Saturday, July 14, 2012

Solar Prices Expected to Keep Falling in 2012

Solar equipment manufacturers will struggle for the rest of the year with a sustained drop in panel prices, a Goldman Sachs analyst said Tuesday.

Prices have tumbled for the past few years as Chinese manufacturers flooded the market with cheap solar systems. Analyst Amy Song said China appears committed to a "vicious circle" of aggressive investment despite international criticism and higher tariffs in the U.S. That will likely keep panel supplies high and prices low throughout 2012, Song said.

At 94 cents per megawatt, solar modules cost less than half of what they did three years ago. Goldman Sachs expects prices to drop by another 27 cents, or 29 percent, to 67 cents per megawatt by 2013.

Song noted that demand for solar equipment has remained strong in Germany, the world's largest market for solar. It's expected to pick up in Japan, which has recently installed a generous renewable energy incentive program. But supplies will remain robust as long as China continues to prop up its solar industry with cheap loans, low taxes and free land.

"Until we see a clear pullback in these local policies, the circle is likely to persist," Song said.

The U.S. already has called for higher tariffs on Chinese solar in response to what it considers to be a flood of underpriced solar. The European Union could follow, and that could lead to additional expenses for Chinese companies, Song said.

Song singled out Yingli Green Energy as an investment risk, downgrading the Chinese company to "Sell" from "Neutral." Song said Yingli could have trouble paying off an aggressive expansion in its manufacturing capacity. Yingli shares fell by 1.4 percent.

Also Tuesday, LDK Solar Co. posted a first-quarter loss of $185.2 million and cut its 2012 revenue forecast, after booking charges related to a plunge in solar panel prices and new anti-dumping regulations in the U.S. LDK Solar's shares fell 5.9 percent Tuesday.

Shares of other solar companies also dropped. Trina Solar Ltd. fell by 8 percent and Suntech Power Holdings Co. by 5.2 percent. First Solar Inc., the largest solar company, fell by 2.1 percent.


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