What has the recession done to the solar energy industry?
Written by guest contributor Jennifer Gorton from Forex Traders
The Great Recession of 2008 caused economic upheaval around the globe. As Bear Stearns and Lehman Brothers and several other prominent American financial institutions collapsed in September of 2008, it seemed for a short time that the entire global financial system may collapse. Fortunately, Central Bank leaders around the world gathered in one accord and decisively slashed interest rates to historically low records in order to ease credit markets and inject liquidity into the financial system. This concerted effort worked a financial miracle as the world economy subverted a complete meltdown.
Six months later, in March of 2009, the Great Recession seemed to bottom out as growth returned to developed nations, equity markets rebounded, and unemployment began to fall. Most industries suffered greatly in 2008 due to the months of September through December, but growth did resume in 2009. In this article we will break down the growth of the Solar Energy Industry during these market cycles over the last two years, and then discuss what may happen as the United States continues in its quest of economic recovery.
The Great Recession of 2008 was, of course, led by the Sub-Prime Mortgage Crisis. When the falsely inflated bubble of sub-prime mortgages burst in early fall 2008, it nearly undid the entire financial system, as very few banking institutions and financial firms had truly recognized the degree of risk and exposure these risky assets carried. Thus, most industries fell into contraction throughout the last 4 months of 2008, but industries heavily dependent on the housing sector were hit among the hardest.
Solar energy industry is tied to the housing market
Since the Solar Energy Industry is heavily connected to the housing sector, one would infer that it probably took a major hit in 2008, but, in reality, the industry did quite well relative to the horrible economic conditions in the rest of the economy. In fact, the U.S. Solar Energy Industry expanded in 2008, although its expansion was definitely limited due to decreased demand for solar installation. In 2008, solar capacity rose about 9%.
Consumer demand fell sharply during the last 4 months of 2008, and this weighed heavily on final growth numbers as the year ended. Also, the extremely poor credit conditions that arose in the wake of the Sub-Prime Crisis served to cause big problems in the Solar Energy Industry as, “Many companies report that although consumers continue to express interest in solar, concerns about personal finances and tight credit have reduced sales,” said the Solar Energy Industries Association.
Extremely tight credit conditions weighed on consumer demand in those last few months of 2008. In the first quarter of 2009, these problems continued for the industry. Credit remained very tight, and general economic unrest was still very prevalent in the world economy. Then, in March of 2009, as the economy began to turn around, the demand for solar energy also rebounded nicely. The first quarter of 2009 was very disappointing for growth numbers in the industry, but the rebound in March led to incredible growth through the last three quarters of 2009.
The 2009 US Solar Industry Year In Review states that, despite a global recession, “the solar industry added new solar electric installation totaling 441 MW, pulled in $1.4 billion in new venture capital investments, created 17,000 new jobs and grew by 36% in annual revenue.” These numbers stand in sharp contrast to the very sluggish growth experienced in most industries in 2009. At the end of 2009, the Solar Energy Industry claimed a total supply chain that supported nearly 46,000 jobs in the U.S. and this number is expected to surpass 60,000 by the end of 2010.
Now, in 2010 the global recession has cooled as growth has now returned to all developed nations. However, the economic recovery is hitting a major wall of resistance. In late July, Federal Reserve Chairman Ben Bernanke informed the United States Congress that the economic outlook in the United States is “unusually uncertain.” This is not good for financial markets.
This unusual outlook for the economy for the second half of 2010 and into 2011 may have a negative impact on the solar energy industry, and it may cause wild volatility in currency trading. Tight credit markets will continue to weigh on consumer sentiment and consumer demand and may cause less than optimal growth in the solar energy industry in the second half of 2010. However, the industry will mostly likely not contract, it will simply not grow as fast and aggressively as it could if credit markets were functional in normal conditions and consumer demand was at normal levels.
Tags: demand solar energy, great recession, recession impact solar, solar energy industries association, solar energy industry, solar power
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