The patient in this case is the photovoltaic market, from which we have received very different, sometimes contradictory signals in recent weeks. The summer slump is subsiding but reports of bankruptcies and insolvency are coming in. While installation figures have been promising, not least in Germany, the market is in trouble and manufacturers are concerned by continuing low prices. On the other hand, at least for Germany, quite respectable new construction figures have been reported in recent months, which do not at all reflect the acute problems in the market.
Remarkably, module prices continued to plummet in August 2024. This strong price correction, especially for high-efficiency modules, is essentially due to the long overdue price adjustments made by many wholesalers. Module prices in large-scale projects and spot market prices on relevant platforms have already been gradually reduced in recent months as part of the ongoing price war. The wholesale trade and the online shops of the better-known suppliers have attempted to keep the prices of products for the installer market at a level that was not excessively painful for as long as possible. Efforts have also been made to use the proceeds from new goods with higher performance to compensate as far as possible for the losses in older (PERC) stocks.
A hoped-for sales rebound has not occurred, however, and European stores have reduced prices by €0.02 ($0.02) per Watt of panel generation capacity to €0.04/W from July to August 2024. That up-to-20% monthly fall may be the biggest to date. Of course, the whole thing is put into perspective again when the individual price points from the wholesale trade are mixed with those from the spot market and project business. Mainstream panel prices have fallen 4%, high-efficiency panels 11% in just one month. As a result the current price of modules with an efficiency of at least 22% is 30% down on the start of 2024.
That further weighs on older, lower-performance stock held by wholesalers and processors and manufacturer reductions in output and shipping volumes are yet to compensate for a huge overestimation in demand. Inventory is filling up in Europe, even among module manufacturers. As already mentioned in an earlier comment, these are becoming increasingly worthless and are putting a strain on liquidity, especially for wholesalers and installers who are therefore reducing their purchasing volumes.
Chinese manufacturers, in particular are continuing to try to shore up market share by cutting prices to less than panel production costs. The quarterly figures released by some listed solar manufacturers are correspondingly poor. Although the domestic market in China is still gigantic compared to all others, it has not been possible to consume all the production surpluses there for a long time. The government seems to be backtracking on approval of large-scale projects and favorable loans and not every PV project receives a connection permit. The grids in Asia are also increasingly overloaded by renewable power generation and need to be expanded. Many completed solar plants are apparently being curtailed constantly or simply not feeding into the grid at all.
For many PV manufacturers, the only way out of the price trap is to continue reducing their production until the market stabilizes. It is said many production lines have already been mothballed - actual realized solar equipment production capacity is reported to be at 20% to 50% of its theoretical volume. It remains to be seen which companies will survive in the medium to long term. Some tier 1 manufacturers, and many smaller producers from the second tier, could be affected by an unprecedented market shakeout, particularly in the inverter, storage, and PV accessory segments of the market. An almost unmanageable number of new suppliers has attempted to establish themselves in these segments in recent years.
As is happening with some solar traders and processors, companies are falling victim to their own high expectations or those of investors. In the unprecedented PV gold rush of recent years, many could no longer imagine an imminent downturn. Those who have been in the industry for any length of time, however, know that there is no consistency and no permanently calm market environment in the renewable energy sector. A rapid rise appears to inevitably be immediately followed by a fall before things go up again - it is an eternal oscillation around a steadily rising success line. The years since 2021 or 2022 brought a very good run for solar and growth has been above the long-term trend line of around 20% to 30% per year.
Now the entire market is slipping into negative territory, seemingly in order to fluctuate around a healthy level in the medium term. Things will probably get worse for a while before they start to pick up again. To find our way out of the current situation, we need demand to pick up quickly in all areas. Optimism must be rekindled. Taking Germany as a warning, smokescreens regarding the abolition of all subsidies for renewable energy, from German Finance Minister Christian Lindner and his Free Democratic Party, are of little help. Proposals about what should replace current legislation in order not to frighten the financial world, and to create planning security are still too thin on the ground.
We need this if we want to avoid the same situation as occurred around 2012, when politicians largely withdrew support from the industry out of panic at the supposedly unaffordable cost of subsidies. Back then, it was claimed that solar and wind energy could be further expanded without comprehensive support programs. We all still have bad memories of the result. The photovoltaic market in Germany collapsed by 80% and took a good 10 years to recover. We must no longer risk such a development and must instead promote solar in society. Renewable energy is, in principle more economical than all conventional energy sources and should be expanded with increasing speed. To continue integrating clean-energy technology in a grid-friendly manner, energy storage systems need to be integrated at all grid levels and framework conditions for a flexible and intelligent electricity market are needed. Targeted promotion of these measures must create incentives and thus a positive investment climate. Then the ailing patient will soon feel better again.
Overview of price points broken down by technology in August 2024 including changes over the previous month (as of 16 August 2024):
