According to analysts at Bloomberg News, 24.8 GW of PV panels will be installed worldwide in 2012, down ten percent from the 27.7 GW installed in 2011. Since 1999, installations have grown on average 61 percent annually, making this year the first decline in over a decade.
On a global scale, Germany and Italy – the world’s biggest PV markets – recently reduced subsidies that not only ramped up installations in those countries, but had also contributed to the precipitous fall in panel prices over the past years.
Analysts say that these subsidy cuts are likely to reduce demand for PV panels in Europe, which is bad news during the period of global oversupply.
“Overcapacity has been an overhang for this industry, and with Germany tightening it doesn’t seem like it will ease,” said Amir Rozwadowski, an analyst at Barclays Capital Inc., told Bloomberg.
“It’s difficult to assess where there’s a significant push-out that would lead to accelerating demand, given the anticipated decline in Europe,” he said.
The Bloomberg analysts note the global oversupply of panels over the past years, which has led panel manufacturers to lower prices, and has pushed some firms into bankruptcy. Factories have the capacity to produce around 38 GW in 2012, much greater than the predicted demand for the year.
In the U.S., a key subsidy expired in December 2011 and has yet to be renewed. With this drawback of subsidies in key markets, some worry that even with record low prices, solar panels will still not be cheap enough to install the amount available to supply.
And despite the supply glut, China’s latest five-year-plan indicates that top domestic firms will expand production, a prospect that does not bode well for Western PV firms. However, China’s biggest panel manufacturers have forecast higher sales for the coming year. Whether the anticipated demand will eventuate, though, is yet to be seen.