Where are we going with solar tech?
A Gauguin of the solar industry paints the past, present, and future market after surveying key players.
Correction, 12:55 p.m. PDT March 19: Global Solar is not technically a subsidiary of Solon as was suggested by the analyst. According to Global Solar, Solon acquired a 19 percent stake in 2006. The remaining 81 percent is owned by a European venture capital investor.
One year ago, silicon, the most common material used in making solar panels, could not be supplied fast enough. It gave an opening to many new solar tech start-ups looking to pick up venture capitalist interest and cash.
While some technologies may not have been as efficient as traditional silicon solar panels, they had other qualities. Thin-film photovoltaic systems were very popular.
But now with a silicon supply glut that's going to get worse before it gets better, the game has changed. Solar venture capitalists will lean away from innovative technologies toward sure bets closer to commercialization, according to a report released Wednesday by Lux Research.
The report deciphers in company-by-company detail where the solar market stood before the 2008 fourth-quarter crash, and how it's affecting the development of new solar technologies. It predicts where the bottom of the solar market is, who will climb out of it, and when that will start to happen.
Overall, the solar market will go from $36 billion over 5.5 GW (gigawatts) worth of solar panels sold in 2008 to $29 billion over 5.3 GW in 2009, an illustration of the average decrease in price per watt. The silver lining, solar to grid parity and growth to $70 billion across 18.5 GW, will not be seen until 2013.
Investors may still bet on technologies like CIGS (copper indium gallium selenide), but only those under the auspices of a larger established parent company, according to Ted Sullivan, a senior analyst at Lux Research who oversaw the report.
"Nobody really comes out of this unscathed, but those who will be least harmed by this will be companies like First Solar. Even with crystalline silicon prices dropping as far as they are, First Solar is still cost competitive. They may have to reduce (their prices) a little but they still are the formidable," said Sullivan in a phone interview with CNET.
Minor players will collapse, leaving market share for others to pick up and grow.
"Players might get hurt on pricing, but emerge almost stronger from this because a lot of the second- and third-tier competitions will play out," said Sullivan.
Because of the interest from developers and solar installers, CIGS is still a viable solar technology to watch.
CIGS technology will grow from $321 million in revenue this year to $950 million in 2013 despite the fact that many of today's CIGS companies won't be there to see the turn around, according to the report.
Sullivan points to Q-Cells' subsidiary Solibro and Global Solar, which Solon has a stake in, as two CIGS companies that will likely survive because they are warrantable in the sense that they have the backing of strong companies.
Although six months ago suppliers could not keep up with the demand for silicon, makers of both traditional crystalline silicon and thin-film silicon solar panels have huge surpluses of inventory, according to the Lux Research report.
As in many industries, the economic crash of fourth quarter 2008 has left the solar industry with fewer consumers and inventory build-up resulting in a forced drop in prices.
Prices for commercial utilities purchasing solar panel systems, for example, have fallen from roughly $3.80 per watt to as low as $2.50 to $3.10 per watt, according to Lux Research report figures.
"Today, crystalline silicon producers like Suntech Power, Gintech Energy, Motech Industrial, and others are reportedly holding roughly up to 100 MW each in excess inventory, while thin-film silicon producers such as EPV Solar are reportedly stacking modules to the ceiling as storage space runs short," says the report.
Lux Research says that there is light at the end of the tunnel and that it can determine where the bottom is, based on its review and interviews of over 200 solar companies, as well as producers, installers, and project developers.
In crystalline silicon, Lux Research sees Sharp Electronics, Suntech, and Q-Cells in stronger financial positions and, therefore, able to instill faith in its warranties, making them more attractive to buyers. But companies like Yingli and ET Solar will be forced to discount to distract buyers from the perceived risk of an unproven company.
"Most surprising thing for me, within the crystalline, I tried to find the cut-off for those easily viable. People named companies like Yingli....Yingli? The bar was surprisingly high. They named only the best of the best not-bankable companies, which surprised me," said Sullivan.