PHOTON’s 7th Solar Silicon Conference – Part 2

[Munich, Germany]

Understanding the PHOTON Consulting, LLC, numbers.

It was post or perish for PHOTON’s 7th Solar Silicon Conference while I was listening to presentations at PHOTON’s 4th Photovoltaic Investors Conference. Although I knew there would have to be a follow up post, forgetting my notes at my hotel kept things extra minimal.

The afternoon presentation by PHOTON Consulting analyst Joonki Song provided insight into the silicon spot price prediction of $125 to $350 for the next three quarters of 2009. Mr. Song said:

In 1Q09, even with much lower spot price, willingness to pay by users still sets spot price.

PHOTON Consulting has determined a disconnect exists between the silicon spot price and crystalline silicon (c-Si) solar module spot prices per Watt. Backing out silicon cost from module prices ranging from €2.52 to €3.43 per Watt (€2.60 last) between January and February 2009, a silicon spot price of $130 per kilogram is justified based on $1.20 ingot to module processing costs. Profiling 2009 photovoltaic (PV) market demand by system price, geographic location, and segment, PHOTON Consulting projects an average $3.20 per Watt c-Si factory gate module selling price. This average module price and the willingness to pay pricing mechanism justifies the silicon spot price of $125 to 350 per kilogram from 2Q09 (second quarter 2009) to 4Q09. I presume the silicon spot price range variation is driven by module price dynamics and company specific silicon utilization in grams per Watt.

By contrast, DIGITIMES reported later last week “Spot market prices of poly-Si expected to fall to US$100/kg in mid-March” by Nuying Huang and Adam Hwang (subscription may be required). If true, this may signal the start of a module price march towards $2.00 per Watt.

Less detail was provided justifying the 12.5 GW (GigaWatt) system installations forecast. Michael Rogol of PHOTON Consulting reviewed the aforementioned 2009 market demand curve and cited the increasing volume of project announcements pointed to resilient module demand despite the macroeconomic environment (Source: “Solar Installation Monthly” by PHOTON Consulting, LLC).

Mr. Rogol acknowledged the 4 GW German rooftop installation estimate was contentious but small installations are not dependent on project financing and German bank lending for PV has thawed. Mr. Rogol noted the core forecast uncertainty remained project finance and said:

If project financing does not continue to return as we are seeing it, then the market will have significant downside in price. If it does return we will have a very strong price environment.

In the blog Tech Trader Daily – Barron’s Online, “Still Too Early To Buy Solar Stocks, Citi Says” by Eric Savitz reported:

Citigroup’s Timothy Arcuri observes in a research note today, global demand is likely to sink to 5 GW, from 5.3 GW in 2008. But driven by a growing pipeline of utility-scale projects and aided by government stimulus programs, he thinks the total will jump up to 7.6 GW in 2010 and 9.6 GW in 2011. But Arcuri cautions that at the moment there is about 4 GW of product in the supply chain, or about 10-12 months of current demand.

If the PHOTON Consulting forecast is optimistic, then Citigroup forecasts a solar apocalypse. The 4 GW inventory question should be settled as solar companies report their 1Q09 earnings. Please keep in mind major photovoltaic markets are concentrated in the northern hemisphere (it’s winter) and seasonality was a word emphasized by Q-Cells CEO Anton Milner in his presentation at PHOTON’s 4th Photovoltaic Investors Conference. My take is 2009 PV market demand will fall between the PHOTON Consulting and Citigroup views with the caveats mentioned in Photovoltaics: 7 Trends to Watch in 2009.

I suggest checking out the new Top50-Solar® website design and the cool Geographical View.

This is GUNTHER Portfolio Post 300!
Thanks again to all the readers, subscribers, and friends of GUNTHER Portfolio.

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