Even though falling solar panel prices led to a plunge in solar stocks in 2011, the CEO of U.S.-listed Suntech, the world's largest producer of panels, remains upbeat on the sector, saying it is has now become competitive vis-à-vis other energy sources.
Zhengrong Shi told CNBC on the sidelines of the World Economic Forum in Davosthat “10 years ago solar panel prices were about $6 per watt, but now (they) are approaching 1 dollar per watt."
"A six times reduction in 10 years – solar has grown really fast. I think all this is indicating that solar is becoming more and more competitive,” he added.
Suntech , founded in 2001, has seen sales grow to $3 billion over the past 10 years. In the third quarter of 2011, the company reported a gross profit of $107.8 million and a gross margin of 13.3 percent compared to $33.7 million and 4.1 percent, respectively, in the second quarter of 2011.
Shi adds that solar panel companies that do not have enough scale to survive the extreme compression in margins are being shaken out. “Right now, there is an oversupply situation, manufacturing capacity is expanding faster than growth in the market. The industry is going through consolidation,” he said.
While currently Europe accounts for around 50 percent of Suntech’s sales, he says demand out of the U.S., China, India and South Africa is growing fast. “In India, electricity generated from solar is already cheaper than diesel,” he said.
While Shi acknowledges falling natural gas prices will put pressure on demand for renewable energy, he says it’s important to consider overall resource availability in the long term.
“Natural gas prices, oil prices are going up and down, but we have to look at overall resource availability — we should focus on the long term sustainability of this planet. I think solar, wind and all these renewable energies are definitely a better answer.”