Solar Market to Hit $100B By 2013, But Price Cuts Looming

The solar market is booming — plans like Google’s to wean the U.S. off fossil fuels over the next two decades involve massive investments in installing solar technology. According to a report from Lux Research the global solar market will reach $100 billion in revenues by 2013, with an almost five-fold increase in installations over the next five years. That $100 billion figure includes revenues from the modules as well as installation and system costs for five solar technologies: standard silicon photovoltaics (PV), concentrating photovoltaic systems, thin-film solar, organic PV and solar thermal.

But if you’re a solar supplier getting ready to kick back and wait for the cash to flow in, think again. Lux says that starting next year the market could start to get a lot more difficult for companies to make a profit. In 2009 the supply of solar modules is expected to overtake demand, and the resulting price drop will mean “an industry shakeout, with the weakest players being acquired or failing,” writes Ted Sullivan, senior analyst at Lux Research. As Lux has put it before, the solar bubble is about to burst and it could take many incumbent solar players down with it.

Who’s most at risk? The smaller me-too solar players that produce traditional crystalline photovoltaics and haven’t invested in new technologies like solar thin film. Basically, firms that don’t have large enough scale or innovative technology to protect them will be the hardest hit. A drop in prices does mean demand will rise in response, but the problem is that margins will be difficult for years, says Lux.

Overall these difficulties are a minor setback in the grand scheme of things; the industry is just maturing. The reality is, in this weak economic climate, solar is still soaring. The market is only at $33.4 billion today and will reach $100 billion in just five years — that’s 48 percent growth every year through 2013. Installations will grow from 4.9 GW in 2008 to 23 GW in 2013. Even with a margin pressure shakeout coming, this is still boom times for solar.