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Solar Bubble to Burst Next Year, Report Says

While the solar industry has been shining bright over the past few years, the industry’s forecast isn’t all sunshine, according to a report issued Thursday morning from Lux Research. Even though solar revenues are expected to more than triple to $70.9 billion in 2012 from $21.2 billion in 2007, solar supply will exceed demand as soon as 2009, according to the report. And that means large solar players, namely firms that produce traditional crystalline photovoltaics and haven’t invested in new technologies like solar thin film, will have some storms to weather.

Well, the tipping point had to come. There’s been a shortage of available solar-grade polysilicon, the key ingredient to traditional solar panels, but that polysilicon constraint will start to relax next year and end in 2010, says Lux, which looked at 133 polysilicon construction projects currently in the works. And with enough polysilicon to meet — and exceed — demand, combined with the recent aggressive pace of installations in countries like Japan, Germany and Spain, demand for solar installations will reach 8.96 GW in 2009, while solar supply will reach 9.57 GW.

The pendulum swing is also due, in part, to new technologies that don’t rely on polysilicon, such as thin-film solar, which uses a variety of non-silicon materials printed on flexible bases, and solar thermal, which uses the sun’s heat to produce electricity.

The solar horizon will look cloudy for a few years to come, says Lux. There will be oversupply through 2012, when they project a demand of 20.3 GW worth of installations vs. a supply of 21.2 GW.

Those in the tech industry know what it feels like when a bubble bursts. Michael LoCascio, senior analyst at Lux Research, puts it simply when he says:

While sales volumes, measured in megawatts, will continue to increase, average sales prices will fall. The result is that revenues for crystalline silicon PV will drop on a year-over-year basis in 2010 for the first time in memory – which will cool the enthusiasm for venture capital funding and IPO events.

Yeah, that’s the sound of the solar bubble popping.

18 Responses to “Solar Bubble to Burst Next Year, Report Says”

  1. Solar thermal wil never die! They are too earthy, natural simplistic, practical and use common known technology not sophisticated stuff! Prop up a mirror and boil water! nothing new here! Spain does it well1 Why worry about a whole concept if one small section falters due to shortages that are temporary in nature anyway! Time marches on, Silicon of high quality will be supplied by some eger entrepreneur seeking profit for effort, and the more things change the more they are the same!

  2. Gross underestimate of the potential for demand growth here. How could you guess the demand there would be for Prius cars or organic food? These things start rolling and are hard to stop.

    Green is going toward the mainstream and picking up additional demand along the way.

  3. This analysis does not take a huge potential market in South Asia into account. Every one of the countries in that part of the world faces power cuts of 5 to 12 hours in every 24 hour period and if solar panel manufacturers would get their heads out of the sand and sell their products there, they would find that the demand / supply assessments that the report here talks about, are bunk. The region is home to 1.5 billion people overall, and even if 10% of the population buys these panels instead of the inverters that they use for emergency power supply drawing from the prehistoric grids there, whoever breaks the market would become a billionaire, at the very least.

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  5. I am not so sure I believe this “over supply” theory. The market for solar will correct and make it much more affordable for residential usage. Especially with solar leasing companies popping everywhere I am not sold. Basic economics tells me that more supply/competition will drive down the price.

  6. Someone send me a penny postcard when someone qualified to comment on manufacturing, engineering or science shows up. Marketing and merchandising was my old gig – New World and Asia.

    My confidence level in “analysts” or “green-geek-economists” is below ground level.

  7. Actually most “green” power is a lot more expensive than fossil fuels or nuclear energy. And like Al Fin said, the production of some of these technologies like solar panels can be very polluting.

  8. Green energy is definitely the best solution in most cases. Technology like solar energy, wind power, fuel cells, zaps electric vehicles, EV hybrids, etc have come so far recently. Green energy even costs way less than oil and gas in many cases.

  9. China has invested heavily in the production of solar-grade polysilicon, based upon the recent runup of prices by a factor of between 5 and 10. The new polysilicon plants are polluting China’s air, soil, and water in a remarkable way, apparently with government blessing.

    When the bubble bursts it will be the peasants whose water, air, and land have been toxified by industrial waste who will be left paying for the sins of their government and corrupt industrialists.