Solar Market Turns Positive as Demand Grows

Rising demand around the world for solar energy is lifting the industry into profitability after years of oversupply. For years, solar manufacturers, spurred on by subsidies and government procurement, churned out higher volumes of solar panels. This succeeded in dramatically bringing down costs, but pushed manufacturers deep into the red when prices plummeted. After a shakeout, many of the companies left standing are returning to profit. Costs continue to decline, and finally demand is catching up with supply.

China’s biggest solar makers recently announced much improved financial performance. Yingli Solar, the world’s largest supplier of solar modules, expects to reach profitability by the third quarter of this year. Its peers, Trina Solar Ltd. and JinkoSolar Holding Co. also laid out higher production and profits for the year. JA Solar reported its first quarterly profit in over two years.

Across the world an estimated 37.5 gigawatts of solar were installed in 2013, a 22% increase from the year before. Analysts expect the global solar market to expand by an additional 39% this year. Much of that demand is expected to come from China, which has long been a massive supplier, but not the biggest market for solar. China surpassed Germany last year to become the world’s largest solar market, and may install as much as 14 GW of solar in 2014.

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Growth for the solar market has shifted decidedly to Asia after years of being led by Europe. Germany is reducing subsidies for solar, and many other European countries have already done so. China, dealing with air pollution, is boosting support for solar. And Japan, trying to find capacity replacements for its shuttered nuclear power plants has implemented one of the most generous feed-in-tariffs in the world.

In the U.S., solar energy is also growing quickly. One of the interesting trends is shift towards rooftop solar and away from large-scale utility projects. For years, the latter drove the market, but future growth is expected to come predominantly from the residential consumers, particularly with innovative financing programs pioneered by companies like SolarCity.

By Charles Kennedy of Oilprice.com