All eyes are on the solar market, watching to see when supplies will meet growing demand and when prices will tumble to a point where solar is no longer an “alternative” energy. A recent study by Photon Consulting of Boston titled “Detailing Demand: Where Will All the Volume Go?” forecasts that supplies throughout the global market will grow to more than 23 GW by 2010 and that demand will hold steady, triggering a price reduction of about 20 percent compared with 2007 rates.A recent Photon Consulting report forecasts that factory-gate module pricing will drop to close to $3 per watt by 2010, with system prices overall dropping nearly $2 per watt.Analysts Chris Porter and Michael Rogol base their conclusions on the fact that current demand is outstripping supply and that governments are putting policies into place to encourage further growth. In addition, downstream cost reductions in emerging markets also will bring down prices. The authors indicate that system prices are higher in many emerging solar markets than in more established ones because customers in these newer markets are more expensive to serve. Regulatory processes are less developed, for example, and a greater level of customer education is required. Future improvements will lower the cost of serving these customers – and, thus, prices.Incentives fueling growthGovernmental incentives and grid price increases are fueling strong growth in North America, Spain, Italy and South Korea, which collectively saw an increase in installations from 300 MW in 2006 to more than 800 MW in 2007. And while Germany and Japan still lead in installations, with 44 percent of modules worldwide, initial growth rates in those two countries are beginning to decline.Demand in North America is expected to grow to nearly 5 GW in installations annually, assuming that policy support holds steady, that grid prices continue to rise, and that cost and price reductions are found industry-wide. Not surprisingly, however, the greatest growth will take place where the strongest feed-in tariff markets are – currently, South Korea and across southern Europe.Factory-gate module pricing declined by 6 percent in 2007 to $3.78 per watt, which was attributed in part to price drops in maturing markets coupled to a growing interest in lower-cost thin-film modules. Prices of both modules and systems will drop in more established markets as policy support declines, and demand will shift to markets with relatively higher-priced modules. This change will lead to a global weighted average factory-gate module price of $3.03 per watt in 2010, bringing solar even closer to grid parity in many markets around the world.