Look out for a weak second quarter from the solar industry warns FBR Capital in a note published Friday.
“As most investors anticipate a hockey stick–shaped demand uptick in the U.S., China, and other emerging countries, we see a slow rollout of subsidies, tightened terms from financiers, and overhyped news items flowing in, especially from untrustworthy news sources.”
Product prices are in free fall according to the industry contacts FBR spoke with. Those prices aren’t stimulating demand. As a matter of fact, FBR doesn’t see demand returning until the first half of 2010 now, as opposed to the second half of the year.
Here’s FBR’s take on prices:
Modules price fall defied all expectations. One developer noted that the only thing that can stabilise module prices is a hockey stick–like jump of oil and natural gas prices. Recent checks show that Yingli (YGE) has reduced its price to as low as $1.70/W to reduce inventory and that, to keep its marketshare, STP had to reduce prices to the $1.80/W to $1.90/W level, as well. Although YGE remains less bankable to most developers/financiers with less-than-stellar track records versus Suntech Power (STP), several developers like Recurrent Energy have increased intake from YGE to gain more projects. We have also heard that STP priced its modules below $1.50/W for the 30MW Austin project for 2010. Being unable to cope with pricing pressure, SunPower (SPWRA) is focusing on BOS and is likely to stay in the residential marketforcomponents.We have heard that a loyal customer recently moved to Kyocera from Sunpower for projects worth $30 million. Despite the fact that Kyocera modules have only 20-year warranties, Sunpower’s inability to reduce prices has caused developers to become increasingly interested in Chinese modules. Developers a real so seeing a decreasing need for thin film, as crystalline modules are becoming more affordable. Although SolarCity was initially successful in selling FSLR modules in the residential markets at $6.50/W to $7.00/W of installed cost, it is feeling the pressure from other regional installers that are providing attractive pricing using Sharp, Kyocera, and Suntech.
Another piece of information that’s floating around influencing solar prices is misinformation about China says FBR:
The China syndrome. Although news about a 500MW projectby STP in Qinghai, China, got leaked, the company told us that it is a non binding agreement, meaning that no price or delivery terms have been set yet. Ever since talks about solar subsidy began in China, we have received unverifiable news from one source or another, all stemmed from China. We think many solar news items from Websites in China have led investors in the U.S. to believe that these subsidies will begin a solar project frenzy in China. We think investors are better off waiting (1) for a COMPLETE goal-oriented solar subsidy program from the government (more like Germany, and NOT Spain) and (2) for an assessment on when these subsidies can actually be recognised in company revenues. In the case of STP, it needs more time and groundwork before announcing the project, and we caution investors about such overhyped newsitems, as solar companies frequently do similar paper deals.
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