According to market analysis conducted by IMS Research, the price of solar photovoltaic (PV) modules is dropping as a result of record high inventory levels.

Global PV module inventory levels have reached more than 10-gigawatts in the second quarter of 2011.  Inventories at manufacturers, distributors, integrators, and installers have all grown this quarter.  The record-high inventory has largely been caused by increased production as well as decreased incentives in key European markets.

Through the institution on new regulations the Italian market has been halted, while Germany and Spain have both cut their solar feed-in tariffs over the last year.  Suppliers have also seen their inventories rise quickly as production has out-paced shipments.

IMS predicts the price of solar modules will continue to dip and this will lead to a strong recovery in the PV market in the third quarter.  The drivers of the recovery will be the United States and Germany.

Despite the major glut of solar modules saturating the market, IMS says the high inventory numbers are not that shocking when all variables are considered.  According to Sam Wilkinson, IMS PV Research Analyst, the current numbers are only around three to four gigawatts above 'normal' levels.

"Throughout 2010, when all products were moving quickly through the supply chain, channel inventory typically stood at four to five gigawatts; which is roughly equivalent to one quarter's production. Generally speaking, a module will take around three months to be shipped, transported and make its way through distribution channels before being installed, so this figure appears reasonable."

In 2010, the U.S. solar industry experienced record-setting year in which it was the country's largest growing energy sector.  Couple the administration's belief that the next era of innovation will come from new energy technologies alongside falling solar modules prices, and the industry could see even more growth this year.

Photo by Danilo Rizzuti.