Low Prices for Solar at a High Cost for Solar Companies

Good for Solar

A recent report from Queen’s University shows that in some areas of the US, Solar has reached grid parity, and prices continue to fall as a result of lower installation costs, technological advances, and overall competition. This means that the potential of solar in the US is really starting to show with a record amount of 499 MW of PV was installed in the US last quarter, reaching more than one GW in 2011.

At the same time, as the Solyndra scandal is slowly fading, banks seem to get more comfortable with solar, opening up for other sources of funding than the traditional venture capital. One reason for this is that there now is a market for solar as a commodity and solar is quickly becoming a relevant alternative to traditional grid electricity.

Bad for Solar Companies

This commoditization of solar is a sign that the industry in general is maturing and that solar will have a significant role in the US energy mix. However, whereas falling prices is good for solar in general, the solar manufacturers are slashing their profits in order to stay competitive. The potential of solar has resulted in an overcrowded market, and of all of these manufacturers, only a few will be around in a few years, Eric Wesoff, Chief Analyst at Greentech Media, said recently.

This was obviously one of the main reasons for why Solyndra went bankrupt, and it makes traditional venture capital investors careful. Many investors are opting for safer investments, and in general, as one investor told me, “we’re hesitant to invest in more solar”.

/Magnus