A new report coming out of the semiconductor industry paints perhaps the bleakest picture yet for the PV industry in 2009. According to iSuppli (via Solid State Technology), worldwide photovoltaic installations will decline 32% this year, sales will drop roughly 40%, and the average price of solar installations, per watt, will decline 12%.

Rapid Growth and Sudden Crash

Photo Credit: chascar

The problem started with the industry’s rapid growth over the last several years. Averaging about 40% growth per year had the solar industry foaming at the mouth and flooding the market with production capacity. But a rather sudden crash in the U.S. housing market, which in turn spawned a worldwide recession, is bringing the industry back to reality in a hurry. Now a lot of new production capacity is sort of floating in the wind with little demand for its services.

Stability in Store

Still that may be just what the PV industry needs, says iSuppli. The downturn will work to consolidate the market — weeding out the less successful ventures — and bring balance to production and demand. If there is blame to be had, then much of it lies with Spain. In 2008 Spain was responsible for half of worldwide PV installations, but vital incentives, including a feed-in tariff, are set to expire which, are expected to have a sizable and negative effect on sales in 2009.

Reasons for Hope

Here in the United States the recession is as intense as anywhere and many solar companies have been forced to reel in and pare down in an attempt to weather the current storm. Yet positivity remains generally high among startups, with a renewably-energetic Obama administration, the stimulus package, and renewed federal tax credits as incentives for hope.

Photo Credit: linh.ngan

Future Coming into Focus

None of that, however, can help the PV industry this year, says the report, but the future beyond 2009 is a different story. Yes installations are expected to decline by 32% leading in to 2010, but by 2011 the industry is expected to more than double, and continue to do so into 2013. A big reason being the growth of a young industry into maturity. Supply will settle down and become more in line with demand, bringing profit back into the market and renewing investor confidence. Feed-in tariffs and government incentives will still be vital to growth, but with prices continuing to fall, the return on investment for PV installations, sans government subsidies, will come into focus.

The iSuppli report, despite its gloomy predictions for 2009, even as we ramp up for another season of sun in North America, reflects other predictions we’ve read. These days are like the deep breath, not before the plunge, but before the burst into sunnier days: the storm before the calm.

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Posted on May 5th in Solar News by Dan.