The solar panel glut joins the oil glut

Bloomberg/Fuel Fix:

Solar manufacturers that are ramping up production now face a looming glut of panels, forcing companies to adjust or face dire consequences.

Trina Solar, Canadian Solar and JinkoSolar Holding Co. are among the suppliers boosting output at factories that will expand global capacity by 18 percent this year, according to Bloomberg New Energy Finance.

The manufacturers are locked in a race to build bigger and more advanced factories to crank out panels faster and cheaper. Just as they start rolling off the lines, demand is expected to slow, especially in China where the government rolled back subsidies last month. Prices are slumping, and suppliers expect margins to slip as well. It’s a pattern we’ve seen before, after a global oversupply five years ago drove dozens of companies out of business.

“Oversupply appears to be business as usual in the solar industry,” said Jenny Chase, New Energy Finance’s lead solar analyst.

The solar industry went through a similar boom-bust cycle after capacity grew faster than demand, triggering a two-year slump starting in late 2011. The result was a wave of consolidation as prices plunged and panelmakers’ losses piled up. Cheap panels also helped spur demand for more solar power, eventually prompting the survivors to expand production.

“These companies are all fighting for market share and their tendency is to build more and more capacity,” Pavel Molchanov, an analyst at Raymond James Financial, said in an interview. “Ultimately that drives down prices and margins for everyone.”

Canadian Solar, the second-largest manufacturer, is building a a 350-megawatt facility in Brazil, and JinkoSolar is expanding output from a 450-megawatt factory that went into operation in Malaysia last year.
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This is happening as demand shrinks and subsidies are being reduced or eliminated.  The push for market share in a glutted market is reminiscent of the Saudis Response to increased competition.  But when you are losing money with each transaction you can't make up the losses with increased sales at a loss.

Solar still has the problem of being unable to modulate its energy flow.  It also suffers from the whims of the weather.  For it to be a reliable source, it needs to have energy storage capacity to deal with the excess that can be used when the sun is not out.  The current overcapacity does not address this problem.