According to Industrial Info Resources, half of all solar panels manufactured in 2009 will not be sold, resulting in a massive oversupply that will take until at least three years to sort out. Technology value chain research and advisory corporation, iSuppli, reports that a collapse in demand is responsible for the glut of panels.

The reduced demand is largely the result of changes in Spain's feed-in tariffs. In September last year, the Spanish government announced a 500-megawatt (MW) cap on solar installations for 2009, alongside reduced feed-in tariffs. While not as severe as the 300-MW cap originally proposed, the move has severely curtailed Spain's need for solar panels. Spain accounted for 50% of worldwide installations in 2008.

Reports from iSuppli also state that the demand drop has led to a massive buildup of inventory throughout the supply chain, ranging from polysilicon to photovoltaic cells to complete solar systems. Despite this, solar cell and panel makers have continued to increase capacity and production of solar cells, exacerbating the situation.

For 2009, total solar panel production will grow 14.3% to 7.5 gigawatts (GW), up from 6.5 GW in 2008. However, only 3.9 GW worth of installations will take place this year, meaning that almost one out of every two panels produced in 2009 will not be installed, but stored in inventory.

iSuppli announced, "Even in the face of the downturn, many panel and cell producers have continued to ramp up their capacities as if a recession had never occurred. Most companies are doing this in order to maintain their share in the market. As a result, Suntech Power Holdings Co. Ltd. (Jiangsu, China) will push Q-Cells aside and become the No. 1 producer of crystalline cells in 2009, we predict. Sharp Corp. (Osaka, Japan), Yingli Green Energy Holding Co. (Baoding, China) and JA Solar also will defend their top-five positions this year by not reducing their solar-cell production increases. Those suppliers that have reduced or made adjustments to their production of cells and panels as a result of the softening demand have seen their short- and mid-term strategies falter. These suppliers include Q-Cells, SunPower and BP Solar."

One of the world's largest manufacturers of solar cells, German company Q-Cells SE (Bitterfeld-Wolfen), recently announced plans to slash 500 jobs from the company's 2,600-strong workforce in order to deal with depressed prices in the sector. Q-Cells withdrew the company's 2009 sales forecast in July, claiming that the price drop and high operating costs were responsible for a 62 million euro second-quarter operating loss.

Just this month, Chinese solar rivals LDK Solar Co. Ltd. (Xinyu) and JA Solar Holdings Co. Ltd. limited posted miserable quarterly results due to the price slump caused by oversupply and reduced demand.

Source: Industrial Info Resources, a leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets.