Solar Industry 2014

The solar industry is seeing a revival in 2013, thanks to an unprecedented demand growth in Japan and China. Despite the Chinese government keeping alive a massive amount of bankrupt capacity, solar panel prices have stabilized at the 60-70c/watt price as Japan drives up the solar panel prices. Top companies have managed to run at 100% utilization as China and Japan could account for almost 60% of global demand in 2013. This is a complete change as demand in the previous years used to depend entirely on Europe. Now the whole locus has shifted towards Asia. 2013 should be a growth year after a flat 2012, but will the growth sustain in 2014 as China and Japan start to reduce their demand.

Its impossible to predict solar demand given that the industry is still in infancy and solar technology is changing dramatically. However, one thing that should be kept in mind is that the solar panel industry always surprises on the upside. Despite massive demand busts in countries such as Spain, Czech, Italy, demand in solar industry continues to grow at a 10 year 50% CAGR. I don’t think China and Japan can sustain much more than 10 GW of demand per year (China could, but it faces grid constraints in wind already). Europe also has saturated most of its big markets with solar energy. So most of the new demand will have to come from USA, Latin America, Africa and rest of Asia.

Read on GWI Japan to become the world’s biggest Solar Market by Revenues.

India should be a big growth driver, given the country’s huge energy needs and fuel problems. Solar energy has already become quite cost competitive in many applications and governments are strongly supporting solar energy to meet massive energy deficits. South Africa has also taken a big leap by giving permissions for huge solar panel projects. Brazil, Chile and Peru are starting to warm up to solar energy. Brazil should be another major growth driver given the country’s high solar insolation and electricity costs.
I think that solar growth is going to slow down to 15-20% a year, as the base effect starts making its presence felt. Solar energy is no longer a 100 MW industry like the early 2000s but a 30 GW industry now. Note the solar industry is now entering a more mature phase which cannot sustain a 50% CAGR now. However, the high double digit growth rate is nothing to scoff at and the right stocks will make a huge amount of money for investors.

The initial stage of high competition is ending and consolidation is seeing the industry revolve around fewer players. The technology is also getting standardized, as silicon solar panels leave others in the dust. This is the classical growth pattern seen by industries during their life cycle.

Read on GWI List of Solar Companies By Country.