Buying Low: The Solar Industry’s Imminent Return to Health and Profitability
After two years of turmoil the solar industry is set to rebound, and surviving
stakeholders have a fresh new outlook that’s ripe for investment, says Lux
BOSTON -- May 30, 2013
Overcapacity and poor margins have bankrupted a multitude of solar suppliers
and forced corporate investors out of the market over the past two years.
However, according to Lux Research, the industry is set to recover quickly
thanks to converging supply and demand. Smart corporate investors have
recognized the coming resurgence and formed partnerships in strategic areas
like system deployment or balance of systems technologies. Further, companies
are seeking differentiated technologies to position for growth that will
define winners and losers years down the line.
The industry’s turnaround comes as a result of multiple factors reversing its
downward momentum. Lux Research’s Solar Systems Intelligence and Solar
Components Intelligence teams analyzed solar market economics and industry
movement, and found the following:
*Margins recover as oversupply plummets in 2015. Thanks to the bankruptcies
of uncompetitive players, and underlying financial constraints preventing
capacity expansion, overall module capacity will decrease to 58 GW in
2015. Meanwhile, the growth of new markets like China will lead to global
demand growth from 31 GW in 2012 to 52 GW in 2015. In combination these
will lead to module oversupply of only 12%, down from 100% in 2012. As a
result, module margins will recover up to 10% from their near-zero
*Corporate thought leaders will race to re-enter the market. Some early
movers like BASF and Johnson Controls have already made strategic moves to
enter the market by leveraging existing technologies or market platforms,
while ABB made a billion-dollar acquisition of a major solar inverter
supplier. Others will race to form partnerships and make acquisitions in
2015, driving up the cost of entry. Those that choose to slow-play the
market will risk finding themselves on the outside looking in.
*Stakeholders are planning years ahead. As the surviving supply landscape
becomes increasingly clear, winners are ensuring their positions in the
market for the long-term by investing in technologies to increase
performance, lower costs, improve product quality, and enable new
features. Areas of investment range from high-efficiency crystalline
silicon cell technologies – note First Solar’s acquisition of Tetrasun –
to hybrid photovoltaic/thermal cogeneration systems from the likes of IBM,
to coatings for higher-quality, longer-lasting modules – a major focus in
light of recent allegations of defective products.
The market has changed drastically over a short span of time. Large, dominant
manufacturers have risen in concert with many spectacular failures thanks to
steep cost reductions. Meanwhile, corresponding incentive reductions have
forced developers to quickly adapt business models and find new markets. These
growing pains have scared many investors away but the positive outlook on
market and industry player health is sure to bring many back into the fold.
The industry’s rough maturation has cast it in a poor light, but solar’s
growing presence in the future energy mix is undeniable, as also exemplified
in the energy outlooks from several prominent oil companies. It remains to be
seen is which corporate leaders will find mutually beneficial partnerships and
investments early and reap the rewards of growth for a low price, and which
laggards will miss out on the opportunity.
Register for a complimentary Lux Research webinar, “Reaching the Light at the
End of the Tunnel: The Coming Resurgence of the Solar Industry,” on June 25 at
About Lux Research
Lux Research provides strategic advice and ongoing intelligence for emerging
technologies. Leaders in business, finance and government rely on us to help
them make informed strategic decisions. Through our unique research approach
focused on primary research and our extensive global network, we deliver
insight, connections and competitive advantage to our clients. Visit
www.luxresearchinc.com for more information.
Lux Research, Inc.
Carole Jacques, 617-502-5314
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