami has reduced the world’s appetite for further deployment of nuclear energy. Incremental and potential break-through solar technologies loom on the horizon, and increased manufacturing output will undoubtedly reduce production costs and assist in the drive toward solar grid parity. Finally, China and the US, the world’s largest producers of fossil fuels, have barely scratched the surface of adoption. At the beginning of 2011, China and the US combined, accounted for less than 10 percent of worldwide solar installations.