The Reason Why Solar Costs Were Falling Is The Same Reason Why They're About To Go Back Up

We recently told you why we’re long-term bullish on solar: there’s a Moore’s Law-esque effect in installed capacity, and there are huge investment opportunities. 

But there’s also been a lot of short-term euphoria, and this chart from PowerClerk tells part of the reason why: the cost of panels themselves have fallen precipitously in the past few years.

falling solar

Unfortunately, it’s not going to last.

For years now, a feedback loop has been running in the solar market: demand has spiked in Europe, thanks to huge incentives for residents to switch.

That, in turn, created an enormous glut of solar panel manufacturing in the Middle Kingdom. 

MJ Shiao of GTM Research told us that trend is going to slow — and possibly cause prices to go back up — as manufacturers consolidate: 

We’re starting to see uncompetitive manufacturers bow out, and also more importantly see the Chinese government take an active role in consolidating the Chinese manufacturing market — calling on manufacturers to stop increasing their productive capacity to alleviate pricing pains.

So in the near term there’s a lot of uncertainty, and in times of uncertainty you start to see pricing stabilise. We actually have seen pricing for panels go up.

But longer term, prices will still come down, he says, thanks to ever-advancing technology that will allow panels to keep more heat.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.