The solar market saw solar prices dropped drastically due to oversupply in 2011 and most solar firms across the supply chain suffered losses. Nevertheless, a significant drop in prices for solar PV systems stimulated new demand. Though the Europe market was plagued by a debt crisis, total global installations still reached 26.1GW, a 30% growth on year, and showed that demand was not as low as the market believed.
As for 2012, governments in Europe have been reconsidering solar incentive policies and plan to make cuts to subsidies. Major solar markets such as Germany, Italy, and France all face dwindling demand. However, many new markets such as Japan, China, India and the US have emerged due to cost reductions to the solar PV systems. Strong demand from these new markets may offset the impact of the dwindling markets in Europe. Digitimes Research estimates the 2012 solar market will experience installation growth of 9.4%, reaching 28.5GW.
Capacity expansions taken up by the solar firms in recent years have caused supply to significantly exceed demand. Hence, despite a continued increase in demand, the industry will likely continue to suffer due to oversupply. Price increases will not be easy, which means the undesirable market conditions will first impact firms that lack improved technologies and have relatively higher production costs. Asia-based firms (mainly in Greater China) will continue to increase their market share. However, the supply chain is not likely to get rid of an oversupply problem until 2014 when demand shows significant growth and excess capacity exits the market.