A recent post in Environmental Capital, a green business blog of The Wall Street Journal, sounds the alarm about solar panel overproduction. WSJ writer Keith Johnson says,

What started out as a slight oversupply is turning into a full-blown supply glut which is sending shockwaves through the whole industry and which could take years to play out.

What’s less clear is just how big the supply glut really is. One new report…says that global solar-panel production will increase this yearabout [sic] 14% to 7.5 gigawatts.

7.5 GW worth of panels, weighed against an estimated new 3.9 GW of solar installations: this is the disparity that leads the firm behind that report, iSuppli, to predict an inventory backlog of solar panels until 2012. The effect of this “supply glut” has been to drive down the cost of traditional silicon-based panels, which is great for everyone but the thin-film solar manufacturers (and the traditional panel manufacturers themselves, of course, whose profit margins are disappearing). Since thin-film has been relentlessly touted as the low-cost solution solar has been waiting for, this throws a wrench into the works.

I’m not a market anaylst. But I do know that it’s impossible to predict what state and national legislatures are going to decide with respect to incentivizing solar over the next couple of years. Mandates for higher percentages of solar power within renewable portfolio standards could increase demand for panels above current projections. Unforeseeable world events or natural disasters could send everyone scrambling into the arms of distributed generation resources, like solar panel installations. You just never know. And even if this one report’s predictions come true–well, maybe thin film solar is just going to have to strive even harder to provide low-cost solar power in order to get its fair share of the market. Necessity, after all, is the mother of invention.