Credit: David Shankbone

Credit: David Shankbone

The New York Times reported last week that the price of solar panels has dropped 40 percent in a little more than a year.

That’s good news for consumers who have been scared off by the initial upfront costs for installing a solar array. The federal 30 percent subsidy for renewable energy projects has helped increase the number of installations and the number of the number of consumers willing to consider these units. State and local incentives have been helping, too. When coupled with falling panel prices, the all-important payback period can be significantly reduced.

But the news is probably a mixed bag for panel makers. Clearly, more efficient manufacturing has been a factor, but so, too, has heighten competition. According to the article, materials sourcing and manufacturing in China may be a bigger factor:

Until recently, panel makers had been constrained by limited production of polysilicon, which goes into most types of panels. But more factories making the material have opened, as have more plants churning out the panels themselves — especially in China.

“A ton of production, mostly Chinese, has come online,” said Chris Whitman, the president of U.S. Solar Finance, which helps arrange bank financing for solar projects.

While business is up for solar installers, the Times reports that some domestic PV makers are still losing money. Some market watchers have been cautioning about the possibility that elements of the solar manufacturing industry were facing a major downturn in revenues and venture capital because of a purported beginnings of an oversupply of PV units. In early 2008, we reported in the ACerS Bulletin (see p. 5) that Lux Reseach Inc., for example, said supply will begin to “exceed demand in 2009, leading to falling prices and a shake-out among companies, particularly crystalline silicon players that haven’t invested in thin-film technologies.”

A recent posting on Lux’s blog notes that many well-known PV manufacturers didn’t show at the July Intersolar conference, but a host of Chinese companies had a big presence.

In a somewhat related followup story, the Times also reports on how a shift to the use of microinverters on each panel can decrease performance problems sometimes experienced with multipanel arrangements and allow consumers to install an initially small solar system but add more panels later as the prices drop.