The first quarter has been a rough one for most solar companies. Aside from First Solar whose profits tripled, most solar companies reported large decreases in their profits and, most likely, losses. But the last two reports (from Trina Solar and China Sunergy) paint the picture of a potential return to profitability in the second quarter.
Prices fell faster than costs
In the first quarter, the average selling price (ASP) of solar modules fell like a rock. Meanwhile, solar producer costs fell less quickly. For instance, China Sunergy reported its ASP fell 45% from $2.97 in the fourth quarter to $1.64 per watt! This price is 50% below their first quarter 2008 price. Sunergy took a loss of $8.8 million as its costs fell a slower ~37% pace. They estimate a return to profitability in the second quarter on lower costs (since most of their residual high-priced polysilicon has been cleared from inventory).
Lower Polysilicon Cost Allowing Profit at $2 per Watt
Polysilicon production has now more than caught up with demand. And major polysilicon producer, Michigan-based Hemlock Semiconductor, just announced yesterday the ahead-of-schedule completion of a plant to make an additional 8,500 tons of polysilicon per year (a more than 10% increase in its global supply). The spot price of polysilicon is reported to have fallen more than 60% from last year to as low as $65 per kilogram. Such a low polysilicon price brings silicon-based solar producers back into competition with thin-film players like First Solar moving forward.
Shipments likely to grow in second quarter
Many companies are not only predicting a return to profitability in the second quarter, but an increase in sales. For instance, Trina Solar expects to ship 23-33% more modules April-June (60-65 MW vs. 48.8 MW in the first quarter). Overall, 2009 may be a repeat of 2008 capacity growth levels ~6 GW, but revenue will be significantly lower. As long as solar producers are successful at reducing costs, the future is beginning to get bright again for industry growth.
Within a few days, I’ll share the early June tally for solar prices. And we’ll get a sense of how quickly this climate-friendly energy source can get competitive with the fossil fuel-fired power plants that dominate today.
Onwards to Sustainability-