IS THE END OF ULTRA LOW SOLAR PRICING NEAR ?

FIRST THE GOOD NEWS:

As of December 2009, prices for grid tie solar systems have fallen to record lows. So low in fact that prices have reached levels that are about 50% lower than the levels that they were at in July of 2008. The primary reasons for this dramatic drop in pricing are varied but it all began in 2006 with high demand for solar in Europe, especially Germany. This enormous demand led to silicon shortages that began in 2007. With demand and prices for silicon at their highest levels in years, silicon manufacturers quickly began ramping up production. By the first quarter of 2008, European demand led to a massive worldwide solar module shortage. Prices for solar modules skyrocketed worldwide. By the second quarter of 2008 Solar modules at reasonable prices were difficult to find anywhere in the U.S.

The silicon production ramp up that began in 2007 reached its peak by the third quarter of 2008 which quickly led to a glut of silicon on the market. This drove silicon prices down which attracted many new wafer, cell and module manufacturers. By the fourth quarter of 2008 wafer, cell and module manufacturers started entering the market at record pace.

By the first quarter of 2009, the German solar market all but dried up and the world plunged into the depths of one of the worst economic crisis since the great depression. By the second quarter of 2009, the solar market was all but dead. Inventories of wafer, cells and finished solar modules began piling up in warehouses all over the world and prices began dropping faster than all the layoffs that were occurring in the solar industry. By December 2009, retail solar prices hit record lows.

The fourth quarter of 2009 will be remembered as the great solar shakeout. Several solar manufacturers and dozens of solar dealers were lost to bankruptcy, some were absorbed by larger companies.  If there was ever a time to invest in a solar system, that time is now. The materials and labor that are involved in the installation of a grid tie solar system for your home or business have never been more affordable.

As long as you spend a few moments educating yourself in the differences in performance and reliability between the many available products, it would simply be difficult if not impossible to go wrong by investing in solar today. The bottom line is this: If you've done your research and are ready to invest in solar in the next couple of months, then you couldn't possibly have timed your purchase any better. Prices are at their lowest, the 30% Federal tax credit is in place and rebates and other financial incentives are still viable in many states.

 NOW FOR THE BAD NEWS:      

As in real estate and many other markets, there comes a time when prices bottom out and have no where to go but up. In the solar industry their comes a point when prices drop so low that manufacturers can no longer remain profitable and either fail due to an inability to compete or hold their ground until demand returns to the market.

Backorders Beginning Again

For the first time in over a year, we are once again being notified of backorders due to demand. In November, Suntech®, the world's largest crystalline solar product manufacturer announced that their 210 Watt and 280 Watt solar modules will not be available in the U.S. until possibly mid 2010 due to strong European, Japanese and Chinese demand.

Siliken®, a San Diego based solar module manufacturer announced today (12-07-09) that their entire production is back ordered until mid January. Reduced pricing that was available just weeks ago from Canadian Solar® and ET Solar® is no longer available. We are now seeing a dramatic increase in the number of domestic and overseas requests for solar module quotations.

It may be a bit early to make predictions, but the writing is on the wall. Backorders are on the rise and pricing is either stabilizing or is once again beginning to creep up.

Rebates Are Drying Up

Rebates and other financial incentives for the installation of a solar systems that sat idle for months are now being gobbled up by consumer demand. Many states and or utilities have either used up all of their available funding or are about to initiate dramatics cuts in their incentive offerings. For example San Diego Gas & Electric's cash rebate will drop from $1.10 per watt down to only 65 cents per watt. And with only a half of a megawatt worth of rebates remaining and 6.58 megawatts worth of rebate applications under review, PG&E's current rebate is pretty much gone. 

The Economy Is On The Recovery And Sales Are On The Rise

The economy is beginning to show signs of recovery and sales of grid tie solar systems are up sharply. We've encountered a 5 fold increase in our closed solar sales compared to just 3 months ago which has triggered a hiring boom at our company that required an upgrade to our phone system and an increase in the number of phone line that service our facility.

The inbound sales calls that are entering our sales office consist primarily of consumers who have completed their shopping and are ready to make a purchase as apposed to consumers who are simply seeking information. If this demand continues, simple economics of supply and demand will once again begin to push solar prices skyward.

The EPA To Regulate Green House Gasses. Electric Rates To Rise

To make matters worse for the solar module supply and demand scenario, the EPA announced today (12-07-09) that it has ruled that "greenhouse gasses endanger human health" Click Here To Read More which clears the way for penalties and taxation for the emission of carbon dioxide and other greenhouse gasses in the U.S. Green house gas emissions is primarily associated with the automotive and electricity production industries due to their use of fossil fuels including petroleum and coal.  This will have the potential of dramatically increasing the cost of using gasoline and electricity for every consumer in America. 

Because a solar systems produces carbon credits which can offset carbon production, the demand for solar installations is expected to rise dramatically in 2010 which again will effect supply, pushing solar equipment prices upward.

Obama Expected To Make Pledge In Copenhagen To Reduce Greenhouse Gas Emissions

And if all of this weren't enough, depending on when you read this article, President Obama will be meeting or already has met in Copenhagen in December 2009 to discuss the U.S.' contribution to the reduction of greenhouse gas production over the next 10 years which will again raise the cost of consuming energy and fuel increased demand for solar.

In Summary:

1. Demand for solar in the U.S., Europe, China, Japan and other countries is on the rise.

2. Prices for solar modules appears to be stabilizing or are beginning to increase.

3. Solar manufacturers have begun to announce backorders.

4. Rebates and other incentives for solar installations nationwide are being depleted.

5. The EPA has cleared the way for increased pricing for the consumption of carbon based forms energy.

6. The Climate Summit in Copenhagen will result in an increased carbon emission reduction pledge from the U.S.

7. Electric Rates Will Rise Dramatically Due To Proposed Carbon Reduction Mandates.     

Solar Home is not in the business of predicting markets but common sense should tell you where all this is headed. Our suggestion is that no matter who you buy your solar system from, it is imperative that you submit your application for whatever rebate or other financial incentive that your state or utility is offering before they're gone.

We've been selling solar systems since 1997 and we know how quickly the solar market can turn. For us this is more than another cycle, for us this is the beginning of a revolution in the way the world consumes energy. Like the great U.S. land giveaways of the 1800's, this temporary slump in solar pricing and the currently available financial incentives will be remembered as one the greatest opportunities in U.S. history.