If one were to mold their view of the solar industry simply by what they read in the media headlines, it would be tough to believe that solar is an industry with substantial future growth potential. I know, I know....the old saying goes 'Don't judge a book by its cover', and I guess the same can be said for an industry -- don't judge an industry by its headlines. But it's hard not to. Solar headlines these days seem to focus on reduced margins, organizational restructuring, incentives cuts, and price erosion. So what's really going on with Solar?
There's a few ways to approach this question so I'll do my best to position it from a few sides. From one angle, and probably the most powerful because it directly relates to the thing nearest and dearest to all of our hearts (money), is the Wall St. side of the house. No question the news around solar stocks is and has been grim for quite some time. How can it not be? For the past 6 months or so we have listened to the majority of large solar module manufacturers slice and dice future guidance, we have seen reorganization, bankruptcy, and reduced margins. These are all words in which investment bankers don't like to associate with their portfolios. This past week I was in New York conducting a handful of meetings with investment firms and, to no surprise, discussion around solar was minimal at best. The focus seemed to venture toward anything 'Cleantech' other than solar.
As part of a research team that recently published a forecast demonstrating how the solar industry would grow from nearly 23GW of solar module sales in 2011 to almost 44GW in 2015 my natural reaction is to look past the stocks and focus on the 'who' and 'where' behind this expected renewable energy growth. As an industry analyst (and not financial), I have the luxury of taking this mindset and focusing on long-term industry growth.
Then there is the subsidy side of solar that also rightfully captures a lot of headlines. In the United States we are approaching the expiration deadline of the 1603 tax grant program. According to the Solar Energy Industries Association (SEIA), this program has single handedly contributed $1.5 billion toward more than 22,000 individual solar projects in the U.S. as of November 2011. If you follow SEIA (@SEIA) you have seen these guys take the lead in trying to get this grant extended. I applaud the effort and support the cause 100%...but at the same time, I am not optimistic that it will be extended, given the rapidly approaching deadline and the current state of the economy. I hope I am proven wrong. In other recent news, this past week was the deadline for installing small scale photovoltaic systems in the United Kingdom before the feed-in tariff (FiT) is reduced by 50% as proposed by the Department of Energy and Climate Change (DECC). This action taken as part of a move to control the allocated budget dedicated to UK residential FiTs so as not to jeopardize the entire incentive scheme altogether. Germany will also see a 15% reduction to its solar Fits as of 2012. I could go on and on about reductions and changes to these generous subsidies but I think you get the point.
I could list many more negative discussion points that seem to dominate the media headlines such as rapidly declining module prices, overly generous state loans given by Chinese banks to domestic module manufacturers, and recent bankruptcies at companies that have received government/taxpayer support. Rather than doing so I want to summarize by going back to what I believe should be the focus point, which is the solar industry is a market that has the potential to grow from 23GW of modules sales in 2011, to 44GW of modules sales in 2015. And beyond this, the sky's the limit. Over the past 10 years solar markets have been created over night as a result of changes to incentives, and unfortunately some have also disappeared over night as a result of discontinuing those same incentives. We as an industry need to focus on how to grow this market at a sustainable pace regardless of the obstacles in place. China, India, and many other countries around the world have put forth very high solar energy targets which undoubtedly will provide an opportunity for many involved in these projects. Its new business opportunity for manufacturers, installers, project developers, and more. And at the end of the day when you push all the money potential and job opportunity aside, installing this level of solar means a better environment for all.
So, given all the negative headlines surrounding the solar industry as of lately, I'm curious, what does this all mean to you?