THE PRICE OF SUN RIGHT NOW

Solar Industry Update: Pricing Pressures Rising (sign-up required)
May 25, 2011 (Mercom Capital)

"The solar industry’s supply chain is in a state of flux with prices deteriorating in all segments at a pace faster than [expected]...[due to weakened] demand and excess capacity expansion…[I]t is not known where prices will stabilize. Wafers and cells prices have fallen 30% in less than three months. Modules price have declined steadily since March, and accelerated the decline over the past two weeks…[M]odules from top tier China-based vendors appear headed toward the $1.40-1.45/w range.

"Polysilicon price [is] still a wild card…but appear[s] to be on the decline, ending a long period of stability. While polysilicon prices were stable in 1Q11 at a level above…expectation, spot prices declined to $65/kg in the past week, the lowest level in roughly one year…[T]here is [likely] downside to the $40-50/kg range in the months ahead. If that decline occurs, wafer, cell and module prices will likely tick down $0.05-0.15/w as this silicon savings is passed through."

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"Much of the recent price [decline has] been brought on by the weak [CY11] demand conditions…Three key factors have led to this weak demand: 1) a policy change that froze the Italian market in March and April, 2) poor weather into March in Germany, and 3) surprisingly, prices that stayed high and limited demand in Germany when the weather improved. None of these factors is expected to re-occur in 2H11."

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"Italy has set its policy for CY11 and CY12 and module price declines have improved system economics in Germany…As prices fall and demand improves…a new equilibrium will be [likely] found, perhaps in the July timeframe once excess inventory has cleared and buyers become comfortable that prices have stabilized.

"Many players in the supply chain have idled production, which will foster the expected inventory reduction. Our forecast calls for significantly greater demand in 2H11 than 1H11, and we believe 4Q11 demand should be sufficient for low cost brand leaders of China to remain nicely profitable…[although] 3Q11 appears to be at risk…Risks have clearly risen in the solar industry, and while inventory can clear, policy changes and excess capacity will have lasting impact…"