This Tuesday I attended my second CleanTX Power Lunch at Austin’s Chamber of Commerce. It’s a monthly event that draws in professionals to hear from a guest speaker in the cleantech/energy sector. This month we had Raj Prabhu, CEO and co-founder of Mercom Capital Group. Mercom is a global communications and consulting firm that works with companies in the cleantech and finance industries.

Prabhu came to the Power Lunch to tell us about the state of the global solar market, and started on a somewhat gloomier note. But it’s true, recently solar has been doing poorly – people in the industry have been losing jobs and companies are turning belly up. However, Prabhu clarifies that there are two sides to the story. While manufacturers (upstream) are suffering and many of them facing bankruptcy, the development side (downstream) is actually doing pretty well.

Downstream solar companies are now benefiting from historically cheap panel prices. This includes solar leasing firms and system providers. The situation is comparable to one of those see-saws you see in a children’s playground – it’s either the upstream or downstream segment of the solar industry that end up on top and you rarely see them hovering at an equal height.

Prabhu then had us look at the solar market broken down by country. Until recently, Germany led the world in solar installations. Now, the German government has started pulling back on incentives, causing forecasts to drop dramatically for the country. Italy also made a name for itself as a leading solar installer and even outshined Germany in numbers in 2011 (9,248 MW vs 7,487 MW). However, Italy has also fallen back in the past two years with a lack of funds.

China and Japan are now picking up the slack with figures growing at eye-boggling rates. “Demand and manufacture has shifted East,” affirmed Prabhu.

But what dictates our world’s solar installations? Those would be investments. In 2008, we had a peak in funding which went primarily to thin film technology. Then, in 2009 we had a recession, where credit markets got tied up and things fell off. From there, funding grew over the next two years at a modest trickle. According to Prabhu, funding mainly went to a small group of companies because investors were interested in seeing them through all the way through to commercialisation.

In 2012, funding took another downward turn. A lot of companies either went out of business, or got acquired for very low prices. And 2013 doesn’t look too bright either, said Prabhu. So where is the little funding that we see taking place actually going? Funding is mostly going to niche technologies that are helping increase efficiency or reduce costs in solar. Prabhu explained that in reality, the number of funding deals taking place hasn’t necessarily dropped, we just have a lot smaller ones taking place.

Nonetheless, “consolidations happen and market consolidate” said Prabhu, attempting to give us a glimmer of hope for the solar market. He suggests that we will see another 20-25% of growth in the solar market in a matter of time. China alone, sets to reach 35 GW by 2015! It’s an ambitious goal, to say the least, but one that is not necessarily impossible. Demand in the East really is picking up, for both economic and environmental reasons.

“In 2010 there was a shortage of panels. Last year they would have delivered them to your house if you wanted them.”

There’s no denying that the solar market has been on a bumpy ride to date. “In 2010 there was a shortage of panels. Last year they would have delivered them to your house if you wanted them,” said Prabhu. Today, manufacturers are starting to make money again. Prabhu went so far as to suggest that demand and supply is tightening up. Perhaps soon we will see a revamp in solar manufacture. The important thing is that we learn from our past mistakes, and if we can expand global capacity enough we should do just fine.