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April 23, 2014  |  Login
Solar's Growth Prospects
By John Rubino

Though both fall under the general heading of solar power, PV and solar thermal are very different technologies with generally separate destinies. So let's consider each in turn.


Italy and Spain have launched their own feed-in tariff programs, while California is offering cash incentives that subsidize new PV installations by up to $2.50 per watt. By the end of 2008, 20 nations and most U.S. states are expected to have solar incentives of some kind in place. And China, with its big trade surplus and desperate need for electricity, will both produce more solar panels domestically and import more from overseas. Demand, in short, will remain strong in the near term, mostly as a result of government incentives.

But PV profitability is another story. In 2007, demand was so strong that solar panel makers were able to hold the line on prices while their production costs fell, sending profit margins up. This combination of rising sales and widening margins has attracted an avalanche of capital, which the recipients are using to build new factories. When that capacity comes on line in the near future, the result will be a temporary glut similar to what the semiconductor industry goes through periodically, says Travis Bradford. "[In semiconductors], every eight or nine years you get a supply bottleneck. Then profits go up and people invest a lot of capital and prices adjust. In PV, we're probably between the 'invested a lot of capital' and 'prices adjust' phases. By late 2008 PV prices will be falling like a rock.There's a massive margin squeeze coming." It will take a couple of years, says Bradford, for supply and demand to come back into balance, during which time the profit margins of the solar panel makers may fall below 2007 levels.

Then things get really interesting. During the margin squeeze, costs will keep falling. By 2012, module prices will pierce $2 a watt ($3 to $4 installed), predicts Bradford. At that point, solar power will be economically viable without government subsidies, and it will embark on a long, long run in which rising demand drives new supply, which lowers prices, which spurs more demand, with no real end in sight. At last, a positive feedback loop!

For an idea of what kind of growth this implies, start with the fact that Germany, the world's most solar-centric economy, gets less than 1% of its electricity from PV. Outside Germany, solar barely registers. Its U.S. market share is 0.05%, which means it could expand 20 times from 2007 levels and still be at only 1%. Meanwhile, China and India by themselves will install more new solar generating capacity each year than the whole world used in, say, 2004. more

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