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Solar: All Eyes On Price Declines At Intersolar Conference

July 13, 2011, 1:35 PM ET

By Tiernan Ray

Analysts covering the solar energy technology industry have been reviewing the wares this week at the Intersolar North America industry conference in San Francisco, which started yesterday and ends tomorrow.

Jefferies & Co. analyst Jesse Pichel writes today that demand from solar project installers is sluggish, with many waiting on the sidelines for pricing of modules and panels to decline further.

“We met with various downstream developers and installers including SunDurance, Focused Energy, Gestamp, Astrum, DC Power, and PSOMA.,” writes Pichel. “Most downstream companies stated that psychology may be the largest factor as developers and consumers await pricing to bottom.”

At the moment, module prices of $1.25 to $1.30 per watt “seem to be holding,” he writes. Production, though, is not slowing, as “tier 1 and 2? producers continue to expand capacity.

“Prepaid equipment will be purchased but non-deposited orders are canceled. Every top-tier company stated that only market share matters and price competition has intensified,” he observes.

Pichel warns that makers of wafers for solar are facing a squeeze, with China Sunergy (CSUN) and Canadian Solar (CSIQ) citing prices for wafers of 50 cents per watt, while polysilicon used to make those wafers is at $45 to $50 per kilo. Pichel advises avoiding the wafer makers until polysilicon makers lower their prices.

Axiom Capital’s Gordon Johnson cites a “current” $1.15- to $1.25-per-watt module price range, and argues some “tier 2? producers that are not fully-integrated manufacturers could be squeezed by module costs of 99 cents to $1.06 per watt.

Johnson writes that his meetings with China Sunergy, Solarworld (SWV), Yingli Green Energy (YGE), Jinko Solar (JKS), as well as other parties such as equipment vendor Meyer Berger and project development vendors Proinso and Highlink Partners, suggest that while European demand remains subdued, demand in the U.S. and China, “is not emerging, as many expected, to offset European weakness.”

Johnson sees another two to three months of inventory in the distribution channel producing further cell and module price declines.

A rosier view is offered by Brigantine Advisors’s Ramesh Misra, who writes today that “there is underlying optimism at Intersolar North America,” driven by “the belief that the industry hit bottom in the first half of 2011, and though spot pricing is still weak and inventory is still high, Germany alone could be a 5-gigawatt market in the second half [of 2011].”

Misra sees project rates of return in Germany “running in the high-teens” given lower module prices, and that could spur demand ahead of the next subsidy cuts in January, he thinks.

Misra, unlike Johnson, is encouraged by U.S. and China prospects: “Some believe that China could also be a nearly 2-gigawatt market this year,” he writes, while California looks to institute a 33% “renewable portfolio standard (RPS) for utilities” by 2020, and governor Jerry Brown is pushing for 12 gigawatts of small-scale renewable energy generation by that time.

He thinks “installers will take advantage of low module pricing to get a jump-start on these initiatives.”

Misra also sees module prices in the $1.15 to $1.25 level, and says he hasn’t seen as much of the “bargain-basement” module producers at $1 per watt that he saw at the Intersolar Europe conference earlier this year.

http://blogs.barrons.com/techtraderdaily/2011/07/13/solar-all-eyes-on-price-declines-at-intersolar-conference/