Solar-panel installations may rise by more than 50 percent this year, matching Apple Inc.’s 2010 sales increase after launching the IPad, as the technology emerges as a mainstream consumer product.
Builders may add as much as 28 gigawatts of new generating capacity, equal to about 25 new nuclear reactors, according to Bloomberg New Energy Finance. The analysis company raised the top of its forecast range to 28 gigawatts from 21.5 gigawatts in January. About 18.5 gigawatts were installed in 2010.
Power users in the sunniest parts of California, Italy and Turkey for the first time can generate solar electricity for about the same rate utilities charge for conventional power, New Energy Finance Chief Solar Analyst Jenny Chase said. Panel makers including China’s JA Solar Holdings Co. and First Solar Inc. (FSLR) of the U.S. more than doubled global manufacturing capacity in 2010, helping drive down prices for homes and companies.
“People will see their neighbors put up panels and ask how it works,” Chase said in a telephone interview from Zurich. “They might think it’s still expensive, but next year the installer will come back with a lower price. And so it goes.”
Producers of solar-grade silicon for panels such as MEMC Electronic Materials Inc. and Renewable Energy Corp. (REC) are best-placed to benefit because the chemical process they use is more difficult to replicate than the technique for assembling panels, Chase said. Investors have taken notice.
Both companies trade above the industry average in terms of estimated earnings compared with share price. MEMC of St. Peters, Missouri, trades at 11 times estimated profit, while Norway’s REC is at 14 times, compared with the 10 times-earnings average for the 37-member Bloomberg Global Leaders Solar Index.
The purified material, known as polysilicon, is likely to be in short supply as the industry only has capacity to produce about 24 gigawatts of it annually, said Chase, who supervises a staff of six solar analysts. Additional demand will likely be met by thin-film panels that generate power from other substances such at cadmium telluride.
The 28-gigawatt top end of New Energy Finance’s forecast for 2011 is almost equal to the generating capacity of the combined nuclear-reactor fleets of Germany and China, which took decades to build. The mid-point, 24 gigawatts, represents a 30 percent increase on 2010, when installations more than doubled.
The price of solar panels will likely fall to $1.50 per watt in the second half of the year compared with around $1.80 in 2010, Chase said.
$5 Per Watt
Full solar systems, which include racks, cables and converters, will cost about $5 per watt, making photovoltaic power potentially a $140 billion industry this year. That’s on par with the global market for major domestic appliances like dishwashers, refrigerators and tumbledryers, according to London-based Euromonitor International.
“It’s no longer a niche technology,” said Antony Froggatt, a senior research fellow for energy and environment at Chatham House in London. “It’s becoming a mainstream contributor to the electricity system.”
Apple, whose IPad helped open the consumer market for tablet computers as its iPhone did for smartphones, increased sales to $65 billion in the year to Sept. 30, with the iPad sales of $2 billion in its first three months. Overall revenue at Apple, the biggest electronic goods-maker, will reach $100 billion (AAPL) this year, according to a survey of 48 analysts by Bloomberg News.
While both touch-screen mobile computers and silicon-based solar panels were available in prototypes decades ago, they needed a series of technological breakthroughs before sales could rocket.
Germany, the biggest market for solar panels, will hold its No. 1 ranking this year, installing at least 6 gigawatts of panels, followed by Italy with at least 4.5 gigawatts, New Energy Finance estimated. The U.S. will see about 1.6 gigawatts plugged in.
Panel producers may see their profit margins squeezed after new factories boosted annual production capacity to about 32 gigawatts at the end of last year from 15 gigawatts in 2009. Production capacity exceeds demand even under Chase’s most optimistic scenario.
“I can’t see them all succeeding -- they are in a Catch-22 situation,” Chase said, referring to the 1961 novel by Joseph Heller that portrays series of no-win scenarios. “If they don’t expand they can’t reduce costs and if they do expand they are contributing to massive overcapacity.”
Demand for solar may be supported by a backlash against atomic generators after the radiation leak at the Fukushima plant in Japan. The WilderHill New Energy Index has gained almost 7 percent since the March 11 accident as governments around the world reviewed their nuclear plans.
Germany, where Chancellor Angela Merkel halted the seven oldest reactors on March 15, has 20.5 gigawatts of nuclear power from 17 reactors while China has 10.1 gigawatts, according to the Vienna-based International Atomic Energy Agency. The Chinese government, which halted approvals for new reactors, is building 27.2 gigawatts of new reactors, out of 62.9 gigawatts under construction around the world.
New reactors average about 1.1 gigawatts in capacity.
Nuclear power plants that can run 24 hours a day typically generate at least five times as much electricity as solar plants of the same capacity, which are dependent on the intensity of the sunshine, Chase said.
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