Solar Glut Worsen As Sales Drop For First Time in 10 Years

Fewer solar panels will be installed this year as the first drop in more than a decade worsens a glut of the unsold devices that’s already slashed margins at the top five manufacturers, an analyst survey showed.

Homes and businesses will put up 24.8 gigawatts of solar panels worldwide, according to the average of six forecasts compiled by Bloomberg News. That’s equal to the power of about 20 nuclear reactors and down 10 percent from the 27.7 gigawatts added last year. Installations have grown 61 percent a year on average since 1999, Bloomberg New Energy Finance estimates.

The decline would be the first since Germany began offering premium rates for solar power in 2004, opening the way for mass, utility-scale installations. It will exacerbate price-cutting and a surge in inventories that last year forced Solyndra LLC into bankruptcy, prompted SunPower Corp. to seek a buyout and gutted margins at top manufacturers led by Suntech Power Holdings Co. and First Solar Inc.

“Overcapacity has been an overhang for this industry, and with Germany tightening it doesn’t seem like it will ease,” said Amir Rozwadowski, an analyst at Barclays Capital Inc. in New York. “It’s difficult to assess where there’s a significant push-out that would lead to accelerating demand, given the anticipated decline in Europe.”

Germany and Italy, the biggest photovoltaic markets, cut subsidies to curtail a boom last year, helping depress prices for panels by more than 50 percent.


Supply Glut

The capacity of factories to produce photovoltaics may top 38 gigawatts this year, 53 percent more than the median demand forecast, according to New Energy Finance estimates. The London- based research company expects installations to slip this year to 24.6 gigawatts.

That overcapacity dissolved margins of as much as 30 percent that the biggest solar manufacturers enjoyed two years ago. Trina Solar Ltd. (TSL) said Feb. 23 its gross margin was 7.1 percent in the fourth quarter of 2011, down from 31 percent a year earlier. Suntech, the world’s biggest solar company, said its gross margin fell to 9.9 percent in the most recent quarter from 17 percent.

The Bloomberg Large Solar Index tracking 17 manufacturers lost 68 percent of its value last year, led by drops at Hanwha SolarOne Co. and Renesola Ltd. (SOLA) of China and Conergy AG of Germany. This year, the benchmark has gained 13 percent, led by Renesola and Conergy.

China may double its installations this year, absorbing some of the excess production, according to Suntech and Trina. The two companies in January said they expect the nation to add 4 gigawatts to 5 gigawatts of panels this year compared with 2.2 gigawatts in 2011.


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