Dark Days for the Solar Industry
A perfect storm is wreaking havoc on the solar industry.
After years of breakneck growth, dynamics within the solar industry have rapidly changed. Recently, the demand for solar power has been hurt significantly by both tighter lending to project investors and the introduction of a 500-megawatt cap on Spain's solar subsidy program (the world's largest last year) that will shrink the Spanish market by at least 80% in 2009. Although the United States and China offer very attractive long-term stories, both markets remain relatively undeveloped, and it is likely newly announced incentives/subsidies will not materially increase installations until 2010. As a result, we expect growth in global solar installations to decrease for the first time this decade in 2009 (see Chart 1) because there simply is no market than can replace the 2-gigawatt (33% of the 2008 global total) reduction in demand from Spain.
The downturn in demand highlights another serious issue that was clearly emerging last year: The industry presently has far too much supply. During the solar boom of the last few years, demand consistently outstripped supply, and essentially every solar panel produced was sold. Solar companies could increase sales as quickly as they could expand production, all the while at very profitable levels. Not surprisingly, new entrants flooded in, and existing companies expanded rapidly, with the whole industry planning as if high double-digit growth were set to continue indefinitely.
Stephen Simko does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.