Are Solar Companies Hoping to Double Panel Sales This Year?

The solar industry is getting big, but will it double in 2011 over 2010?  Solar companies are expected to double capacity to 36 gigawatts this year (the equivalent of 36 nuclear power plants!).  Capacity is the key word there.  Yes, they will likely double capacity as they have been generating 100% IRRs on new plant construction.  More is better, right?

The problem is sales need to double in order to fill all that capacity.  Will that happen?  I personally do not think so.  Last year, the industry was saved by Italy catching a Hail Mary as they installed about 5 times the number of power plants they had originally had forecast.   That will not happen in 2011 according to sources in the government.  Within the next couple of months the subsidy incentive spigot will be turned off.

So, who will create the demand for all this new supply?  It must come from countries willing to subsidize the installation of the solar plants.  The US?  No way, not with the current government makeup.  What about Africa?  There is not enough money there. 

The only country with the willpower to really put on capacity is China.  Unfortunately, China has just announced that it will be studying the successes and failures in Europe’s solar programs this year, and will announce something for 2012. 

The bottom line here is that the solar component industry is operating in a state of hope.  Probably only 10% of the planned installs have money down on the equipment.  This is a train wreck in the making.  Expect a very volatile year for the solar component manufacturers as selling prices get crushed by the excess supply.

Potentially the only beneficiaries in this situation will be installers in jurisdictions where subsidy levels remain high and there is budget to subsidize a robust pipeline through 2011.  It looks like the US installers could be the big beneficiaries of this impending price drop in component prices.