Solar Component Prices Continue to Fall

The current decrease in prices is attributed to “poor order controls” and stagnant demand. 

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The prices of solar cells with 17% conversion efficiency rates have fallen further this week from $0.45/w to $0.42/w, representing a decrease of about 6%. Other industry analysts have indicated a price below the $0.40/w mark for some of the solar cells. The continuous fall of panel prices is the biggest concern for the industry, as profits are wiped out; several firms had to file for bankruptcy. The current decrease in prices is attributed to “poor order controls” and stagnant demand.

As SolarWorld’s case against Chinese manufacturers gains momentum, Europe’s demand for photovoltaic is expected to fall.  All the global solar firms in general, and Chinese firms in particular, are now looking toward the new emerging markets of the Middle East, South America, and Africa for business opportunities. Industry analysts are also hopeful that the Japanese market will pick up after the announcement of the new FiT program.  

The problems for the global solar industry were further aggravated when in May, the U.S. Commerce Department imposed up to 250% tariffs on Chinese solar panel manufacturers, excluding the 3% - 5% tariff imposed in 2011, as the US suspected that government subsidies favored Chinese manufacturers unfairly. As a result, Trina Solar had reported a decrease of 20% in shipments for Q2 2012. A day later, on Tuesday, Canadian Solar (NASDAQ: CSIQ) also revised its Q2 shipment estimates downward, although modestly, from 430MW - 450MW to 410MW - 420MW. The small decrease was due to the fall in US demand; however, the company will still able to improve on its shipment numbers from the first quarter of the current year.

Dr. Shawn Qu, the company’s chairman and CEO, believes that, “As a Tier 1 company, focused on non-commodity opportunities, including our rapidly expanding global project business, we are succeeding in an otherwise challenging market.  We are driving sales growth in higher value segments, reducing our manufacturing costs, maintaining strict supply chain oversight and working to further improve our operating cash flow." Canadian Solar also expects its gross margin to remain between 12.0% - 12.5%. However, due to the Euro’s fall in value against the US dollar, the business recorded a foreign exchange loss of $8M.

Some developing countries, such as India and Pakistan, have announced their solar energy plans, while Saudi Arabia also announced a massive 41GW solar energy strategy. However, it might take several months until these strategies are converted into purchase orders, which will eventually increase the demand for solar panels. Until the solar cell manufacturers start receiving orders from new and emerging markets, the problems of panel prices and over capacity are likely to persist. An increase in demand might happen sooner than expected as on Monday, India’s Ministry of New and Renewable Energy (MNRE) reported that the country had crossed the 1GW solar photovoltaic installation mark. The recently released data suggests that as of June 30, 2012, the country had an installed solar capacity of 1,030.66MW.