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Thursday, October 19, 2006

German Market for Solar Modules soft

[Solar Power 2006, San Jose, CA USA]

I have confirmed German market softness for solar modules with multiple confidential sources. One confidential source stated the following:
The situation is that potential customers are waiting for price reductions of 10 to 15 % on modules. The storage of suppliers is full. Market slow down significant in the last two months. Industry expects a return of the market beginning next year due to expected price reductions.

Second hand from an interviewee, I heard that the ErSol Solar Energy AG (FRA:ES6) CEO, Claus Beneking, addressed this issue at the Solar Energy: Driving the Cost Down event hosted by the German American Business Association, Northern California chapter.

In Germany, new customers are reluctant to commit to solar photovoltaic system installations if solar module price reductions are imminent. Also, as interest rates have climbed, the financial return from grid-tied residential solar installations has become unattractive to homeowners. Most German homeowners going solar finance their systems with long term bank loans paid for with guaranteed feed-in tariffs over the operating life of the solar electric system.

Some German solar system integrators with solar module take or pay contracts may be building solar module inventories during the market slowdown, and this could impact their finances and revenues. As a result, restructuring, shakeout, and consolidation may occur among solar system integrators and solar module manufacturers in 2007. Solar system integrators need to improve and streamline their marketing, sales, installation, and support processes after a period of high growth encouraging operating inefficiencies.

German market softness may represent a slow quarter or two in the longer term photovoltaic market growth trend. German solar manufacturers believe market growth will return in early 2007 as price reductions are implemented.

Regional differences between solar module markets may be driving a disconnect between solar module prices and inventories. Certain individual companies may be less impacted by the slowdown in the German market than peer competitors depending on the operating strengths of their system integration partners.

If you speak to most of the major solar photovoltaic module (“solar panel”) manufacturers about product availability here at Solar Power 2006, the standard reply is they have sold out their production. I have tried asking manufacturers about their lead time (how long it takes from order placement to shipment), but the manufacturers are unwilling to provide such estimates. In their shoes, I would not divulge or guesstimate lead time information either.

Although US based solar installers were promised solar module price reductions for October 2006, solar module manufacturers instead decided to raise prices about ten cents ($0.10) per Watt. At least one major top 10 solar module manufacturer bucked the price increase trend and decided to reduce solar module prices by twenty-five cents ($0.25) per Watt in a bid to increase market share and perhaps maintain lean inventories.

Please share your first hand knowledge on this issue by leaving a comment.

GP Note: Given the confidential sources, I would exercise extreme care before drawing conclusions or taking actions with this information. There are many factors to consider before determining how this development might impact specific solar photovoltaic companies. New growth markets such as Spain, Italy, and the United States may compensate for reduced growth rates in Germany.


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