Day 1 of the Greentech Media Solar Summit 2012 is in the books, and it was an action-packed day.
GTM kicked off the day with an overview of where crystalline silicon has come and where it is going from the supply side. This was laid on top of a demand forecast for some interesting conclusions.
- According to GTM analyst Shyam Mehta, there is no end in sight to the structural oversupply in the solar industry. Even when accounting for rationalization of high-cost supply there will be an oversupply based on GTM's supply and demand predictions. All of this was presented with the big caveat that we have all been terrible at predicting demand in the solar market, so take it for what it's worth.
- The current oversupply in the industry isn't terribly different from 2009, when there was a similar percentage of oversupply versus demand. The difference is, in 2009 the weak demand was based on a lack of financing for projects, so you could lower prices all you wanted but demand wasn't going to pick up. This time around, a price war has emerged in a fight for survival.
- GTM is predicting cost per watt for crystalline silicon modules of $0.45 by 2016, and Mehta is concerned that the prediction isn't aggressive enough.
The keynote speaker for the day was NRG Energy's (NYSE: NRG) Tom Doyle, who among other roles is president of NRG Solar. His perspective was that of a large purchaser of modules, so he was very happy about the recent drop in prices, because it makes his projects more competitive. Here are a few notes and quotes from Doyle that I found interesting:
- "I am extremely optimistic about where the market is headed."
- "I didn't expect to see the prices we're seeing today until 2015."
- A 1% increase in efficiency = a 5% reduction in balance of system costs.
- Solar needs to start from the ground up, not in Washington.
I was also interested to see that Doyle and others have the feeling that giant utility-scale projects like California Valley Solar Ranch (250 MW) and Ivanpah (392 MW) are a thing of the past. The sweet spot now is 20 MW to 60 MW for many developers.
Tariffs and the solar industry
There was a spirited debate over solar tariffs and whom they benefit and harm. To review the recent ruling, the Department of Commerce recently set import duties of 4.73% for Trina Solar (NYSE: TSL), 2.9% for Suntech Power (NYSE: STP), and 3.59% for all other Chinese cell manufacturers. A ruling on dumping of solar panels is expected in two weeks and is expected to be larger than the previously announced tariffs.
Tariffs seem to be viewed as a negative overall for the solar industry in the short term, but a larger question remains about the long-term impact. Solar should thrive where innovation and costs combine to make the most competitive product. China's subsidies for the industry have given the country a quasi-monopoly on solar manufacturing and squeezed out companies that had innovative solutions outside of China. Some of these, like Solyndra, probably wouldn't have stood on their own any time soon, but are we killing ideas that could benefit solar from other parts of the world by moving everything to China? The debate remains open.
Can thin-film survive?
In the afternoon I attended a discussion over whether thin-film solar could survive. Panelists had a vested interest in its survival, but I had a hard time being convinced it will be a profitable path forward. CdTe manufacturing from First Solar has been under fire from falling crystalline costs, and CIGS has yet to be a widely used technology. Both are much less efficient, and although they have cost and performance advantages, the industry is trending toward efficiency instead of cost alone.
If I had to bet right now, I would not make a long-term bet on thin-film. With that said, it has a lot of advantages over crystalline silicon, so if a technology emerges that makes it more economical and efficient, I may change my mind.
My thoughts on the day
It's been interesting to note that SunPower (Nasdaq: SPWR) and First Solar (Nasdaq: FSLR) are looked at as outliers in the solar industry right now. SunPower is so far ahead on efficiency that its panelists have been looked at as outliers by those from Chinese companies. First Solar has such high margins that it is considered the gold standard that is unreachable for nearly everyone, although that story is changing.
What's next?
Day 2 of the Solar Summit is today, and I will be live tweeting from @FlushDrawFool again. Highlights for investors will be a roundtable titled "Investing in Solar in 2012 and Beyond: Buy, Sell or Hold?" There is also a debate on net metering, as well as a roundtable discussing whether crystalline silicon PV can bring us to grid parity, and I'll be focusing on opportunities in emerging markets. I'll be back tomorrow with a recap of Day 2 and will include interviews with industry experts in the next week.
