For anybody reading this blog this will come as no surprise, but the New York Times has an informative article explaining the shortage of supply in the solar PV market and some of the causes behind it.

The main cause? In a word, Germany. After the government made it possible for Germans to sell electricity back into the grid at above-market rates, the country’s solar industry took off. It has essentially been a sponge to the market.

Combined with sustained demand from Japan, Spain, and California, where new “Million Solar Roofs” legislation is on its way to being passed, the strain on supply continues to get worse. Then there’s China, which is looking to get into solar in a big way, and even Ontario is considering a program that would give solar a boost in the province. Question is, will policy changes today make any difference if there’s no supply for newly created demand? 

Something’s got to give, otherwise we’re going to see people getting frustrated with long delivery times and rising prices by suppliers taking advantage of the situation. After years of seeing solar prices fall, they’ve started to rise this past year for the first time.

Another part of this problem is a shortage of silicon. The solar industry is competing against the semiconductor industry for purified silicon stock, which is also in short supply. This has led to much higher costs for solar PV makers, which are passing the extra expenses onto their customers.

I recall an interview I had last summer with Milfred Hammerbacher, president of Spheral Solar in Cambridge, Ontario. I asked him whether we can expect lower prices for products once Spheral gets its new mass-market manufacturing process sorted out. His response was a simple “No.” He said the huge demand in the market made it possible for Spheral to sell at existing prices for at least the next couple of years. Rather than pass the savings from a new and efficient mass manufacturing process to its customers, Spheral for now has chosen to take advantage of generous margins.

It makes good business sense for Spheral. If anything, perhaps the emergence of companies such as Spheral will at least prevent prices from rising any further.

It’s an interesting situation, one that will hopefully be resolved in the coming year or two as suppliers ramp up output and new entrants attempt to get in on the action. Unfortunately, purchasers will have to tough it out until the market stabilizes.

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