There’s no shortage of supply in the global solar panel market these days, but with the growth in demand flagging everywhere from China to Europe, a glut is once again threatening to drown producers. Bloomberg reports:
The manufacturers are locked in a race to build bigger and more advanced factories to crank out panels faster and cheaper. Just as they start rolling off the lines, demand is expected to slow, especially in China where the government rolled back subsidies last month. Prices are slumping, and suppliers expect margins to slip as well. It’s a pattern we’ve seen before, after a global oversupply five years ago drove dozens of companies out of business. […]
The solar industry went through a similar boom-bust cycle after capacity grew faster than demand, triggering a two-year slump starting in late 2011. The result was a wave of consolidation as prices plunged and panelmakers’ losses piled up. Cheap panels also helped spur demand for more solar power, eventually prompting the survivors to expand production.
If this is giving you a nagging feeling of déjà vu, that’s because we’ve been through all of this just a few years back, when China’s aggressive government subsidization of panel producers led to a massive oversupply in panels that demolished profit margins and forced some of the industry’s biggest players to fold.
Of course, falling panel prices will make this more of a buyer’s market for solar panels in the coming months, but before greens get carried away thinking that the day has finally come for renewables to supplant fossil fuels, remember that the panels are just one portion of the cost of a solar array—there’s also the installation, maintenance, and transmission lines to consider. Then, too, there’s the fact that solar can only provide power when the sun is shining, making it a viable solution for only peak electricity production (not baseload, like coal, natural gas, or nuclear). A dip in panel costs will help some consumers that might’ve been on the fence about investing in solar, but it won’t fix the intermittent energy source’s underlying problems.
This impending glut isn’t a sign of health for the solar power industry, but rather the result of a worldwide race to the bottom as producers have viciously competed for market share by continuing to up output, regardless of whether or not the demand was actually there. The sad fact is, while we may currently have plenty of them, today’s solar panel’s aren’t efficient enough to out-compete fossil fuels (like plentiful natural gas) on price. We’d be in much better shape if governments had devoted their focus on the research and development of better panels, rather than the propping up of companies intent on churning out more of them.