Solar industry emerges from darkness
Installations at power plants and on roofs are expected to swell 40 per cent in 2013 amid speedy recovery from a two-year slump
Solar industry manufacturers are rebounding from a two-year slump faster than technology companies recovered from the dotcom bubble of the late 1990s.
The benchmark BI Global Large Solar Energy Index of 15 manufacturers, which slumped 87 per cent from a February 2011 peak to November 2012, has regained 55 per cent of its value in the past year. The Nasdaq Composite Index reached its post-bubble low in October 2002 and regained 37 per cent of its March 2000 peak value in the following year, data showed.
Suppliers including California's SunPower, which has gained more than fivefold this year, and China's Yingli Green Energy are driving the rally as panel prices stabilise. Installations at power plants and on roofs will swell 40 per cent this year from a 6.1 per cent pace last year.
"The worst is probably behind us," said Jenny Chase, lead solar analyst at Bloomberg New Energy Finance. "We've just gone through a big trough in solar supply."
Investors poured US$205 billion into clean-energy projects in the past year, soaking up some of the global oversupply of panels. The recovery would continue in 2014 with prices remaining stable, Chase said. Manufacturers are "a lot less depressed".
Analysts have become more optimistic about solar shares in recent months. The average rating for SunPower, the biggest US supplier of polysilicon-based solar panels, was 3.5, up from 2.4 in December and the highest in more than two years, data showed.
A rating of five indicates investors should buy the shares, and one means they should sell.
JinkoSolar, the only Chinese solar manufacturer to report a profit in the second quarter, has an average rating of 3.7, up from 2.3 in May. Its shares have more than tripled this year.
Investors have rushed back into shares of the biggest panel makers even before they have returned to profit. Yingli, which has more than doubled, is forecast to report narrowed losses from 2012. Canadian Solar, which has risen almost sevenfold, is forecast to return to profit of US$27 million from a US$195 million loss in 2012.
"It's pretty clear over the past nine months that things have improved significantly," said Robert Petrina, Yingli's managing director for the Americas.
Yingli was the biggest panel maker last year based on 2.3 gigawatts (GW) of shipments, and the company expects that figure to increase as much as 43 per cent this year. The global photovoltaic industry may install as much as 42.7 GW of panels this year, 40 per cent more than in 2012, according to New Energy Finance.
The strongest companies were now selling panels above cost, said Chase. A year ago, more than half the Chinese panel makers in the solar energy index reported negative gross margins. That is a strong sign that the industry is starting to turn the corner from the past two years, when factories were overbuilt.
The top 10 manufacturers boosted their panel production capacity 19 per cent to 20.6 GW in 2012 from two years earlier. Those factories came online as demand waned. Panel installations more than doubled from 2009 to 2010. The pace slowed to 58 per cent in 2011 and then slumped to 6.1 per cent last year.
Demand is climbing in Japan, where the government is promoting wider use of renewable energy instead of nuclear power, and China, where the installed capacity is expected to double this year. The two countries will be the top solar markets this year, according to New Energy Finance.
The solar slump had casualties, driving more than two dozen manufacturers into bankruptcy, and some companies were still struggling, said Chase. "I don't think we're out of the woods. There may still be some bankruptcies," she said.
Those failures might benefit the industry as weaker companies were forced out and larger ones absorbed their customers and assets, said Mark Mendenhall, president for the Americas at Trina Solar. The company expects to ship as much as 2.4 GW of panels this year, up 50 per cent from 2012, and its shares have more than tripled this year.
"You're going to see a greater separation between the well-run companies from those that are trying to operate purely on a low-price basis," he said. "This is an industry that's got out of its childhood, emerged from adolescence and is poised to enter adulthood. That which doesn't kill you makes you stronger."