Wednesday, February 14, 2007

Solar Panel Shortage - Good or Bad?

For the last few weeks I have had mixed emotion about the current trends in the solar market. I have been trying to buy some solar panels only to be informed that currently there is a shortage in US market and the backlog of orders is huge. To make the situation a little more shaky if you are not in for a large order you may have a little more trouble.

Who's the Culprit?
So here's what's going on - Germany, Italy, UK, and Japan have become very large consumers of solar panels lately. The production is still geared to meet the demands of yesterday and it will take time for the manufacturers to ramp up their production.

On one hand this is a good sign but for some this is bad. As an enthusiast and proponent of solar energy it gives me immense satisfaction. An increase in demand so much so that it has caused a shortage in the market is a good sign of the technology adoption and affordability, albeit subsidized. But as a potential consumer myself, I can only wait for so much before realizing that this upswing in demand will cause the manufacturers to increase their capacity, not only to match the current market but also for future, which may lower the prices due to competition later. If this is a temporary spike in demand in Germany and Japan, then the time is not far away when the surge of demand will stablize but not the inventory of panels. The manufactures will then give rebates to cut down their inventories. So, I should wait and watch.

Now, the questions is why do I think that this is a temporary surge in demand. Well, the answer to that is very easy. German and Japanese governments are providing huge subsidies to solar buyers at the moment, which they are unlikely to continue for long. In Germany the subsidies are as much as half (1/2) a Euro per kWh currently with promises of 0.99 Euros per kWh for feeding electricity back to the grid for next 20 years, around 2002. In addition, there are interest free loans that now have as many has 10,000 applicants backlogged. Is this all realistic to sustain, specially for a country that now has almost negative growth rate of economy.

Am I losing it?
For a consumer, in short, yes. As a serious buyer in the United States all set to invest in solar energy, I am indeed losing. But as I mentioned before, the loss is to a market which is a bit skewed at the moment. Not to mention that the current shortage has also overheated the market - prices for panels are higher than they should be what they were a year or two ago.

For an investor this is probably the best time to invest in these companies. This trend is here to stay for a while. After this shortage is over the demand will pick-up in different states of the US that currently allow consumers to sell power back to the utility companies.

For an entrepreneur, this is again, probably one of the most conducive environments to get into the business of solar panel production.


Nitin Mulimani said...

Even in Arizona where I live, I am apalled by the poor adoption of solar technologies. While I was talking with my colleagues at work, one of them pointed that some of the home owners associations do not allow installing solar panels over your houses :).

On the other hand, adoption of solar technologies is growing in India. The government initially gave subsidies for people to install them. Now-a-days people think about installing solar panels for atleast heating water purposes.

During a recent conversation with my father he was thinking of using solar technologies for protecting his farms. Basically the fence will have electric power, enough to give a small shock to animals trying to enter and still safe for human beings. This is very common in NewZeland and even in parts of India where the forest department tries to protect

Moser Baer, a technology major is planning to set up a manufacturing plant in India to produce thin film solar panels.