In 2012 only one of the major solar companies posted a tiny profit, and companies averaged over $28 million in losses. Other solar industry metrics like earnings per share (EPS), price to book ratios, sales growth and analysts projected earnings are similarly disheartening.
As reviewed in a report titled “The Critical Decade: Global Action Building on Climate Change,” new solar power capacity in China has risen by 75 percent in 2012 and is expected to triple by 2015. Globally, the capacity of solar photovoltaic panels increased by 42 percent in 2012.
Solar companies are coming to terms with the economic realities of oversupply and falling PV prices. It is both a normal and a healthy part of the growth of any sector that market forces will kill the weak and enable the strong to thrive. Bankruptcies and mergers should not be interpreted as a sign of the overall weakness of the industry. It is more accurate to appreciate the changes in the solar sector as the birth pangs of an industry that is coming of age. In the final analysis the death of some will help the industry to prosper in the long run.
© 2013, Richard Matthews. All rights reserved.
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