Yesterday's electronic version of the Wall Street Journal had an interesting headline:

"Solar Prices Headed Down on Massive Glut"

The story reports that the "supply of solar panel modules ramped up at the beginning of this year and came into collision with slack demand, sending inventories up 64.3%." (emphasis in original).

Wow! Massive Glut! Inventories increased by 64.3%! That is terrifying! The solar energy industry must be headed for disastrous over-supply and ruin!

Wait a second. What does a 64.3% increase in inventories actually mean?

It means, according to an expert quoted in the WSJ story, "the equivalent of one-and-a-half months of excess inventory."

So, let me get this straight. The Stimulus Bill contains tens of billions of dollars for investments in renewable energy including solar, plus it looks like we will have some sort of "cap and trade" or other carbon reduction legislation in the US that will provide a further incentive to invest in solar, plus the Obama Administration is taking a leadership role in global efforts to reduce carbon emissions which will require more investments in renewables like solar, plus the price of oil is still over $60 per barrel despite the worst global recession in most of our lifetimes -- and who knows where the price of oil will go once we start emerging from recession -- which makes renewables like solar attractive alternatives.

But the solar panel industry is experiencing a "massive glut" because it has one and a half months of excess supply?

Fortunately, solar energy investors have a slightly longer perspective than journalists and financial analysts. That one and a half month excess supply of solar modules will soon be history.

John Howley
Orlando, Florida
 


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