Analysts see solar-sector crunch

As the financial crisis raises borrowing costs and prices of solar modules fall, many of the world's solar energy companies could fail or be forced to merge, analysts say. The industry has long been attracting heavy investment and government subsidies that have propelled supply ahead of demand, Reuters reported.


Analysts at Goldman Sachs said they expected solar module prices to fall by about 15% next year due to the consequences of oversupply. Others predict that the economic downturn will lead to widespread solar company failures, especially for those that do not have a strong market-share or technology leadership. "On a global average, three out of four [solar energy] companies will not make it," said Robert Schramm of Germany’s Commerzbank.
However, analysts also note that oversupply and reduced demand for photovoltaic solar energy could aid the industry in the long run by bringing prices closer to the cost of conventional electricity — so-called grid parity.
But Hans-Otto Truemper, managing director of Grossboetzl, Schmitz & Partner, which has US$2.3 billion of assets under management, still thinks the timing is not ideal for the renewables sector.  "If you look at the current energy costs — oil prices have practically more than halved — then the competitiveness of solar and wind power needs to be called into question," he said. "However," he added, "I see opportunities in the sector. And in the long term, there is no way around it."

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