TechPulse 360

The solar market was a tough ride in 2009. It could be more tumultuous this year.

That’s because so much of the industry’s sales are tied up in one country – Germany – and subsidized Chinese manufacturers are cutting prices so deeply that competing is nearly impossible.

In a worst case scenario, solar shipments this year could fall below those in 2009, says analyst Paula Mints

The result could be falling sales in 2010 if German policy makers cut the country’s generous feed-in tariff, says Paula Mints, principal analyst at Navigant Consulting.

Mints, who spoke at the Industry Strategy Symposium in Half Moon Bay, said she estimates solar manufacturers shipped 5 GW of panels in 2009. Under the worse case scenario (a dramatic cut in the German subsidy), that could fall to 4.1 GW this year.

A more hopeful outlook with little or no cut from Germany could lead an upswing of 5.5 GW of shipments.

The difficulty hinges on the reality that Germany accounts for 58 percent of sales (76 percent for Europe as a whole). Sure, China is a booming market as the government tries to stimulate domestic purchases, and India is on the rise, too. Demand in the United States also should grow, though not at an explosive rate until 2011.

So what happens in Germany dictates the health of the solar market. So, too, do manufacturers in China, which have been selling panels at almost breakeven. About 52% of solar panels come from China and “prices were so low it was impossible to compete with them” last year, says Mints.

As a result, the industry’s profit margin fell almost 10 percent in 2009 after rising for four years. From a pure revenue perspective, “it will take this industry at least three years to recover and be above 2008” levels, says Mints.

Until then, the tough ride will continue. That is unless the U.S. market takes off earlier than expected. “We need for the U.S. to become a top market for the whole industry to keep moving forward,” she says. “We can’t keep relying on Europe.”