A new Solarbuzz Quarterly report said that weak European demand has led to a photovoltaic (PV) module glut of 8.6 gigawatts of modules by the end of the second quarter of 2011, which ended June 30. The overabundance of modules should lead to further price decreases, according to the report.

The weak second quarter is a major factor that will limit growth of the industry to just 5 percent over 2010, according to the report.

“The revised global PV market size of 19.3 GW for 2010 is now projected to increase to just 20.3 GW in 2011,” the report said. That’s far lower than projections by many photovoltaic manufacturers that according to the report planned to produce 1.4 to 1.7 times what they did in 2010, to meet projected demand.

“Our forecasts are largely unchanged from those set out in March 2011,” said Solarbuzz President Craig Stevens. “The slowdown in market demand was anticipated following large cuts in FITs [i.e., feed-in tariffs] and other program changes across Europe.”

While the U.S. market is growing, it’s still not enough to offset the weaker European solar market.

“The U.S. currently only represents around 5 percent of the global demand. U.S. market share will grow significantly over the next 5 years,” Stevens said.

The excess modules produced in the second quarter could lead to year-over-year price reductions in module prices as steep as 25 percent, according to Stevens. Already module prices fell 16 percent since the start of 2011.

Those price drops mean that demand is likely to pick up in the second half of 2011, the report said.

During the second half of 2011 and particularly in the fourth quarter, the report anticipates that demand will outpace supply.

“The rate of price decline will reduce in the second half of 2011. There may some selected opportunities for price tightening depending on the level of production in [the fourth quarter],” Stevens said.

Image courtesy of Solarbuzz.