German Demand Ensures PV Supply Is Used
Although the global solar panel market remains in an acute state of oversupply, the inventory glut plaguing the industry has begun to abate somewhat due to surprisingly strong demand from Germany, according to iSuppli Corp.
"Solar-panel installations in Germany began surging to record levels in July as prices for Photovoltaic (PV) systems plunged," said Dr. Henning Wicht, senior director of photovoltaics research for iSuppli. "This phenomenon has boosted the global solar panel business and mitigated the severe oversupply situation that has stung the industry throughout this year."
iSuppli now is forecasting that Germany will install 2.5 Gigawatts (GW) worth of solar panels in 2009, compared to its earlier forecast of 1.53GW. This will help drive worldwide demand for solar panels to 5.2GW in 2009, up from iSuppli's former expectation of 3.9GW. Nevertheless, global demand for solar panels still is expected to fall by 3.8 percent in 2009 compared to 2008, a dramatic change from the double-digit growth seen in recent years.
The global PV market entered a severe downturn in early 2009 due to a sharp decline in expected installations in Spain. With suppliers ramping up production at a rapid pace, the drop in demand triggered a severe inventory pileup that caused prices to fall. Prices for solar systems in July fell by 20 percent compared to the beginning of the year.
The German market seized on these attractive prices, spurring the massive increase in sales. The rise in German sales means that the global supply of solar panels now is expected to exceed demand by 65.9 percent in 2009, down from iSuppli's previous forecast announced in August of a 91.9 percent overage. The real impact of the German rebound will come in the year 2010 and beyond. Based on the massive oversupply situation in early 2009, it appeared that the panel glut would persist through the year 2010. However, with Germany exhibiting strong demand elasticity in the face of price reductions, the glut could be resolved as soon as next year, depending on how the industry reacts.
"Supply and demand dynamics in the fourth quarter will set the tone on whether the oversupply situation continues in 2010," Wicht said. "If panel makers reduce production during the fourth quarter of this year, anticipating the seasonally weak first quarter in Germany, then supply and prices could stabilize."
To maintain the investor momentum in the largest national market—Germany—system prices must be reduced by 10 percent again in 2010. Distributors and wholesalers already are preparing for the first quarter by announcing price reductions for 2010. This will help prevent a stall in sales, such as what occurred in spring 2009. The figure presents iSuppli's supply and demand forecast for the year 2009, and the solar panel industry's production roadmap for the years 2010 to 2013 compared with expected installations. The production roadmap represents the maximum possible production that could be generated by the solar panel industry, rather than what will actually be manufactured.
If the industry manufactures at its full capacity, there would be a panel oversupply of 75 percent in 2010 compared to expected installations. However, manufacturers are not expected to produce at full capacity due to issues including inventories, further strategy shifts, manufacturing cuts and consolidation, reducing the expected level of oversupply.
