EL SEGUNDO, USA: For those who came in late, iSuppli recently issued a warning for the global solar photovoltaic (PV) industry, indicating that a "solar eclipse" is likely to happen in 2009!

According to iSuppli, bringing an end to eight consecutive years of growth, global revenue for PV panels is likely to plunge by nearly 20 percent in 2009, as a massive oversupply causes prices to drop.

Global revenue from shipments of panels will decline to $12.9 billion in 2009, down 19.1 percent from $15.9 billion in 2008. A drop of this magnitude has not occurred in the last decade and likely has not happened in the entire history of the solar industry!

The revenue plunge will come despite a 9.6 percent rise in Gigawatt (GW) installations of solar panels in 2009, growing to 4.2GW for the year, up from 3.8GW in 2008. However, 11.1GW worth of panels will be produced in 2009, up 62 percent from 7.7GW in 2008.

This means that supply will exceed demand by 168 percent in 2009, up from 102 percent in 2008. With the gap between supply and demand rising to such a level, pricing and market revenue will drop in 2009.

I was fortunate enough to have a discussion along these lines with Dr. Henning Wicht, senior director and principal analyst, photovoltaics for iSuppli, on this subject. Excerpts:

CIOL: The obvious question: how bad is the solar market right now and why?

Dr. Henning Wicht: The upstream part of the solar business (cell, module) will suffer from price decline due to strong oversupply. The downstream side will benefit (installation, end-user, investor) by lower system prices.

CIOL: What can be done to get over this coming bad phase in 2009?

HW: Three things: improve the cost structure, improve sales side, and diversify downstream.

CIOL: What can or should be done to bring about some balance within the current imbalance in the demand and supply situation?

HW: Difficult to answer! Supply and demand are diverging heavily. With the current trajectories even in 2012, 100 percent more modules are produced than installed. Let us discuss this question again in six months when we update our data.

CIOL: Will the various support programs still continue to remain beneficial, both to support markets to become independent sustainable and to develop the regional industry?

HW: The support programs are still needed and beneficial. If China, India, Mexico and other sunny regions would start to support soalr installations, that could change the picture drastically.

CIOL: Do you forsee newcomenrs having problems in getting the required credit for their projects?

HW: Yes!

CIOL: "The short-term boost in demand from Spain and Germany kept installation companies busy and solar orders and module prices high. But this boom is over." So, what's next for European players?

HW: Germany and Spain continue their leading role as solar installation regions (even after the boom). France, Italy and Czech Republic are attractive, but still much smaller markets.

CIOL: "The race to larger manufacturing scale comes to an end when the production is not sold anymore." Sold to whom? What about the emerging nations, like China and India? Aren't there buyers in these places?

HW: The demand in the traditional solar markets is not elastic enough to absorb all solar production. Potential new markets, for example, China and India, do not yet have installation capacities and administration to significantly change global solar demand short term.

CIOL: Why would the newer Chinese and Taiwanese suppliers will be hit particularly hard?

HW: That would happen because many suppliers in China and Taiwan expanded production capacity heavily without securing equally the sales/downstream part.

CIOL: What does all of this do to iSuppli's top 20 rankings? Who would be the movers and shakers, then?

HW: Worldwide, we will see some changes! However, the top 10 companies are typically better placed than the competition regarding cost structures, downstream integration and vertical integration.

CIOL: Obama had some plans to boost solar? What about those?

HW: Yes, we all know that Barack Obama is in favor of renewable energy. However, he will not be able to change a 160 percent oversupply of solar panels in 2009.

CIOL: Up to when will the polysilicon constraints last? You (iSuppli) had indicated PV strategy changes!

HW: Polysilicon prices are coming down already. Our indication from October 2008 seems to be fairly good.

CIOL: Is it going to be a "bumpy road" to grid parity? How will the subsidies be kept going?

HW: Subsidies will continue! It will always be a bumby road because ramping cycles differ heavily between silicon, cells, modules and installation capacity.

Please remember: the installation business will now benefit from low module prices. It will recover some of the margins it has lost in the last years due to high module prices.

CIOL: Finally, is iSuppli still sticking by solar, semicon investments being equal by 2010?

HW: Please let me cite again our interview in October: The investments for solar production raising up to several hundreds of Mio USD, up to 1 Bio $ per production site. That is coming close to a semiconductor fab. The total capex of semiconductor is still 10 times larger than PV. However, PV is rising much faster.