Solar Panel Prices ‘Close to Bottom,’ According to Deutsche Bank

Solar panel prices will stop falling after a slump last year pushed them to unprofitable levels, forcing producers to cut output, according to Deutsche Bank AG.

“Prices are close to a bottom,” Vishal Shah, a New York- based managing director and solar analyst for the bank, said in the western Indian city of Jaipur today. “They’ve stabilized across the supply chain because companies are losing money.”

Prices fell 47 percent in 2011, according to data compiled by Bloomberg. Excess production capacity forced producers to lower prices, depressing margins and prompting 15 of 17 members of the Bloomberg Large Solar Index to post quarterly losses. Chinese companies led by Suntech Power Holdings (STP) Co. supply about half of the world’s solar cells and have 45 percent of its capacity for polysilicon, a raw material used in panels.

“Companies can’t make money by just adding new capacity anymore,” Shah said in an interview at the Solarplaza conference in Jaipur. “We expect significant supply reductions in the next 12 months” for solar panels.

Polysilicon prices are set to drop further to about $20 a kilogram because of growth in output capacity, he said. The average spot price for polysilicon fell 59 percent to $29.28 a kilogram in a year, according to Bloomberg New Energy Finance.

China idled almost a third of its polysilicon production in December to support prices, while a glut in panel capacity will cut the number of local manufacturers to 15 from more than 300 within five years, the state-run Energy Research Institute says.

To contact the reporter on this story: Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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Solar Panels in the U.K.

Simon Battensby/Getty Images

Photographer: Simon Battensby/Getty Images