Overcapacity and poor margins have bankrupted a multitude of solar suppliers and forced corporate investors out of the market over the past two years, but the industry is set to recover quickly thanks to converging supply and demand according to Lux Research.
Profit margins will recover as oversupply plummets in 2015, according to Lux. Due to the bankruptcies of uncompetitive players, and underlying financial constraints preventing capacity expansion, overall module capacity will decrease to 58 GW in 2015. Meanwhile, the growth of new markets like China will lead to global demand growth from 31 GW in 2012 to 52 GW in 2015. In combination these will lead to module oversupply of only 12 percent, down from 100 percent in 2012. As a result, module margins will recover up to 10 percent from their near-zero averages today, according to Lux.
Lux says that so-called “corporate thought leaders” will now race to re-enter the market. Some early movers like BASF and Johnson Controls have already made strategic moves to enter the market by leveraging existing technologies or market platforms, while ABB made a billion-dollar acquisition of a major solar inverter supplier. Others will race to form partnerships and make acquisitions in 2015, driving up the cost of entry. Those that choose to slow-play the market will risk finding themselves on the outside looking in, Lux says.
Successful stakeholders are planning years ahead, according to Lux. As the surviving supply landscape becomes increasingly clear, top solar companies are ensuring their positions in the market for the long-term by investing in technologies to increase performance, lower costs, improve product quality, and enable new features. Areas of investment range from high-efficiency crystalline silicon cell technologies to hybrid photovoltaic/thermal cogeneration systems from the likes of IBM, to coatings for higher-quality, longer-lasting modules – a major focus in light of recent allegations of defective products, Lux says.
Lux describes solar’s growing presence in the future energy mix as “undeniable,” as also exemplified in the energy outlooks from several prominent oil companies. It remains to be seen which corporate leaders will find mutually beneficial partnerships and investments early and reap the rewards of growth for a low price, and which “laggards” will miss out on the opportunity, Lux says.
