While new solar installations in the photovoltaic (PV) market are expected to rise to 22 gigawatts (GW) in 2011, the road to growth will be bumpy, according to new research from IHS iSuppli.
Inventories for materials across the PV supply chain are set to grow in the first quarter, expanding by as much as 22.9 percent for crystalline silicon (c-Si) modules and by 21.4 percent for thin-film (TF) modules. Some comfort can be derived from the fact that the inventory spike is confined to just the initial two to three months of the year and is only temporary, IHS believes, as a result of softening demand for new solar installations. All told, days of inventory (DOI) for c-Si modules in the first quarter of 2011 will reach 48 days, up from 37 DOI in the fourth quarter of 2010. DOI for TF modules during the same period will reach 41 days, up from 32 DOI. These DOI levels equate to what was previously seen in 2009.
PV modules will suffer the most pronounced jump in inventories, but solar polysilicon, wafer and cell materials also will see a distinct upward increase—early indications of a looming overcapacity situation.
Much of the reason for the inventory spike is due to the subsidy-driven nature of the PV market, with feed-intariffs (FITs) in many countries decreasing on Jan. 1 and unfavorable weather conditions prevailing in key European markets. While demand is usually lighter toward the beginning of the year, these factors are contributing to an even weaker demand for solar installations.
However, the good news is that IHS believes global 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 a level that won’t force them to cut production. DOI might reach 2009 levels, but an inventory scenario as dramatic as that during the first half of 2009 or 2011 is not likely to occur.