The state of the PV industry – Complex times ahead: Here we go again…
By Gaëtan Masson, Director @ Becquerel Institute
The word “reasonable” never really applied to the PV sector and 2016 is not going to change this state of facts. The 10 years of market and industry development have been marked by a series of market booms and failures, companies growing faster than light and going into bankruptcy before one could notice, and forecasts being beaten one after the other. When some imagined a market rapidly growing, the market stagnated more and more often.
China über alles
2016 does not escape these PV rituals and while the global PV market seemed to be finally under control, with a reasonable growth rate coming from developing markets, the surprise came from China, again. With enough installations in the first two-quarters to beat any other country, China will push the global PV market indicators into the range of 65-70 GW (according to the latest report from the PV Market Alliance) this year. Coming from 50 GW in 2015, the growth is so significant that it might have surprised many spectators.
It also seamed that the years of unforeseeable PV growth rates were apparently behind us and with an evolving market the industry could finally manage its future without the chaotic events that we experienced in the last decade.
Now it appears that the Chinese PV market probably will have trouble to keep the high level of installations that were scored in 2016 and we can expect a downturn in 2017.
A wearying Chinese market could unassumingly bring the PV market down to a level below the one that could have been expected in 2016 without the Chinese boom, by an order of magnitude, and below 60 GW.
The declining PV market, the complex situation in Europe, and a decreasing market in China won’t be compensated by the expected growth in the US (but will it last until 2017?), India, and other emerging countries. This unfortunately could postpone most capacity expansions for the near future.
0,38 USD/Wp. And this might not be the end
The real-world characteristics of living in an open globalized market can be resumed easily as the market always understands the future better than most analysts. In that respect, the current price decline for PV modules that has been seen from Q2 2016 is, unfortunately, confirming the fears of over-capacities in the PV market.
In April 2016 at the SNEC PV Power Expo in Shanghai, the lowest official prices reported for PV modules were still above the 0,45 USD/Wp mark. One could object that cheaper modules were available but this level was at least compatible with announced production costs below 0,40 USD/Wp from most of the competitive players with less sustainable margins.
While 0,38 USD/Wp has been recently reported, the low range of prices is now sinking below the production costs of several tier 1 players. This is alarming to know because even the most competitive producers might have difficulties to make a reasonable profit at this price level. This is especially import since when the average prices were around 0,43 USD/Wp this was also tough for an industry that just came out of a strong consolidation process and had some key players are still struggling with their profitability.
Interestingly, 0,38 USD/Wp as a minimum price for PV modules tends to confirm the hypothesis of a steeper-than-expected price learning curve for crystalline silicon modules. Of course, during consolidation times, with reduced demand, the long-term learning curve doesn’t really indicate the future anymore but it tends to confirm that the PV industry costs went down faster than expected due to different economical conditions in Asia. In the same way, at least two major players in the top 10 announced recently that they could be able (the conditional is essential) to produce around 0,25 USD/Wp at the horizon 2020.
From a market point of view, the price decline is always a good hook for further growth. Except in this case the market inertia (or policy inertia) doesn’t provide new markets to open soon enough to influence the prices upwards. The conditions for unlocking new PV markets, ensuring a stable development framework allowing them to live long and prosper, require more time than what would be needed to counterbalance the price decline, and the new overcapacity.
Analyzing the price evolution for multicrystalline materials within the last few months, the price of polysilicon remained rather stable and increased slightly. But, and this is more interesting, the price of wafers went down dramatically in the April-September 2016 period, with reported prices going down occasionally by 40%. The same could be seen for cells with lower decline rates and of course, modules, as explained.
This pricing instability will put tremendous pressure on non-vertically integrated manufacturers and could reshape completely the PV industry in the coming months and years.
So far, 2016 is bringing many interesting wonders and 2017 might be even more surprising. The good news is this might be a new turning point, with an increased competition, and careful actors looking for market share and profitability. In other words, difficult times ahead for innovation, equipment sales, and B2B business in the PV sector, globally but only death and taxes can be expected forever.