photo: Southern California Edison
While demand for solar panels is expected to continue to grow by double-digits in the years ahead, 2009 could be a make-or-break year for some companies, according to an analysis from HSBC Global Research.
After grappling with a shortage of polysilicon – the base material of conventional solar cells – for the past couple years, the industry now faces falling prices. The spot market for polysilicon has plummeted 35% since October, writes HSBC alternative energy analyst Christine Wang, who predicts prices will fall 30% next year.
That’s bad news for solar module makers who locked in long-term contracts at higher prices – which looked like a smart move when polysilicon was in short supply and prices rising rapidly. “The winners will likely be the companies with competitive cost structures, scale, good product quality, strong balance sheets, and strong customer relationships,” according to Wang. “We believe that new entrants and small players will suffer the most as they lack brand recognition.”
The culprits are the usual suspects – the global financial crisis as well as some cutbacks in subsidies from countries like Spain. Solar cell companies that have rapidly ramped up production over the past two years now may be saddled with too many high-priced products.
Wang downgraded Chinese solar giant Suntech (STP) and set a price target of $4.50 – down sharply from HSBC’s earlier target of $55. Suntech was trading at near $10 Monday afternoon but still nearly 90% off its 2008 high. (SunPower (SPWRA), First Solar (FSLR) and other solar cell makers have also seen their share prices nose-dive.) “High portion of polysilicon based on contract prices will hurt Suntech,” writes Wang, who estimated that 80% of Suntech’s polysilicon supply is locked into contracts “on less favorable fixed prices.”
Falling panel prices is good news for solar system installers like Sungevity and Akeena Solar (AKNS) and their residential and commercial customers. When Green Wombat ran into Akeena CEO Barry Cinnamon in San Francisco at the announcement of Better Place’s Bay Area electric car project, he said he was in no rush to enter into long-term contracts with solar cell suppliers as he expects prices will continue to fall in 2009.
Still, not all the news is gloomy for the industry. Wang expects that the financial crisis won’t derail government support for solar, given climate change pressures and state mandates to increase the use of renewable energy. The move by utilities like PG&E (PCG) and Southern California Edison (EIX) to sign long-term contracts for electricity from photovoltaic power plants will also keep demand high in coming years.
Wang projects solar cell demand will grow 45% between 2008 and 2012. “Developed countries are increasingly focused on environmental protection and curtailing the causes of climate change, and we do not believe this trend will shift just because of a (hopefully) short-term financial crisis,” she wrote.
Green Wombat 
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Christine Wang is obviously an idiot.
There is no logic to her argument, Suntech is established, their profit margins will be down, but you cant have it both ways. The new entries and small players can get the raw product cheaper. This woman obviously is totally confused. And there are ways around some of these contracts. it seems these analysts want to drive the solar company values down, perhaps for their own reasons.
I have to agree with the comments. I don’t pay attention to the analysts. They are usually WRONG. Wang is way off the beat and track with the $4.50 target price. Is she serious? Did she leave off a zero after the 4?
Remember…when analysts say sell, buy buy buy. The doom and gloom outlook is very unsubstantiated. I look forward to seeing her track record with this in 2 years.
Downgrade to 4.5 from 55 after it has already fallen 90%, what a joke, Wang should be fired. Like downgrading the Dow from 14000 to 7800 on investor sentiment…
How can you trust someone who said earlier it was going to $55.00, and now has a target of $4.50? What a joke
Hmmm, I’m just guessing, but the fall in oil prices seems to mirror the fall of the solar stock prices. Those tricky OPEC guys, cheap oil for a while, Americans forget about the high cost and then OPEC starts inching up the price again. And we have no alternative but to pay for it, brcause this country is run by a bunch of idiots elected by a greater mass of idiots!!!!!
It’s interesting that First Solar gets included in this article, with no mention that they do not use any polysilicon in the production of their solar modules.
I bought shares of FSLR, First Solar because I think they have the right idea in regards to where solar is going. I am young and have time to let my stocks appreciate, I think this market is a terrific thing because everybody knows that oil prices will go up again. We can see that one of the major causes of demand for solar energy is high oil prices. It should be no surprise to anyone that solar stock will bounce back. I just want the lowest price. As far as Wang goes, at least she managed to fill the page with some material. It’s clear that she doesn’t know what to say.
The fate of Solar Panel maunfacturing companies are gonna to be very similar to computer chips mauufacturer in years to come. Solar Panels are commodities to Solar system installers and end users. Period. The Solar panel manufacturers are subject to all competitons, government supports and financial credit crunch happening in the real world. Just look at today’s price of computers and computer chips.