From pv magazine Germany
Dark clouds hang over the European solar market, and SolarPower Europe has even spoken of a “perfect storm.”
Module prices have plunged by nearly 30% since January, with utility-scale PV offers hitting €0.11/W ($0.12/W). The solar industry's cyclical nature is resurfacing when the EU Commission and German government plan to rebuild their PV supply chains.
A debate has ignited among industry participants on the need for measures to restrict Chinese module imports, sparking heated debate on social media. Saxony-Anhalt Energy Minister Armin Willingmann, leading Germany's energy ministers' conference, has addressed the problem. They have cited unfair competition and have attributed the “module glut” to a US import ban over forced labor allegations in Xinjiang, China. The belief is that unsellable US stock is flooding European warehouses, driving down prices, and exacerbated by Chinese “dumping.” Potential measures, yet undefined, could include import duties or bans in response to dumping and forced labor concerns.
As a result, module manufacturers' sales teams repeatedly increased their demand forecasts, prompting manufacturers to expand production capacities. The market shifted from being a “distribution market,” where scarce goods were rationed, to a “buyers' market,” where price became the primary concern, and demand could be met.
Taking lessons from 2022, wholesalers, mindful of not disappointing customers again, stocked their warehouses generously. Any excess that couldn't fit in the warehouse remained at the port. During the summer, analysts from Rystad, BNEF, and S&P Global consistently observed a gap between module imports and installations, ranging from 40 GW to 60 GW.
The European market also underwent changes, with energy prices gradually returning to normal levels.
“Rooftop market growth in Europe in 2022 was significant due to the energy crisis and high electricity prices, but this sense of urgency for installations in the residential and commercial sectors has waned as electricity prices came back from record prices,” says Zoco.
Verivox reported that on Jan. 1, the average cost of a kilowatt-hour for new customers in Germany was about €0.44 (§0.47). Since then, prices have consistently fallen, with new customers now paying an average of €0.29/kWh. This trend has a clear impact: as electricity prices decline, the incentive to invest in photovoltaics diminishes.
Additionally, rising interest rates have made financing considerably more expensive. Negative publicity surrounding the Building Energy Act has further discouraged potential solar installations, especially in conjunction with heat pumps.
End of the party
Although demand in the rooftop segment remained relatively strong, it did not meet the expectations of manufacturers and many wholesalers during the first quarter, resulting in demand falling significantly short of expectations. An oversupply of modules led to price declines, posing a serious challenge for wholesalers who had purchased modules at higher prices than they could currently sell them for.
Wholesalers who obtained 500 W modules at €0.25/W are now struggling to sell them for only €0.15/W, resulting in substantial capital losses on inventory. This situation has led to some retailers facing financial difficulties, raising the risk of insolvency. To cope with the oversupply, both Chinese module manufacturers and European wholesalers are working to offload their inventory, even if it means selling below value, prioritizing cash flow over profit.
The World Trade Organization's definition of dumping includes not only prices below production costs but also whether manufacturers charge similar prices in export markets as in their home market. Inquiries in China revealed offers for new p-type modules ranging from €0.156/W to €0.164/W, with slightly higher average prices for new n-type modules, ranging from €0.166/W to €0.176/W. The minimum value of €0.11/W likely represents discounted pricing for older PERC modules.
“We have confirmation of distress sales to reduce inventory as well as redirection of some volumes to other parts of the world,” Zoco said.
According to some analysts, the problem of particularly large module stocks is a global one. Zoco, for example, names Brazil as the destination for module redirections.
The widespread transition to TOPCon technology is contributing to the decline in prices for PERC modules. PERC manufacturers are required to switch to TOPCon technology promptly, resulting in the rapid depletion of PERC cell stocks, which are being processed into modules, suspected by both wholesalers and analysts, albeit cautiously. While the process appears plausible, it is challenging to definitively prove.
The swift adoption of TOPCon and Heterojunction technologies is naturally driving down prices for PERC modules. Some manufacturers are enticed by the prospect of “fire sales,” prioritizing the release of capital tied up in modules. Delaying sales could lead to higher losses, although some manufacturers urgently need the funds to remain financially stable.
Chinese manufacturers are also facing a challenging situation, incurring losses due to the ongoing price war. Jenny Chase, an analyst at BNEF, foresees the possibility of bankruptcies among Chinese manufacturers, a recurring occurrence in the cyclical solar industry. The decisive factor in this regard will be internal Chinese demand for modules in 2024 and 2025.
“It is too early to know whether this will have an impact on consolidation at the manufacturer level,” said Zoco.
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