By Chris Berry

Introduction

After a recent slump, solar power has shown tremendous growth. Global photovoltaic (PV) capacity is 139 Gigawatts (GW) as of the end of 2013 and another 44.5 GW is forecast to be added in 2014. One GW is enough electricity to power between 750,000 and 1,000,000 US homes. The 44.5 GW mentioned above is almost a 21% increase y-o-y and equals the output of 10 nuclear reactors, according to Bloomberg. 

Overcapacity has resulted from government subsidies and has served to push panel prices down, helping to make solar more cost competitive with other fossil-fuel based sources of electricity. Dozens of panel makers still exist which implies further consolidation in the industry despite the projections mentioned above.

We are focused on finding value along supply chains across an entire industry and to that end the solar panel manufacturing business offers an interesting case study in finding value in a global “low growth” or “slow growth” environment. One of the key questions for market participants is “how will a panel manufacturer compete and thrive in a hyper competitive industry despite the rosy growth prospects?” Price declines and competition will hurt margins which in turn have the potential to impact investment returns.

The key is solar cell efficiency.