Deutsche Bank: Global solar demand robust, despite disappointing tariff decision

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Research analyst, Vishal Shah reports from this year’s Intersolar North America that global solar demand appears healthy, with the U.S. remaining an interesting market. Both yieldcos and the anticipated U.S. listings of downstream Chinese assets could "act as next set of catalysts for sector," he states.

Regarding the recent U.S. Department of Commerce trade decision, which saw the continuation of tariffs for Chinese companies, Shah says it was worse than expected, with higher than anticipated tariff increases of around 30%, instead of 17.5%.

On the back of the decision, Shah says module pricing could improve, with suppliers intending to look to Q1 pricing levels for the third quarter of the year – around 66 to 67 US cents/W – as opposed to the previously discussed around 63 to 64 US cents/W. He added that it is too early, however, to see where prices in the second half of 2015 end up.

Polysilicon prices are said to be currently sitting at around $15/kg, down from the $18/kg seen at the start of the year. That, combined with "overall module costs in the mid 40c, Chinese companies can still make ~6c margin in the low 60c/W pricing environment," continues Shah.

In the inverter arena, Shah points to intensifying competition. He picked out Enphase as having raised the stakes in the U.S. residential sector, although it has yet to crack SolarCity. The company is planning to offer its products to the installer at similar prices to SolarEdge. Meanwhile, at Vivint, its market share is projected to fall from around 80% to 25% in the second half of this year.

Enphase’s YoY price declines are between 15 and 20%, compared to 8 to 10% for other top tier inverter companies, reports Shah. He adds that while cost reduction for its generation four products is a priority, generation five "would be required in order for the costs to decline to 10c/W range."

SolarEdge, in comparison, is said to not be experiencing any significant pricing impacts and is on track to launch its generation three product by the end of the year. "This product is expected to have significantly higher margins than the current generation product," writes Shah.

Concluding his roundup of Intersolar North America, Shah states that the Chinese solar industry appears relatively unaffected by its volatile stock market, with project financing on track and downstream capacity expansions still a key priority for most. "Capacity expansion in the industry remains modest with most major companies planning to add 500-600MW of incremental capacity in 2H15 timeframe," he says.