The price of solar cells, the main component of photovoltaic panels, dropped in May as additional supply hit the market and demand was curbed by European cuts to solar power subsidies, Bloomberg New Energy Finance said.
Monocrystalline cell prices slumped 7.5 percent to $1.14 per watt from the previous month and multicrystalline cells were down 8.7 percent at $1.09 per watt, according to a report by Martin Simonek, an analyst at the London-based research company. With the spot price of the raw material polysilicon posting a smaller decline of 5.1 percent to $74.4 per kilo, many cell manufacturers have seen their profit margins wiped out, he said.
"The cost of materials is much higher than they were expecting," Simonek said in a telephone interview. "Polysilicon prices are killing a lot of cellmakers."
The squeeze on margins may force smaller producers out of business or to seek a takeover from a bigger rival, Simonek said. Evergreen Solar Inc. last week said it may run out of cash unless it can find more investment and restructure its debts after sales slumped 55 percent in the first quarter.
Spectrawatt Inc., the cell maker backed by Goldman Sachs Group Inc., last month closed its Hopewell Junction, New York, plant, laying off 117 workers.
China's JA Solar Holdings Co. and Suntech Power Holdings Co., the world's biggest solar-panel manufacturers, are leading an expansion by a number of producers that together will add at least 9.5 gigawatts of new manufacturing lines this year, raising global capacity to 41.5 gigawatts compared with demand of no more than 28 gigawatts, New Energy Finance forecast.
German Subsidies
German Chancellor Angel Merkel last week said Germany may have to consider additional cuts to its subsidized solar tariff, which swallows half the country's financial support for alternative energy. Italy this month passed a law which will progressively lower subsidies through the end of next year.
While competition is increasing in the market for solar cells, polysilicon production is still controlled by a handful of companies, such as Oslo-based Renewable Energy Corp., Munich- based Wacker Chemie AG (WCH) and GCL-Poly Energy Holdings Ltd. (3800) of Hong Kong.
New Energy Finance is forecasting a shortage of polysilicon this year, with global production set to reach about 24 gigawatts. Additional demand for solar cells will likely be met by thin-film panels that generate power from other substances such as cadmium telluride.
