|Solar factories have expanded faster than demand and will be able to make as much as 38 gigawatts of panels this year, about 54 percent more than estimated demand, according to Bloomberg New Energy Finance.|
That excess supply will arrive on the market as Europe’s largest economies, including Britain, Spain and France, follow Germany and Italy in scaling back incentives to curtail installation of power systems that are paid above-market rates.
“Demand is falling as governments, particularly in Europe, lose appetite for subsidizing the industry,” said Theodore O’Neill, an analyst at Wunderlich Securities Inc. in New York.
The shifting support in Europe is particularly painful to First Solar because it favors rooftop power systems, which are more likely to use Chinese polysilicon panels. First Solar focuses instead on ground-mounted utility-scale plants that use its thin-film products, he said.
The U.S. Commerce Department, responding to complaints from U.S. solar manufacturers that Chinese competitors receive unfair government support, imposed tariffs last month of as much as 4.73 percent on panels made in China.
First Solar’s EdgeFirst Solar’s thin-film technology, which helped it become the lowest-cost panel manufacturer, generates less electricity than traditional polysilicon panels and doesn’t perform as well for rooftop installations that are widely used in Europe.
“They don’t have a good product for the rooftop market, and Europe doesn’t have the big open spaces where their panels make sense,” said Wunderlich’s O’Neill.
First Solar said it will close its factory in Frankfurt an der Oder, Germany, in the fourth quarter. The company completed a 170 million-euro ($223 million) expansion there in November that doubled production capacity to about 560 megawatts of panels a year. It will idle four production lines in Kulim, Malaysia, this month, with about 144 megawatts of capacity.
The closures come about six months after First Solar ousted Chief Executive Officer Rob Gillette. Chairman and co-founder Mike Ahearn took over as interim CEO and announced plans to scale back or delay expansion plans in Vietnam and Arizona.
‘Deteriorated’“After a thorough analysis, it is clear the European market has deteriorated to the extent that our operations there are no longer economically sustainable,” Ahearn said in yesterday’s statement.
For China’s manufacturers, higher domestic demand may help offset declining sales in Europe.
“China will be a very, very important market in 2012,” Chen Kangping, chief executive officer JinkoSolar Holding Co. (JKS), said in interview last week. “Some will gain share as others shut down.”
Jinko, based in Jiangxi, China-based, expects global shipments to rise 50 percent this year from 950.5 megawatts in 2011.
“This is the problem about solar industry economics: there is just too much capacity out there,” Aaron Chew, an analyst at Maxim Group LLC in New York, said in an interview. “In China, they’re not any more competitive, they’re just bankrolled.”