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Growth in the solar industry?

December 2, 2009

By Drs. Robert & Sonia Vogl

President and Vice President

Illinois Renewable Energy Association

From 2004 through 2008, the solar electric industry grew at a phenomenal rate approaching 50 percent per year. The demand was driven by tax incentives, direct subsidies, feed-in tariffs and a resurgence of interest in clean and secure energy supplies.

It stimulated an expansion of polysilicon supplies, an increase in new manufacturing facilities, the entry of new manufacturing firms and visions of desperately needed new engineering, manufacturing and installation job opportunities. Although some in the industry warned that accelerated growth was unlikely to continue at such a high level, it did little to stop the boom.

By 2009, the boom became another victim of the economic crisis. One estimate for global sales for 2009 anticipates a 17 percent drop.

Expanded supplies of polysilicon flooded the market, contributing to a decline in the cost of solar cells. Spain cut back on its commitment to solar electricity, removing 1.5 gigawatts from the marketplace. Cheap imports from China expanded and were met with claims that they were dumping product at below cost in Europe and the United States. Some utilities announced plans to cut back on their support of solar electricity.

The reduction in demand has led to shutting down production facilities and laying off employees. Some companies have only used half of their factory capacities this year. The turmoil in the industry is likely to speed up consolidation and facilitate the emergence of major companies able to deliver economies of scale.

Some analysts believe it will take up to three years for the solar electric market to recover. Solar companies are hopeful that the United States will be the next big market for solar sales, and manufacturers continue to move forward with their factory expansion plans in spite of overcapacity in the industry. Much of the new production capacity is expected to occur in the United States as the “buy American” provisions in the American Recovery and Reinvestment Act (ARRA), passed this year, contain numerous incentives for domestic manufacture of solar cells and modules.

We wondered what impact the adverse economic conditions have had on installers we know, so we called some to find out how they are faring in these tough economic times. Compared to 2008, the year has been slow for most of them. Some indicated they remained busy all year, with the majority stating they have been busy this fall.

While many of the installations were 2 kilowatts in size, three larger systems are being installed. One is a 50-kilowatt system, another a 7.5-kilowatt system and a third a 67-kilowatt system.

The reinstatement of the rebate system this fall and federal tax credits are having a positive impact on the market. Others anticipate the federal stimulus package of the ARRA should soon have a positive impact on solar installations. People still want solar electric systems, but either lack the cash or credit to finance projects, or have been holding on to cash given the economic conditions. Considering the potential of commercial and utility interest in PV systems, pent-up demand could be expressed in terms of terrawatts.

While the prices of solar panels have fallen because of the glut in the marketplace, prices of inverters and aluminum used in systems have risen somewhat, offsetting the drop in panel costs.

Drs. Robert and Sonia Vogl are founders and officers of the Illinois Renewable Energy Association (IREA) and coordinate the annual Renewable Energy and Sustainable Lifestyle Fair. The Vogls and the IREA are members of the Environmental Hall of Fame. Dr. Robert Vogl is vice president of Freedom Field, and Dr. Sonia Vogl is a member of Freedom Field’s Executive Committee. The Vogls consult on energy efficiency, renewable energy and green building. They have 3.2 kW of PV and a 1 kW wind generator at their home. Forty acres of their 180-acre home farm are in ecological restorations. They are active in preserving natural areas and are retired professors from Northern Illinois University. E-mail sonia@essex1.com.

From the December 2-8, 2009 issue

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