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Solar power: industry overload will come in 2009

suncloud.jpgCan you ever get enough sun? Greenbang guesses that all those SAD cases in Britain would mumble a wishfully resounding ‘no’. After all, it’s not as though we’re overly blessed with sunshine. For the average Brit, one sunny Saturday afternoon does a summer make but not only will the sun not be delivering the tan Greenbang would hope for any time soon, it won’t be able to keep up with electricity demands either.

Being a pasty Brit, Greenbang was unhappy to learn that this is the imminent future facing the solar power industry. According to the sun worshippers at Lux Research, the solar power industry will begin to fizzle a bit in 2009 when supply begins to exceed demand.

Lux estimates that that the annual solar industry will grow to $70.9 billion in 2012, up from $21.2 billion in 2007, but 2009 will mark the decline in the boom time driven by early adopting countries such as Germany, Japan and Spain.

Says Lux Research Senior Analyst Ted Sullivan:

“During this period, solar demand has consistently outpaced supply. But the market is now approaching a tipping point: we project that the supply of solar modules will exceed demand in 2009, leading to falling prices and a shake-out among companies that aren’t prepared to thrive in this new environment – particularly crystalline silicon players that haven’t invested in new thin-film technologies.”

Lux Research projects that the costs of supplying solar generated energy will fall as consumption grows. As a result, it reckons, demand for solar technology will slacken, dampening investment interest in solar companies. Other factors such as the withdrawal of government subsidies and mounting materials costs will also give the industry a bit of a kicking.

And there’s more:

While the solar IPO environment has exploded since 2005 – of the 46 solar IPOs that have taken place on major exchanges since 1995, 76% have occurred in the last three years – solar IPOs dropped in 2007, as total funds raised fell 40% from 2006’s level to $2.20 billion. Since 1995, the 46 solar companies that have gone public on major exchanges have raised a total of $7.33 billion and boasted combined opening valuations of $34.7 billion.

Solar M&A has only become a factor in the last two years. All told, 41 solar M&A deals have taken place since 1995, totaling $2.48 billion – but 97% of this value has been realized since the beginning of 2006, owing largely to an acquisition spree by thin-film solar manufacturing equipment supplier Applied Materials.

1 Comment

  • Kevin
    Posted April 8, 2008 at 6:48 pm

    One thing not addressed by the article is the that the demand side of the Solar equation is mostly industry looking for a tax shelter and wealthy individuals. Paying up front for 20 years of energy cost is a big investment. Enter the PPA or Power Purchase Agreement. This allows individuals and companies to add solar power but not have to carry the cost burden up front. The power company essentially leases the rooftop space and the property owner agrees to a buy the power produced at a set rate. The property owner doesn’t have to perform the up keep or pay for repairs. The power company receives the tax benefits and the long term revenue. This financing innovation is growing fast and I think will continue the boom in solar.

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