Although the news from Lehman Brothers has been troubling today, the venerable investment bank's solar energy equity research team has been a bright spot amid the gloom. Group leader Vishal Shah's daily email newsletter and periodic reports are some of the most informative and cogent in the space--a must-read (or at least peruse) to go along with my morning coffee.
When I asked Vishal if I could excerpt some choice bits from Lehman's solar demand analysis report issued earlier this week, he told me to "feel free" to do so. Below you will find (with minor editing) some of the team's findings, observations, and takeaways from the recent EU PVSEC show in Valencia, Spain. I've also posted a couple semiconductor vs. solar-related excerpts over at the "official" home of Chip Shots at Fabtech.
Here's what Vishal sees ahead for 2009, and what's changed in the his analyses since earlier forecasts. Hint--it's still about the poly:
We believe one of the potential near-term concerns for the sector is that most solar companies have provided somewhat aggressive guidance for 2009 on the assumption that polysilicon supply would become readily available from the spot market or silicon partners. We expect supply tightness to continue and expect solar ASPs to decline at a faster rate than poly costs for companies without relatively long-term supply contracts. We believe gross margin pressure or slower than expected output growth could lead to a wider divergence of share price performance among solar companies in 2009.
Our polysilicon supply survey suggests that execution challenges could likely result in low plant utilization rates and tight polysilicon supply over the next 12 months. We expect further tightness due to strong demand growth from emerging solar markets and forecast spot-market prices above $250/kg in 2009. We are reducing our polysilicon supply estimates from 59,000 MT to 52,000 MT, 92,000 MT to 80,000 MT and 160,000 MT to 145,000 MT in 2008, 2009, and 2010, respectively. We are increasing our demand estimates from 4.2 GW to 4.3 GW, 6.7 GW to 6.9 GW, and 11 GW to 11.3GW in 2008, 2009, and 2010, respectively.
Toward the end of the report, Vishal and Co. offer a little perspective on "screening the longer-term winners":
So which companies stand to win in the long run? The common view is that solar is a commodity with relatively low barriers to entry. Our view is that barriers to entry are low for high-cost/low-efficiency panels—it is relatively easy to make an undifferentiated product for the incentive markets where IRRs are still very attractive—the only constraint is access to polysilicon supply....MORE