PV Bust revisited

The last post was about boom and bust in US shale gas, and previous posts have been about boom and bust in the PV industry.  Both busts are similar in dollar terms and are occurring simultaneously, with many billions of investment mis-allocated.   Both are also similar in the confusion and mis-information they engender.

Previous posts have covered the overcapacity and restructuring of the PV business in general terms.  The long and growing list of specific bankruptcies and larger firms withdrawing from the market  reinforces the grim reality of the situation.  However, there continues to be regular articles and posts that ignore the underlying market realities and interpret continually falling panel prices as a sign of industry viability rather than industry decline.  Some even go so far as to project the last few years of dramatic price decline forward and anticipate lower prices and a golden age for solar deployment. 

A telling statistic for projecting future PV manufacturing capacity growth is the purchasing of capital equipment needed to build PV plants.  These articles cover the 80% decline in the solar equipment supply business and the bankruptcies and layoffs.  As existing capacity is being destroyed through retrenchment and bankruptcy and no new capacity is being built, eventually supply will balance demand and the surviving manufacturers currently selling at or below cost will raise prices to become economically viable. 

The historic long term learning curve of 20% reduction in  PV panel  prices with each doubling of cumulative capacity still seems to be the best price predictor, as it has been  for over thirty years.  This would predict current PV panel prices of around $1.00/Wp which seems a likely point for prices to stabilize maybe next year (2013).  Given the cyclic boom and bust nature of the business prices may not decline from $1/Wp for several years.  

This does not foretell a golden age of PV growth as prices at this level still need substantial subsidies to be market competitive.  The amount of subsidy determines market size.  Subsidy is in general decline.  There is no driver for market growth other than fickle and limited government support.  
By Edmund Kelly