Europe Continues to Dominate Current Solar Market

Germany was able to pick up the slack from Spain and grow to ~50% of the global total. Italy, the Czech Republic, and elsewhere in Europe made up another 24% of the global market.

But Europe’s 74% global share was down from over 80% in 2008. The US remained the third largest solar market (this year after Germany and Italy) at 8% of the global market. Solar installations grew a quick 36% in the US to 485 MW in 2009. Japan ranked fourth after its market more than doubled.

Solar cell production is now close to 10 GW (less than a third of wind turbine production in 2009, but its catching up). Global solar demand may approach the 10 GW milestone in 2010 as it is expected to return to white-hot growth. This growth is less dependent on subsidies since the price of solar modules fell 38% during 2009 and prices are expected to continue to decrease in 2010. This could usher in the period of affordable solar by late 2010, especially if prices for oil, natural gas, and coal continue to trend higher.

While solar won’t be as cheap an emissions reduction option as the bicycle, its ability to compete economically with fossil fuels will be greatly enhanced in the year ahead.

Onwards in the Sustainable Energy Transition-

Dennis Markatos-Soriano

US & Europe Details

In the US, the average price per watt for a single module fell 1.1% or five cents to $4.56 per watt. This price is 5.4% below last year, but remains ~5% higher than the record low reached in 2004. In Europe, the average price fell .9% or four cents to 4.44 euros per watt. This price is a new record low and 5.5% below last year.

In kWh, the price for industrial solar electricity fell .8% or .16 cents to 20.4 cents per kWh. Prices are now the lowest since October 2004 (almost five years) and only .5% from the record low set in June 2004. We should see a new record low by the end of the summer based on current price trends.

Keynesian Price Stickiness

Prices on the individual retail side aren’t falling as quickly as the wholesale numbers I wrote about yesterday: ~5.5% vs. 40+%, respectively. Longterm contracts and general Keynesian price stickiness will eventually shakeout and the lower equilibrium will emerge by the end of 2009/beginning of 2010. And a quick note: these survey prices are per individual module. Average customers generally buy multiple modules that integrate into panels, so the price per watt for most projects is discounted for the bulk purchases to currently below $3 per watt. Still, the Solarbuzz price survey is useful as a comprehensive view of the individual retail sector and gives insight into the trends of the whole industry.

I’ll let you know as further developments occur.

Onwards in the Sustainable Energy Transition-

Oil Above $67 Per Barrel

The early signs of economic stability and a weakening dollar have doubled the lowest price of oil reached last December (~$32.50). Last week’s EIA petroleum report showed US crude inventories falling 1.5%, but still significantly above average. Gasoline supply fell below average levels, but distillates and propane remained above average. With most petroleum inventories above average and recessionary low demand continuing for the next few months at least, it is hard to imagine the price continuing to rise much further in the short term unless production begins to fall on the low rig counts and prices.

Low Gasoline Storage Sends Wholesale Prices Up

Wholesale gasoline prices increased further over the past week, and are poised to send pump prices above $2.55 and potentially as high as $2.60 per gallon in the near future.

Rig Count Up for Oil, Down for Natural Gas

Another reason oil prices should slow down its increasing trend is the oil rig count is increasing on oil’s recent price recovery. The oil rig count climbed 3.9%, which may keep second half 2009 oil production from dipping below 5 million barrels per day. For natural gas, the rig count continues to fall – last week at a 1.1% rate. By this fall, natural gas production will probably slide below the 2008 rate and help prices climb 50+% toward the marginal cost of production of $7+ per MMBtu. Then again, natural gas prices could remain below $6 into 2010 if companies like GM and Chrysler continue to struggle mightily to sell their products.

The current oil price climb is dangerous for our economy unless we accelerate our deployment of efficiency and renewables. Stay tuned in the weeks ahead for more details on the increasing price of fossil fuels and the role it plays in our Sustainable Energy Transition.

Onwards-

Prices fell faster than costs

In the first quarter, the average selling price (ASP) of solar modules fell like a rock. Meanwhile, solar producer costs fell less quickly. For instance, China Sunergy reported its ASP fell 45% from $2.97 in the fourth quarter to $1.64 per watt! This price is 50% below their first quarter 2008 price. Sunergy took a loss of $8.8 million as its costs fell a slower ~37% pace.  They estimate a return to profitability in the second quarter on lower costs (since most of their residual high-priced polysilicon has been cleared from inventory).

Lower Polysilicon Cost Allowing Profit at $2 per Watt

Polysilicon production has now more than caught up with demand.  And major polysilicon producer, Michigan-based Hemlock Semiconductor, just announced yesterday the ahead-of-schedule completion of a plant to make an additional 8,500 tons of polysilicon per year (a more than 10% increase in its global supply). The spot price of polysilicon is reported to have fallen more than 60% from last year to as low as $65 per kilogram. Such a low polysilicon price brings silicon-based solar producers back into competition with thin-film players like First Solar moving forward.

Shipments likely to grow in second quarter

Many companies are not only predicting a return to profitability in the second quarter, but an increase in sales. For instance, Trina Solar expects to ship 23-33% more modules April-June (60-65 MW vs. 48.8 MW in the first quarter). Overall, 2009 may be a repeat of 2008 capacity growth levels ~6 GW, but revenue will be significantly lower. As long as solar producers are successful at reducing costs, the future is beginning to get bright again for industry growth.

Within a few days, I’ll share the early June tally for solar prices. And we’ll get a sense of how quickly this climate-friendly energy source can get competitive with the fossil fuel-fired power plants that dominate today.

Onwards to Sustainability-

2006 Chapel Hill/Carrboro Blue Bikes Launch

During the first quarter of 2009, more bicycles were sold in the US than cars and trucks. While the Great Recession is hurting bike sales, they didn’t fall as fast as automobiles. Over 2.55 million bicycle purchases were made, compared to less than 2.4 million cars and trucks that left our nation’s lots.

Bicycle Sales Still Hurt by Recession

I don’t mean to say that bicycle sales are unfazed by the recession. Their proxy for data, imports (imports make up more than 90% of the US market), are actually down more than 30% from the first quarter of 2008. But that percentage drop is slower than the 35+% drop in sales for cars and trucks. Since nationwide gasoline prices are now rising above $2.40 per gallon at the pump, we may see another wave of US residents shifting to bicycles for their everyday trips. The large savings from riding a bike over short distances rather than driving can help consumer confidence and support economic recovery.

Even Long Trips Can be by Bike

Visionary activists are creating opportunities for cyclists to safely travel longer distances as well. For instance, the East Coast Greenway Alliance aims to connect greenways from Key West, FL, to Calais, ME, on a 3,000-mile long paved trail. For me, it’s an exciting potential to visit family and friends in New Jersey, Connecticut, and Rhode Island (or even the longer trip to my native state of North Carolina!) via bicycle. So far, many corridors of the East Coast Greenway (ECG) are built. But gaps in the trail exist that we all can chip-in to connect. One important current opportunity is for us to show our elected leaders that we support the completion of the ECG and other trails throughout our country as part of the federal transportation bill to be deliberated this summer.

Climate Benefits of Bicycling

Not only are there cost savings from such local and intercity rides, but there are environmental benefits too — especially in the reduction of carbon dioxide emissions. While an average solo car trip or airplane ride emits more than 1 pound of CO2 per mile, bicycling or walking emits close to zero. If we need to travel hundreds of miles, there are great low-carbon strategies for travel that include mass transit and carpooling, keeping our average emissions less than 1/2 a pound of CO2 per mile.

Infrastructure Development Crucial

For Americans to put these millions of new bicycles to use, government leaders from the federal to the local level need to give more support to the construction and maintenance of safe bike lanes and greenways. Such work can be a much-needed source of job growth. From neighborhood paths to an urban counterpart of the Appalachian Trail, bicycling has great growth potential.

Let’s make it happen!

Today, the oil price convincingly passed $60 per barrel as the dollar fell to $1.377 per euro (10% weaker than its peak several weeks ago). Oil had previously touched $60 before retreating during the last few days. But this time, a weekly report from the US Energy Information Administration (EIA) showed a larger drop than expected in US inventories of crude oil, at 2.1 million barrels or .6%. This drop followed a bigger 1.2% drop the week before. Therefore, even though oil storage levels remain above average, the emerging trend of decline has caused speculators to bid the price up.

Gasoline May Spike to $2.50

Gasoline storage levels fell 2.1% to below the average range, its second big drop in as many weeks. With prices now at $2.33 per gallon and wholesale prices that translate into $2.50+, we are likely to see a continued spike in gasoline’s price in the week ahead. In fact, without extremely bad economic news derailing the rally – average gasoline prices seem destined to rise above $2.40 and toward $2.50 soon.

Lower Imports & Lower Demand

Crude oil imports averaged less than 9 million barrels per day (Mbd), down more than 5% from last year. But this still isn’t a problem for the short-term because inventories are so high and recessionary demand remains more than 5% below 2008 levels. Last week’s demand for gasoline, distillates, and propane fell 1.4%, 13% and 4.7%, respectively. The timing and speed of economic recovery along with the pace of oil field decline rates will determine prices going forward.

Fuel Efficiency Crucial

Obama’s announcement yesterday to raise fuel efficiency standards in the US market to 35.5 mpg by 2016 was a great step forward. The Union of Concerned Scientists estimates this policy will save Americans at least $30 billion dollars per year (reduced gasoline expense, etc.) in 2020 based on a gasoline price of just $2.25 per gallon. The efficiency standard will also lower our oil import needs by 1.4 million barrels that same year (enough to replace dwindling shipments from Mexico).

Bottom Line: A focus on efficiency will be crucial to keep our economy from suffering an even worse oil shock than 2008 in the years to come. This same efficiency is a big part of the climate mitigation effort we need to deploy in the US and worldwide. Solid policy like strengthened fuel efficiency standards accelerate the Sustainable Energy Transition, helping our environment and our wallets simultaneously.

Onwards-

For instance, overall petroleum use was only 18.2 million barrels per day (Mbd), down 7.9% from last year and the lowest since May of 1999. Last week, demand for gasoline was down 4.2% from 2008, distillates down 17.7%, and propane down a rapid 31.4%. This low demand has sent inventory levels of everything but gasoline close to records. Crude oil production remained ~.2 Mbd (3.7%) below its mid-April peak. But the beginning of output from the Gulf of Mexico’s Tahiti platform started to flow this week, which may help 2009 average US crude production stay above 5 Mbd.

A Weaker Dollar and Stabilizing Economy

While the fundamentals of supply and demand remain largely bearish for now, speculators are sending oil prices up as high as $58 per barrel on the weaker dollar and signs the economy is regaining its footing. The dollar has weakened over 5% in recent weeks and the rate of job losses is decelerating. Some analysts are talking $70 oil in the weeks ahead, but that seems unlikely unless lower rig counts really pull oil production down quickly. But $70+ by year’s end seems reasonable, as the global economy will hopefully get its groove back. This would translate into gasoline prices ~$2.50 per gallon, so I encourage everyone to refocus on efficiency to lower costs (and be climate-friendly).

Natural Gas Rising Too

Natural gas prices have gone up 25% to $4 from their late April low ~$3.15 per MBtu. And the CEO of major natural gas producer Chesapeake, Aubrey McClendon, said prices are likely to rebound dramatically by late 2009. He expects the new normal for prices will emerge to be more than double today’s price, at between $8 and $9 per MBtu to ensure the marginal cost of new supply is reached.

Again, there is no short-term worry as supply is 23% above the five-year average and demand remains low. But production should decrease on today’s lower rig count by late summer.

Wind & Solar Relative Prices Improve

If natural gas and oil do indeed rise another 100+% and 20+%, respectively, then the relative price of wind and solar will improve dramatically. I will keep you updated at SETenergy.org as this develops.

Onwards in the Sustainable Energy Transition-

Europe price falls to record low

The price per watt of a single module fell to 4.52 euros (a drop of 2 euro cents (.4%) from April). This is a record low and is 4% lower than last May.

US solar price at 3 year low

The price in the US fell four cents (.8%) from April to $4.70 per watt. This is 2.3% below last May and the lowest price since December 2005. Prices are now ~8% higher than their 2004-05 record low. Thus, if prices continue to slide at the current pace we will see new record lows in the US by early 2010.

Solar PV Electricity Prices Down .4%

The fall in module prices translates into a fall of .09 cents (.4%) in the price of industrial solar electricity to 20.78 cents per kWh. This price is the lowest since March 2005 and only 2.4% above the record low set in June 2004. Therefore, we are poised to reach record low solar electricity prices by the end of the year.

Bottom line: Slower demand in 2009 has allowed solar producers to more than catch up with demand. Prices are falling significantly, but have a ways to go before they set record lows in the US and worldwide. And since the price of natural gas and coal are currently ~70% below their 2008 highs, the solar market will continue to be policy-driven until potential grid parity in the early 2010s via fossil fuel price recovery and further solar price reduction.

Three weeks ago, I wrote about a small drop in production as the potential beginning of decline. But then the following week saw the year’s highest production at 5.481 million barrels per day (Mbd). So I waited to report the small fall in production that I read about last week (a 1.1% slide to 5.421) until after a second straight drop followed it. And that consecutive drop was reported this week as output slid further to 5.269 Mbd.

A Significant Drop in Production

While US crude production currently remains .25 Mbd above last year, the .21 Mbd (almost 4%) drop in production over two weeks could signal tighter supplies on the way. If such a rapid decrease continues for three more short weeks,  output would fall below 5 Mbd again and require imports to rise.

High Fuel Inventories Prevent Short-Term Worry

Recessionary low demand has caused all fuel inventories to remain above average. While gasoline demand was only down .4% last week, demand for distillates (mainly diesel) and propane fell 16.8% and 8.5%, respectively. As a result, crude oil inventories are almost 15% higher than last year and the highest since 1990. So it will take many weeks of US production below 5 Mbd for supplies to feel tight again.

Rig Count Falling, But More Slowly

The number of rigs actively drilling for new oil and natural gas wells slid again this week to 945 (oil fell 6 to 196, natural gas fell 1 to 741, and miscellaneous fell 3 to 8). This weekly slide of 10 rigs (1%) is much slower than the ~40 rig drops of recent weeks.  But the further slide means that oil output will probably continue to decline for several months. And natural gas, with its faster decline rates, will probably begin to show significant production decreases soon. With natural gas storage that is 34% above last year and 22.5% above the five-year average, this fuel carries no short-term worry either. But by late summer, output declines may catch up with the rate of recession-induced demand reduction and get the price back above $4 per MBtu.

Bottom Line: The falling rig count is finally translating into lower oil output and will soon show itself in natural gas production numbers. While supplies are ample for the short-term, more market tightness is on the way in the medium term. A continued focus on deploying efficiency and renewables can prevent a 2008-style price spike as output falls in late 2009 and 2010.

Onwards in the Sustainable Energy Transition-

Grid Parity by 2011?

Such cost reduction puts them on track to more than achieve their goal of 65 cents per watt by 2012. In fact, if their costs fall 5% per quarter through the rest of 2009 and in 2010, they would reach 65 cents per watt by January 2011. Such a price would probably translate into grid parity in 2011 as long as solar installers can reduce their costs as well.

Profits More Than Triple 1st Quarter 2008

First Solar reported profits of $165 million ($1.99 per share), versus 2008′s $47 million (57 cents per share). First Solar’s stock price has so far shot up 25% on the news to almost $190.

As a low-cost leader, First Solar is doing much better than many of its peers who have falling profits due to the recession.

Bottom Line: First Solar is showing the world that solar can compete even in a low energy price future. A few more quarters like the last one for them, and grid parity will become a reality for solar in many of the world’s electricity markets.

I don’t own any First Solar stock, though I wish I did

Onwards to a climate-friendly energy future-