What Just Happened: Solar Module Prices Drop To New Lows
2016 was a wild year and not just for solar and after decades of reliance on government incentives, subsidies and mandates the global solar industry may be inured to unpredictability but the industry as a whole should be wary of global trends. Solar PV expert Paula Mints looked at a number of the developments for solar companies in the December edition of SPV Market Research's Solar Flare. Adapted for AltEnergyStocks.com, this series of articles is reprinted with permission.
Over 60% of global PV cell and module manu-facturing is either in China or owned by Chinese manufacturers. At ~30-GWp China’s market for PV deployment is over 44% of global demand.
A parable of what happened to module prices in 2016 is as follows: A company has one primary customer. This customer buys close to 50% of the company’s product. The customer cuts its demand for the company’s product suddenly also indicating that demand the following year will be 50% of its previous level. Suddenly demand for the company’s product has fallen by 50% with the promise of a further significant decrease in demand the following year. The company has several choices: A) sit on inventory, B) find new customers to absorb the excess production, C) sell the product at a sig-nificant discount and reduce capacity to serve the current level of demand or D) all of the above.
Late in 2016 China’s government moved to control demand and several gigawatts of product flooded into the market at historically low prices. Manufacturers outside of China and some Chinese manufacturers reduced staff. The rapid drop in price was, as usual, celebrated by some as an example of progress. The chart above offers average module prices (ASPs) from 2006 through 2016 as well as the low and high module prices during 2016.
What it means for solar: Prices have already ticked up slightly but full price recovery depends on another record year for solar PV deployment in China. Meanwhile other manufacturers face some tough decisions concerning pricing strategy for 2017. It’s a bad time to be a PV cell and module manufacturer.
Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry. You can find her on Twitter @PaulaMints1 and read her blog here.
|Tweet||Add to Flipboard Magazine.|