Ten Solar Energy Predictions for 2013

By Barry Cinnamon, Solar Freedom Now
December 27, 2012 

 

We've been down so long almost anything starts to look like up. Be prepared for another few down years as the solar industry rationalizes production and figures out how to make money downstream; we've lost this profit-making capability upstream. Since I don't have to worry about offending any customers, suppliers, competitors or politicians this year, I can be more candid than usual. The "oversupply" theme runs heavily throughout this list, so without further ado, here are ten solar predictions for 2013.

1. Module prices will continue a gradual decline by another 5-10% in 2013.  That means that the average first customer price will be in the neighborhood of $0.60/watt — with many manufacturers selling in the mid to low $0.50.  There is no chance of prices going up in 2013.  By the end of the year you’ll be able to get two solar modules at the checkout register of your local dollar stores.

2. The game of Chinese Checkers will continue as the big solar manufacturers jump over the smaller companies and absorb their capacity.  Modules are commodities distinguished by balance sheets — not minor incremental performance differences.  Unfortunately, government support of manufacturers (of which almost all countries are guilty) distorts the reality of these balance sheets.  Small manufacturers will just roll their marbles off the board and disappear in dusty cracks in the sofa — and half a billion dollars worth of mothballed solar manufacturing equipment will clutter the back alleys of Asian tourist markets. Weak module companies will merge with other weak companies or just disappear. 

There will be no meaningful acquisitions of module companies (except by state run enterprises) since no one wants the warranty liability from the installed base.  Valuable technology and equipment will be sold for pennies on the dollar or cauterized through bankruptcy.  The net effect on worldwide capacity will not be enough to increase ASPs, just stabilize the rate of decline.  This eventual consolidation will set the industry up for 5-10% profits to be made on commodity module manufacturing sometime in the 2015 or 2016 timeframe.

3. Module manufacturers will continue their downstream diversification efforts in order to find customers for their production.  Inevitably, their balance sheets will be consumed by their need to provide financing for projects using their own products.  But these projects are not profitable enough or fast enough to kick off sufficient cash for rapid growth.  So in total, he who has the biggest balance sheet has the best chance for success in this downstream project business.

4. Inverter prices will also continue to coast down another 5-10%.  China is a manufacturing freight train, and its next stop is inverters.  Once again, bad news for inverter company profits, good news for customers, mixed news for installers and EPC companies (see below), and challenging news for inverter company M&A.