LOS ANGELES More consolidation could hit the solar power industry in 2010, as tough competition and falling prices whittle away companies that are sitting on high cost assets and loaded with debt, the chief executive of BP Solar told Reuters on Thursday.
BP Solar, a unit of BP Plc, and other solar companies are seeing demand for the renewable energy systems pick up after a dismal year of difficult financing and a tumble in panel prices, but panel prices will continue to drop.
"For some people there will be momentum. For others, they will struggle to meet the cost reductions and the price reductions," BP Solar CEO Reyad Fezzani told Reuters in an interview.
Fezzani said BP Solar did its own version of consolidation, shuttering more expensive factories, such as phasing out module assembly at its plant in Frederick, Maryland.
BP Solar has been in the industry for nearly 40 years and has about 1 gigawatt of installed or sold capacity for solar power systems.
"My expectation is that we will see more of the expensive end of the cost curve be whittled down and cut back," Fezzani said.
The executive said that BP Solar is not looking to acquire any companies that may be for sale as "we think they're the ones that should shut."
Next year looks bright for BP Solar, with "very robust sales" for the first quarter of 2010, said Fezzani, who expects Italy to be the company's top growth market next year.
Overall, BP Solar is gearing up to grow 40 to 50 percent next year, Fezzani said.
Fezzani said that government incentives in Italy, China and India are expected to spur growth. Depending on how fast China and India ramp up, supply shortages could return.
"We still have a very immature supply chain in this industry. There are going to be stresses and strains particularly as we're up to levels of growth and capacity that we have not seen before," Fezzani said.
The executive expects panel prices, which have plummeted as much as 50 percent over the last year, to return to a more normal rate of decline.
BP Solar could cut solar power panel costs faster than previously estimated.
The company has targeted a 25 percent cut in panel costs by the end of 2010, and it could make those reductions a quarter or two earlier than its target date, Fezzani said.
"I think we're progressing very well on that path," he said.
The company set that goal to make the renewable energy systems more competitive with traditional electricity.
BP Solar sees the bulk of its business -- about 60 percent -- in Germany, the world's largest market.
The U.S. market makes up less than 10 percent of BP Solar's sales, but the company would like to grow that to 30 or 40 percent.
BP Solar, which sells in the residential, commercial and utility markets, has landed deals in the United States with major retailer Wal-Mart and package delivery company FedEx Corp.
Fezzani said that the company is working to arrange financing for its 37-megawatt project with the Long Island Power Authority and plans to start construction in the second half of 2010.
It is working with the U.S. Department of Energy's loan program, but Fezzani did not say how much it was seeking.
(Reporting by Laura Isensee; editing by Carol Bishopric)