Polysilicon glut promises 2009 fall in solar panel prices

The price of polysilicon is going to keep falling next year, by as much as 35 per cent according to some estimates, making the manufacture of solar panels significantly cheaper.

Already, the spot market price for polysilicon has come down from a peak of $700 (£468) to about $200 per kilogram and experts are predicting it has not bottomed out yet.

For example, Henning Wicht, iSuppli's principal solar analyst, is predicting that by 2010 the price could fall as low as $100 per kilogram.

However, the benefits associated with the falling prices are likely to take several months to filter through to solar panel prices as many leading solar panel companies, such as First Solar and Suntech, are reportedly locked-in to contracts higher prices.

Investors have been abandoning solar stocks in droves this year over fears the sector had become over heated, but they returned briefly on Monday after Suntech's chief executive, Zhengrong Shi, gave an interview with reporters while he was attending the United Nations Climate Change Conference in Poland, in which he said falling prices were imminent.

Shi said that the polysilicon price drop combined with opportunities to cut costs across the whole solar supply chain in 2009 meant the price of solar power could come down by half, if everyone across the sector involved co-operated.

The prospect of solar power moving closer to price parity with electricity from the grid spurred buying on the New York Stock Exchange sending Suntech's price up to more than $10 on Monday.

However, the euphoria did not last long and the price was down to $8.65 at the close on Tuesday. The share price was as high as $90 in January and as low as $5.36 late last month.

Suntech has been a serial victim of investors' fickle take on the prospects of solar firms. The company's share price hit its nadir in November after Shi delivered what he no doubt thought was an upbeat statement similar to that issued this week, in the company’s third quarter conference call. Then, he said he expected Suntech to benefit from the lower spot pricing in early 2009 and it would also negotiate lower priced long term contracts for polysilicon, which would in turn make for bigger profits next year.