Solar PV panel prices may decline by about 10% in 2011

With the growth of demand in the European market, solar panel prices in 2011 may fall by about 10%, which is lower than analysts had expected.

The average price per megawatt in the first quarter will drop to $1.65, which is higher than the average estimate of Bloomberg's previous survey of five analysts of $1.50. Five analysts included John Hardy of Gleacher and Sanjay Shrestha of Lazard.

For many years, the reason for the price drop was due to Chinese PV manufacturers including Trina Solar, which impacted European manufacturers such as Solarworld AG in Germany. The new expectation means that the global photovoltaic market is expected to sell 17,000 megawatts of photovoltaic equipment, and its revenue will increase by 2.55 billion U.S. dollars.

Hardy said that prices will continue to fall in the first half of 2011, taking into account the more healthy demand environment in the global market, the decline will be narrowed year-on-year.

From TRW Solar to First Solar, the profit potential of these largest low-cost PV manufacturers has risen. Investors have begun to increase their profitability expectations for some PV companies.

Last month, Trina Solar and JA Solar gained 30% and 24%, respectively, while the Bloomberg Global Leaders Solar Index rose by only 7.7% over the same period.

Before the German and Spanish governments planned to subsidize the PV industry, major manufacturers flocked to complete the construction of solar projects. At the same time, growth in France, the Czech Republic, and the United States will continue into 2011, and analysts expect sales revenue to increase by 20%.

Hardy and Shrestha said demand growth in Europe and North America will overtake Asia.

Stocks and other evidence also indicate rising demand in the photovoltaic industry:

Reduce inventory

The inventory cycle of PV products decreased by 19% in the second quarter to 84 days. Hardy said shipments remained strong in the third quarter.

JA Solar has reached an agreement with customers last week. In 2011, it will provide 500 megawatts of photovoltaic products to customers and the price has not been disclosed. JA Solar said that customers have paid part of the contract price.

Paul Clegg, the US subsidiary of Mizuho Securities, said in an interview that it was somewhat surprised by the prepayment, which is a signal of price increases and shows that demanders are worried that the next year's shortage may lead to price increases.

Dan Ries, an analyst at Collins Stewart, said that the spot price of PV modules in Europe is about US$1.8 per megawatt. The transaction price is higher than the contract price, indicating that demand continues to exceed supply. From July to August, the seven largest photovoltaic cells in Taiwan All sales revenue of the manufacturers rose.

German market recovery

Photovoltaic product sales in Germany account for about half of the global market. With the expansion of PV manufacturers in France, Italy and North America, concerns about the decline in sales in the region have gradually subsided.

Barclays Capital analyst Vishal Shah told clients in a notice that the demand in the northern market of Germany appears to be stronger than investors’ expectation and that Germany’s photovoltaic industry activity has recovered in two weeks.

Some analysts lowered their expectations, saying that the government may change the subsidy and Asian manufacturers can quickly increase production capacity.

Jenny Chase, chief economist of the new energy industry at Bloomberg, said that next year France will strengthen supervision of new solar projects, limiting market growth in the region, and the Czech Republic will be able to control PV costs and development through licensing.

Chase said in an interview that although the European market is stronger than we thought, there will still be many uncertainties next year. Chinese PV manufacturers can increase their production capacity rapidly to meet market demand, leading to a drop in prices.