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Feb 17
2012
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Solar Industry Overcapacity Could Drag On For Some Time
Solar PV module manufacturing is in the news again this week. Energy Conversion Devices Inc., the parent company for Uni-Solar, filed for Chapter 11 bankruptcy to reorganize and shed some old debt – "squat-tag". It became obvious to everyone paying attention that there is a massive imbalance between production capacity and worldwide demand for PV modules and, according to Maxim Group analyst Aaron Chew, global production capacity is on track to expand in 2012, even after a rash of factory closures, Then, Germany reminded the world that, a. they are the largest PV market (for another minute or two), and b. the German government is going to cut subsidies in April. That combination of news sent module manufacturer stock prices into a bit of a downward spiral.
The next year or two is going to be a wild ride for module manufacturers, as if the past couple weren't – ah, the wisdom of uncertainty. The new plants being built will be more efficient than the ones that have been around for a while. Those older ones need to update their production equipment and processes, but prices are lower than low and their stock is in the shade. So money for re-investment is going to be hard to find. That'll lead to more plant closures, displaced workers and bad press. I'm reminded of 18th century U.S. colonial farmers who habitually worked a plot until it played out and then simply moved a few miles westward and cleared another field; new land was so cheap and plentiful that taking care of (re-investing in) their existing land made no economic sense at all. Its going to be a big year for mergers and there will be bargains for the brave.
So what's the good news? First, the obvious; module prices will continue to drop. The U.S. Dept. of Energy "Dollar-A-Watt" goal may be achieved far sooner than Secretary Chew expected. The U.S. solar market is already poised to explode. Another price drop should be just the catalyst it needs to go exponential. That certainly bodes well for solar integrators, distributors and those of us in the solar training business.
More good news is that Uni-Solar will be sold out from under the bankrupt parent company and will thrive under new ownership. The Uni-Solar technology has been very well proven over more than ten years, the brand is strong and it has virtually no real competition within its market niche. There are orders on its books and a network of experienced installers. A quick sale is expected. So, while there is huge turmoil now, it is transient. Remember, there are bargains for the brave.
To say the solar industry is volatile is a gross understatement. It has been a roller coaster ride since 2008 and it looks like this ride is far from over. Did we ever think for a minute that because we were involved in a clean energy industry, we were exempt from the booms and busts of the global energy market? Think about our colleagues in the oil bidness – its been like this for a century or so. And like every other business, any time there's a shake-out, down-turn or other disruption, gaps appear. Gaps in services, gaps in product availability, gaps in the supply chain. Each gap represents an opportunity for someone to get rich. Solar energy in the U.S. continues to thrive. Find those gaps. Be creative. Be brave.
