Is it boom time ahead (again) for solar panel manufacturing?

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The solar industry is in expansion mode, again. First Solar (s FSRL) — the U.S. maker of thin solar panels, which is seen as a bellwether for the industry — said this week that they plan to boost their solar panel production by as much as 46 percent in 2015.

SolarCity, the solar installer founded by Elon Musk’s cousins the Rive brothers, is building its first solar panel factory in New York and expects to roughly double the amount of solar installations to between 920MW to 1,000MW in 2015, company executives said this week during a call with analysts to discuss its third-quarter earnings.

Seems like the boom is back! Or is it?

For those who follow the solar market, that decision by First Solar is remarkable. It was only two years ago that the company — and the rest of the solar industry — struggled to deal with a growing global market that produced way more solar panels than it needed.

That hardship continued through last year and resulted in the demise of many Silicon Valley solar startups and left many VCs with large losses.

First Solar's Agua Caliente Plant, image courtesy of First Solar.

First Solar’s Agua Caliente Plant, image courtesy of First Solar.

Arizona-based First Solar is looking at building new, and restarting or improving existing production lines, in 2015 because it expects more business in the next two years, said First Solar CEO, Jim Hughes, while discussing the company’s third-quarter earnings with analysts. The company also develops power projects and is building hundreds of megawatts worth of solar farms in California alone.

The growth will not only come from First Solar’s foray into markets outside of the U.S. but also the within their home turf, where the end of a 30 percent federal investment tax credit at the end of 2016 is prompting solar project builders try to beat that deadline.

The investment tax credit has driven much of the solar market growth in the U.S. Power project investors, including homeowners who purchase instead of lease their solar panels, could take 30 percent of the cost of a project off their income taxes. That tax credit is set to disappear after Dec. 31, 2016 for homeowners and drop to 10 percent for other types of projects.

The U.S. market has been among the top three big-growth markets worldwide.  Solar panel installations in the country will likely grow 36 percent to reach 6.5 gigawatts in 2014, said GTM Research.

FirstSolarpanel1

The Solar Energy Industries Association, a grade group, is gearing up for a big campaign to get Congress to extend the tax credit. With Republicans retaking control of the Senate and retaining its majority status in the House, solar companies might face a tougher lobbying effort ahead.

Without a clear signal from lawmakers that the tax credit as it exists will live beyond 2016, developers and investors understandably would feel the pressure to hurry up and get their projects done or at least underway in order to qualify to claim the credit. The same rush-rush mentality has happened many times before in the U.S. and in previously hot solar markets such as Spain and Italy (as well as in the wind industry over the years).

The potential loss of the tax credit has driven SolarCity and others to focus on cutting their project development and construction costs. The goal is to make the price of solar electricity on par with power from coal or natural gas power plants without the hefty government incentive. Reaching that goal will allow solar companies to continue to tell consumers that they could end up paying less for electricity over time if they go solar. It also will entice more business and utility customers to sign up.

First Solar - Agua Caliente - Arizona

Reducing manufacturing and project development and construction costs is also critical for First Solar to stay competitive. For several years now, the company has also been focusing on winning customers in emerging markets, such as India and, more recently, Chile. Earlier this week, it announced the groundbreaking of a 46-megawatt project in the United Kingdom.

The company has previously fumbled in its international expansion. Its effort to build 2 gigawatts of power projects in China’s Inner Mongolia was declared dead earlier this year.

Hughes said he recently hired a new manager to work on developing the Chinese market. But China will not be a priority in the near term partly because profits tend to be thin for projects there.

While First Solar plans to boost production to meet anticipated demand, it’s being cautious about firing up too many assembly lines to contribute to another glut in the market.

“There’s quite a lot of capacity being added in the marketplace right now,” Hughes said. “You’ll continue to see a bit of imbalance of supply and demand. We are cautious about not heading into another period of excess capacity.”

 

 

4 Comments

lunavinluz01

Solar Power industry have to grow for many reasons, special if we want a cleaned environment. I myself are looking to learn more about it, to have my own company selling and installing it. I believe on it so much that I’M willing to spend some of my money on it.

RobPaulGru

What is America’s population of desert dwellers is the most important question. This is not feasible for more than 80% of the US lower 48 land mass.

Siraj Shaik

Nice article. Rather solar panels been in market past more than two decades, but most of the nations have overseen the benefits by having mass production units in those respective countries which could have contributed towards promoting green environment as well as sustainable ways. While the natural resources being either exhausted by continuing power generation thro Hydro, Thermal, Oil & gas at the same have increased cost factors. Alternatively effecting the economy & environment factors. It’s high time for those nations whose dependency is either hydro or thermal power generation look into aspects of rethinking to bring reforms in saving energy as well as their natural resources. One person’s views or contributions cannot change everything but with team work & gaining the people’s confidence, cooperation by promoting educative aspects related to energy, economy & environment will surely workout. When everyone will come up with an attitude into considering positive change that’s needed, will see a better tomorrow that gives the best for coming generations.

Spec9

If you are a competent DIYer, you are crazy if you don’t install solar PV as a project. It is free money.

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