High inventory of solar products has been pushing prices down since second quarter 2011. According to Dr. Yuan-Huai Simon Tsuo, chairman of Motech, the price of solar modules in 2011 will fall to but not below US$1.25-1.30/watt. The price for solar cells should not fall below US$0.9/watt. The market situation should improve in 2013 due to falling prices and demand matching supply, says Tsuo. However, the aggressive capacity expansion in China should be carefully observed.
Tsou added that China-based solar firms announced cost for solar modules in 2011 should reach US$1.05/watt, hence the lowest acceptable price for solar module firms should be US$1.25-1.30/watt. In terms of solar cells, the current price of US$0.9/watt is very close to the lowest point.
According to Tsou, consumers have been expecting the price to reach bottom before placing orders causing price of solar products to drop continuously in the second quarter. Hopefully the current price will not fall further, added Tsou. From experience, once the price of solar products reaches bottom, it is very unlikely for it to bounce back with a large magnitude because oversupply conditions will not be resolved in 2011. If demand reaches 20GW in 2011 as predicted by optimistic views, supply of solar cells will still be around 30-40GW, hence the situation of oversupply will still exist, Tsuo pointed out. However, third quarter is the best season for installation because of the weather.
The market is adjusting and the time period for this adjustment should be 2011 to first half of 2012, added Tsuo, Capacity expansion has been slowing down due to weak demand in 2011, and hopefully demand will catch up to supply in 2013.
Tsuo stated global installations in 2010 were around 18GW according to analysis from market research institutions. The potential installation demand is expected to be around 16-20GW in 2011. But 2011 is very likely to be the first year of flat annual growth for the solar industry since 2004 due to a lack of government incentives in Europe.
The return of demand in third quarter still depends on Germany and Italy. But if demand does not return in the third quarter, the industry will face a bleak year. Demand has been slowing returning in the end of May and hopefully in June, the return would be more apparent.
It is hard for solar cell firms to have utilization rates over 60% in May with high build-ups in inventory, Tsou indicated.
As for other markets, Tsuo pointed out, the growth will be less than market expectations. The energy plan for Japan is clear in support of renewable energy but will not yet contribute to growth in 2011. Installations in China should be around 10GW in 2011, but will not be able to keep up with capacity expansion of solar firms. The US market contains great potential because president Obama has been very supportive of renewable energy, hence re-election will be the key for growth of the solar industry in US.