Manufacturers Suffer, But Buyers Rejoice

LOS ANGELES, Calif. — With dozens of new photovoltaic (PV) module factories churning out more panels than the market can absorb, PV prices are finally dropping.

“A dramatic fall in the price of solar panels has made the clean power source a better deal than ever before, but solar manufacturers’ profits have dwindled, thanks to that rapid decline,” reports the Reuters News Service. “After hitting $4.20 a watt in the middle of 2008, solar panel prices have slid almost 30 percent to about $3 a watt, with research firm New Energy Finance predicting a further 20% drop this year.”

According to John Segrich, an analyst for Gabelli & Company, this year’s worldwide demand for PV modules is estimated at 5,200 mW, while the 20 largest PV module manufacturers are expected to produce 7,000 mW this year. This oversupply is one reason why PV module manufacturers have seen their stock prices drop by 50% from recent peaks.

PV prices are likely to continue dropping in months ahead. Renewable Energy World reported, “The cost of photovoltaic electricity is due to plummet in 2009, according to a new analysis by New Energy Finance. Its latest Silicon and Wafer Price Index shows average silicon contract prices falling by more than 30% in 2009 compared with 2008. . . . Furthermore, with thin-film PV module manufacturing costs approaching the $1/watt mark, crystalline silicon-based PV will come under severe competition for larger projects, resulting in margins shrinking throughout the silicon value chain, the company argues. . . . This may pressure crystalline silicon module manufacturers to reduce selling prices . . . $4/watt could drop to $2.60/watt by the end of 2009.”

Of course, lower PV prices is good news for builders and homeowners, especially in light of the 30% federal tax credit for PV installations. “It’s a great thing,” Barclays Capital analyst Vishal Shah told Reuters. “The pain that we are seeing in the industry right now is going to manifest into stronger growth in 2010 because prices are so low.”