Cautious optimism for solar

Analysts are cautiously optimistic about the state of the market for photovoltaic components this year, following a drastic reduction in pricing over the past 12-18 months.

iSuppli, which tracks pricing on various raw components used by the electronics industry, charts a dramatic dip in the price of polysilicon on the spot market.

In 2008, the spot price rested at $400/kg. This plummeted to $80/kg last year, and will more than halve again in 2010, falling to $35/kg. It will continue falling until it reaches $22/kg in 2012, and will only start to recover the following year, iSuppli analysts predict.

That said, iSuppli's figures show that the rate of decline in the photovoltaics business is slowing. And statistics from industry watcher Solarbuzz bear this out. There were 38 distinct price reductions this month according to the company, which monitors the price of solar modules further along the value chain than iSuppli. This is compared to 176 price reductions in various manufacturers' solar modules in August, according to Solarbuzz.

"When prices are falling quickly, there is some evidence that purchasers of solar systems delay their decision making. The slowdown in the price decline will itself, therefore, be a stimulant to market demand," Solarbuzz said in its January 2010 solar pricing survey. "Other factors like financing and taking account of planned reductions in government subsidies start to take a larger role in the timing of moving forward with purchasing a solar electric system."

Some polysilicon vendors have hedged their positions in a clearly volatile market with longer-term bilateral agreements, rather than relying too heavily on the spot market.

"Most of our capacity for polysilicon is sold through long-term contracts with the leading solar suppliers," said Jarrod Erpelding, a spokesman for Dow Corning, which produces polysilicon for manufacturing clients. "This means that they get long-term, stable supply, in exchange for a more competitive price, especially back when spot prices were very high."

Photovoltaics World magazine polled multiple analysts, some of whom pointed to the world economic situation and reductions in feed-in tariffs in Europe, which has traditionally been a friendly market for the solar industry.

Market watchers predicted overall growth in the photovoltaics market, although it would be partly offset by over-capacity at all steps in the value chain. Gartner, for example, predicted 10 per cent growth this year. This is a marked decrease from its estimate 11 months ago, when it predicted a 38 per cent growth rate.