BP exit solar market as industry margins evaporate

BP Solar announced that it will end its activities in the PV market today, citing it being “Difficult to sustain long-term returns for the company."


BP’s decision is a clear indicator of the challenges that PV module suppliers face in remaining profitable in the current industry conditions. PV module manufacturing capacity has hit 50 GW this year, despite demand reaching just 24 GW. The resulting oversupply has put huge pressure on prices, and average prices are now 44% lower than they were one year ago. Average gross margins are now in the single digits, and most suppliers are making net-losses on their operations. 

Recent high-profile solar investment announcements from the likes of Google and Warren Buffet’s MidAmerican Energy may seem to contradict the move from one of the World’s largest Energy companies. However, these recent investments have all been further downstream in financing large utility-scale systems. These investment cases are very different to operating as a module supplier in today’s climate and so are not likely to be affected by BP, or other suppliers’ departures from the industry.

Recent years have seen huge swings in the balance between supply and demand in the solar industry. From mid-2009 through to the end of 2010, demand out-stripped supply and all suppliers were able to sell their products. This situation has changed dramatically in 2011, when rapid manufacturing expansions have coincided with a slowdown in the growth of global demand. The result has been intense competition and a fierce price war, and not enough demand to support all of the industry’s hundreds of suppliers. Clear winners in 2011 have been large pure-play Chinese suppliers, whose lower cost structure and highly aggressive pricing has allowed them gain market share throughout the year. Consequently, 4 of the world’s 5 largest suppliers of PV modules are now Chinese.

A BP spokesman in the US had commented today that "BP’s goal is to profitably grow in specific segments of the energy industry." BP has clearly abandoned hope of achieving growth or profitability in this space.

BP’s exit is not the only recent high-profile exit from the industry. With a fierce price war led by low-cost Chinese suppliers dragging most suppliers’ bottom lines into the negative, it is not likely to be the last either.

No comments
The Engineers' Choice Awards highlight some of the best new control, instrumentation and automation products as chosen by...
The System Integrator Giants program lists the top 100 system integrators among companies listed in CFE Media's Global System Integrator Database.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
This eGuide illustrates solutions, applications and benefits of machine vision systems.
Learn how to increase device reliability in harsh environments and decrease unplanned system downtime.
This eGuide contains a series of articles and videos that considers theoretical and practical; immediate needs and a look into the future.
Choosing controllers: PLCs, PACs, IPCs, DCS? What's best for your application?; Wireless trends; Design, integration; Manufacturing Day; Product Exclusive
Variable speed drives: Smooth, efficient, electrically quite motion control; Process control upgrades; Mobile intelligence; Product finalists: Vote now; Product Exclusives
Machine design tips: Pneumatic or electric; Software upgrades; Ethernet advantages; Additive manufacturing; Engineering Leaders; Product exclusives: PLC, HMI, IO
This article collection contains the 5 most referenced articles on improving the use of PID.
Learn how Industry 4.0 adds supply chain efficiency, optimizes pricing, improves quality, and more.

Find and connect with the most suitable service provider for your unique application. Start searching the Global System Integrator Database Now!

Cyber security cost-efficient for industrial control systems; Extracting full value from operational data; Managing cyber security risks
Drilling for Big Data: Managing the flow of information; Big data drilldown series: Challenge and opportunity; OT to IT: Creating a circle of improvement; Industry loses best workers, again
Pipeline vulnerabilities? Securing hydrocarbon transit; Predictive analytics hit the mainstream; Dirty pipelines decrease flow, production—pig your line; Ensuring pipeline physical and cyber security

(copy 5)