Investing

US Solar Market Tells Good News/Bad News Story (FSLR, SPWR, JASO, TSL, STP, LDK)

The Solar Energy Industries Association (SEIA) and GTM Research have released their review of the US solar market for 2011. The good news is that new solar installations more than doubled year-over-year from 2010. The bad news is that the collapse in solar module pricing took a heavy toll on solar makers’ profits.

US solar makers First Solar Inc. (NASDAQ: FSLR) and Sunpower Corp. (NASDAQ: SPWR) and major Chinese suppliers JA Solar Holdings Co. Ltd. (NASDAQ: JASO), Trina Solar Ltd. (NYSE: TSL), Suntech Power Holdings Co. Ltd. (NYSE: STP), and LDK Solar Co. Inc. (NYSE: LDK) suffered significantly from the rapidly falling prices.

The US installed 1,855 megawatts of new solar projects in 2011, representing 7% of global new solar installations for the year, up from 5% in 2010. Total US solar generation capacity rose to 3,951 megawatts.

The weighted average system installation price fell by 20% in the year, which made it more economical for customers to build a new system. The declining price was the result of a 37% price drop in the cost of polysilicon, a 40% drop in the price of modules, a 62% drop in the price of wafers, and a 60% drop in the price of cells.

US solar manufacturing in 2011 was flat with 2010, an indication that the sharp growth in installations was the result of lower pricing driven by Chinese solar makers. This raises the question of whether or not there is a place for US solar makers in the manufacturing of solar panels. Here’s what the SEIA/GTM Research report has to say:

We continue to believe that the U.S. can maintain a presence in manufacturing innovative, proprietary technologies, particularly in the early stages of commercialization. Apart from this, the U.S. can remain home to the bulk of innovations that drive down the cost of solar power for years to come. That being said, it would be unreasonable to expect all (or even most) solar manufacturing to come from the U.S. The solar industry is global, and consequently subject to the same economic forces as manufacturing in other sectors. Undoubtedly, some portions of the value chain will find domestic manufacturing attractive while others will not. The U.S. certainly has a role to play, but it will be over the next decade that the nature of that role will be determined.

In other words, expecting the US to re-capture its solar manufacturing position is folly. That’s certainly reasonable. But the part about maintaining technological leadership is arguable at best. China’s solar industry continues to drive its own innovations, both in technology and manufacturing, and to expect that development to slow down may be wishful thinking.

Small US start-ups will also contribute to new solar technological development. But commercializing those innovations will require manufacturing development on a scale that the US might be unwilling to undertake in the sake of the collapse of Solyndra.

Far more US jobs will be created by boosting new solar installations than will ever be created by trying to win back manufacturing lines. As a matter of US policy, that seems to be where the country focuses its attention.

Paul Ausick

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