The solar industry is set for a rebound, according to Lux Research’s Solar Systems Intelligence and Solar Components Intelligence teams.
This follows two years in which overcapacity and poor margins have bankrupted a multitude of solar suppliers and forced corporate investors out of the market.
According to Lux, smart corporate investors have recognised the coming resurgence and formed partnerships in strategic areas like system deployment or the balance of systems technologies. Furthermore, companies are seeking differentiated technologies to position for growth that will define winners and losers years down the line.
The industry’s turnaround is due to a number of factors which are reversing its downward momentum.
Lux’s analysis of solar market economics suggested that margins should recover as the current oversupply issues dogging the market will plummet in 2015.
It said that due to the bankruptcies of uncompetitive players, and underlying financial constraints preventing capacity expansion, overall module capacity will decrease to 58 GW in 2015.
Meanwhile, the growth of new markets like China will lead to global demand increasing from 31GW in 2012 to 52GW in 2015. In combination these will lead to module oversupply of only 12% – down from 100% in 2012. As a result, module margins will recover up to 10% from their near-zero averages today.
Major players are also expected to re-enter the market. Some early movers like BASF and Johnson Controls have already made strategic moves to enter the market by leveraging existing technologies or market platforms, while ABB recently made a billion-dollar acquisition of a major solar inverter supplier.
Others will race to form partnerships and make acquisitions in 2015, driving up the cost of entry. Those that choose to slow-play the market will risk finding themselves on the outside looking in, it warned.
The report also stated that stakeholders are planning several years ahead. As the surviving supply landscape becomes clearer, winners are ensuring their positions in the market for the long-term by investing in technologies to increase performance, lower costs, improve product quality and enable new features.
Areas of investment range from high-efficiency crystalline silicon cell technologies, such as First Solar’s acquisition of Tetrasun, to hybrid photovoltaic/thermal cogeneration systems from the likes of IBM, to coatings for higher-quality, longer-lasting modules – a major focus in light of recent allegations of defective products.
The market is also said to have changed drastically over a short span of time. Large, dominant manufacturers have risen alongside many spectacular failures as a result of steep cost reductions.
Moreover, corresponding incentive reductions by governments have forced developers to quickly adapt business models and find new markets. These growing pains have scared many investors away. but the positive longer term outlook on market and industry player health is expected to bring many back into the fold, Lux suggests.
