Aug 22, 2016: The solar industry seems to be in a state of turmoil, which will continue to persist and might even get worse in 2017, according to industry analysts. The leading solar firms have been repeating the same mistakes again and again, and developers are continuing to bid low. In addition, unsustainable costs for energy contracts resulted in a hustle of bankruptcies in 2012. Rather than learning from past mistakes and growing in a steady manner, the solar industry is moving ahead towards a bad year, which calls for immediate correction.
First and foremost, it is essential to know about the history of boom-bust cycles in the solar industry, which has developed from nearly nothing since a decade, giving executives and investors delusions of splendour in their own expansion potential. The earliest bust took place in 2012 when years of expansion in solar module components ultimately came to a deafening end. The four outputs in solar manufacturing which included polysilicon, wafers, cells, and solar modules, all ultimately became oversupplied and prices came crashing down. This resulted in the bankruptcy of solar giants such as Suntech Power, LDK Solar, Energy Conversion Devices and Solyndra.
Such bad luck of solar producers seemed to be profitable solar developers. Low-cost solar panels from an oversupplied industry made solar price competitive, resulting in enormous expansion plans for developers such as SunEdison and Abengoa. Almost each part of the solar value chain has passed through a phase bankruptcies owing to cost competitiveness with fossil fuels and, the solar firms take on too much development with hardly any revenue, which ultimately leads to its downfall.
Lack of restraint
The continuing lack of restraint might be occurring in manufacturing as well. Canadian Solar is likely to boost module capacity from 4,330 MW at the end of 2015 to 5,800 at the end of 2016, according to industry analysts. On the other hand, SunPower is in the middle of tripling its facility between 2015 and 2019.
Even after the adversities that SunEdison and Abengoa have went through in the past, solar developers continue to appear keen on building projects on razor thin margins with assumptions of extremely small debt costs. Both SunPower and First Solar have scaled back their expansion businesses since they don’t perceive the danger/remuneration as favorable in budding projects, mainly in some upcoming markets.
A hint of hope
The sole bright spot that come into view comprises of residential and commercial solar firms. SolarCity and Sunrun are set to increase their prices and are going after higher-margin consumers. Both the companies will not go for low-margin consumers simply to grow. SunPower has enlarged its margins and expansion plans in both residential and commercial solar divisions. It is expected that this one division of the market is going to avoid beating each other up and, rather put up a more sustainable foundation for expansion in the future.