Barron's: Solar Boom To Be Preceded By Company Failures (ESLR, ENER)
According to a research report published on Barron’s, the global solar market will expand at a 23% compounded rate to $77 billion by 2015, from an estimated $39 billion in 2010. Lux analyst Ted Sullivan believes that the industry will handily beat the current long-term expectations for the industry, with an increase in shipments in 2015 increasing to roughly 26.4 GW, up from 9.3 GW in 2010.
However, the good news ends here. The industry is expected to go through a lot of suffering before seeing such unprecedented growth. Sullivan expects the industry to witness a period of significant overcapacity and “violent changes,” with “widespread company failures throughout the value chain.”
According to Sullivan, both high-cost and low-quality players are prone to the ongoing glut issue. However, Evergreen Solar (NASDAQ: ESLR) and the Uni-Solar brand from Energy Conversion Devices (NASDAQ: ENER) are at high risk due to “high operating costs and insufficient scale.”
Sullivan explains that, despite similarities in technology, the solar industry is completely different from the semiconductor industry in terms of their business models. As a result, the solar industry’s adoption cycle is determined by the replacement cycles for residential and commercial roofs, which spans 15-20 years and up to 30 years for natural gas power plants.
