EDITORS I VIEW
Expanding supply, decreasing demand T
here is no doubt that the next couple of quarters is going to see a massive shake out of the number of companies within the solar and PV industries as an over supply of product will begin to make its mark with demand simply not strong enough to soak up the excess inventory that has been building around the world. As Solarbuzz pointed out in a recent report most of the over supply is due to the fact that tier 2 and 3 manufacturers, desperate to close the gaps with their tier 1 counter parts have collectively contributed to their own individual demise by ramping up capacity in the hope of gaining market share. Unfortunately too many players took this strategy creating an oversupply of product that has already had an impact in driving prices down. The price reduction is great for consumers but drives down margins across the board creating even more competitive environments for companies to have to battle a way through. For many companies this will mean battling for survival rather than success.
It is worth mentioning that all parties along the value chain need to be wary of cheap opportunities in the next few months and due diligence should be a stronger priority than usual, especially when it comes to guarantees and any long term promises. The reality is that many companies will not survive the upcoming corrections and may not be around to satisfy the conditions of future promises. Regardless how well meaning their intentions may be. On the other hand it is a great opportunity for local distributors that have strong enough technical experience to be able to manage a warranty or maintenance agreement themselves. With subsidies under review around the world, companies need to seek any advantage to bolster their company margins to ride out any financial hiccups on the horizon.
All of this process is part of the risk of entering a new technology opportunity. What seems like such a good idea at the time has captured the imagination of many people around the world and every one of them sees the opportunity and believes they have the best approach to success. When so many new players enter a market it often ends up benefiting the established companies that have developed a strong enough capacity that they can respond to such market corrections. Despite the financial reaction from the markets to the over supply any apparent year on year decrease of output will not reflect the strong dynamics that continue to underpin the overall industry,
At a time when renewable energies are actively pursued around the world solar has consistently out performed other renewable sectors and continues to grow into a sustainable global energy market that will continue to offer strong growth and opportunity for those companies that can carry out their long term visions rather than focusing on their short term profits. With technology continually moving forward at a rapid rate and more and more regions opening up the overall industry potential remains strong and committed. The next couple of years will be dominated with reaching grid parity and the economical realities of such a technological milestone. Once grid parity is reached, governments around the world will expect the industry to move to a economically sustainable future. The industry needs to contribute to the debate as to what point is grid parity considered an global success rather than a local benchmark to easily used by other regions to reduce support.
David Ridsdale Editor-in-Chief
Issue IX 2011 I
www.solar-pv-management.com 3
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