Worldwide production capacity for silicon and thin film panels will jump from 3.14 gigawatts in 2007 to 12.36 gigawatts in 2010, Travis Bradford, president of the Prometheus Institute, said at a Greentech Media conference this week.

According to his forecast, thin-filmsolarwill make up 25 percent to 30 percent of solar production capacity in 2010.

While production capacity goes up, Bradford said the prices of solar-power systems would drop.

Prices for traditional silicon-based solar panels will fall from $3.66 per watt in 2007 to $2.14 per watt in 2010, he forecasted, while the average price of thin-film panels is expected to drop from $2.96 per watt in 2007 to $1.81 per watt in 2010.

Part of the reason for the anticipated drop is that Bradford expects the amount of silicon for the solar industry to quadruple from 30,070 tons in 2007 to 125,302 tons in 2012.

Bradford now expects that 10 percent to 20 percent more silicon will be available than what he forecast last year.

Yet according to his calculations, "demand hasn't really changed at all," he said.

Bradford expects the demand to grow from 2.94 gigawatts of panels in 2007 to 6.76 gigawatts in 2010, leaving an excess of 5.6 gigawatts worth of silicon and thin film.

As a result, Bradford said the overall supply problem will be worse than expected.

So far, supplies of silicon have still been “relatively scarce,” he said, but contract prices have begun to level out. The institute estimates that prices were about $60 per kilogram in 2007, compared to $55 per kilogram in 2006 and $45 per kilogram in 2004, and projects that substantial new supplies will reach the market by the second half of this year.

Some analysts expect that there will be an oversupply of panels once the silicon shortage ends. Bradford said his latest forecast shows there will be more excess silicon capacity to absorb, and it will take longer to do it.

The market dynamic will also shift, he said, from a seller’s market to a buyer-driven market. The inability to tolerate the switch, which is also expected to come with a lowering of panel prices and shrinking margins, will result in a market shakeout, according to some analysts (see Solar Sector Heading for a Shakeout, Silicon Still a Hot Topic at Photon and Solar Margins About to Shrink).

Thin-film solar companies that use little or no silicon are expected to suffer less hardship during the shakeout (see Thin-Film to Survive Solar Shakeout).

On Wednesday, the Masdar Initiative, a United Arab Emirates state-owned company that invests in future energy sources, announced that it will invest over $2 billion in thin-film technology.

Initial investments include $600 million for the development of two manufacturing facilities (see Abu Dhabi’s Masdar to Get Into Solar With Help From Applied Materials).