Stockpiles for materials and products across the PV supply chain are set to spike in the first quarter, as a result of a short-term softening in demand for new solar installations. Days of inventory (DOI) will expand by 22.9 percent for crystalline silicon (c-Si) modules and by 21.4 percent for thin-film (TF) modules.
The industry average DOI for c-Si modules in the first quarter of 2011 will reach 48, up from 37 in the fourth quarter of 2010. DOI for thin-film modules during the same period will reach 41, up from 32.
PV modules will suffer the most pronounced jump in inventories, but solar polysilicon, wafer and cell materials also will see DOI increases.
These developments serve as an early indication of a looming overcapacity situation. However, the inventory spike will be confined to just the initial two to three months of the year, IHS believes.
“A major factor behind the solar inventory spike is the subsidy-driven nature of the PV market,” said Stefan de Haan, senior analyst for PV at IHS. “Feed-in tariffs in many countries decreased on January 1, reducing government incentives to install new systems in early 2011. Furthermore, demand—usually lighter toward the beginning of any year—also is being depressed by unfavorable weather conditions prevailing in key European countries. Combined with a less pronounced year-end rally in 2010 compared to 2009, the slowing in demand has resulted in a pileup of inventory.”
The good news is that IHS believes global solar demand will rebound sharply over the course of 2011, bringing inventory for the entire PV value chain back to relatively low levels. On an annual basis, supplier inventory will increase only slightly this year compared to 2010.
The even better news is that despite these first few difficult months, the majority of manufacturers will be able to limit inventory to levels that won’t force them to cut production. DOI might reach 2009 levels, but a major inventory glut as deleterious as that seen during the first half of 2009 is not likely to recur.