Market Analysis

Market Analysis December 2022 - A new year in PV – Part 1: What retailers and manufacturers expect from 2023

It looked as though 2022 might end on a quiet note, with supply chains and component prices already stabilizing, but December painted a very different picture. In PV modules, at least, there has been a lot of movement. In some cases, discounts on individual products have been very significant - up to 9% since last month. Prices for PV modules, at least for new and grade A products, have dropped nearly to the level they were at some 12 months ago at the start of 2022. Is this the beginning of a long-term trend? We will clarify this and other specialties that can currently be observed below. I spoke to a few key people from the industry beforehand.

What delayed deliveries for inverters, and to a lesser extent battery storage systems, so much last year was the shortage of raw materials and the overall chip shortage. At least this snag seems to have been cleared up. Goods that have been ordered are arriving again, and in large quantities. Manufacturers are now shipping lots within 2 to 3 months that buyers have waited for all year, but dealers lack the distribution capacity to cope with the flood of stock. Even after this is cleared up, there may still be occasional problems meeting the generally high demand on time, according to Ulf Hermenau.

The shortage of electronic components has forced many manufacturers to redesign their products. But since this also necessitates additional tests and certification procedures, it inevitably results in delays and increased costs. Inverter and storage customers will feel the effects of this in the new year. Nevertheless, the availability of most products, including new launches, should normalize by the second quarter, provided there are no more unforeseen disruptions. Component prices will also remain stable for the time being, following isolated increases, but a turnaround does not look likely until 2024 at the earliest. Huawei has also changed its purchasing strategy to longer-term, fixed purchase agreements to better counteract crisis-related fluctuations in availability in the future.

The situation with solar modules is quite different. Currently, large quantities are still in Rotterdam and other European ports. Due to the ongoing political uncertainty regarding how profits from electricity generation will be handled, as well as the significant delay in inverter deliveries, many customers jumped ship towards the end of the year or pushed their projects into the coming year. Hardly any want to be saddled with the burden of overly large inventories during the cold season, when installation work can only be carried out under more difficult conditions. As a result, manufacturers are in danger of being left sitting on their modules and are currently undercutting each other with special prices.

The key question now is if this trend will continue or whether it will just be a flash in the pan before module prices rise again in the new year. To answer this, we need to look at both the supply and demand sides of the equation, as well as the drivers and bottlenecks in between. The consensus is that the lack of installation capacity will keep us busy for a long time to come. However, there is already a discernible shift from conventional electricians and other roof-related trades toward the solar industry. Some companies that had turned their backs on this work years ago when demand suddenly collapsed are now returning to PV. Nevertheless, the existing workforce will scarcely be able to cope with the solar boom that is expected in 2023, especially in the retail sector. A lack of in-house sales and logistics staff will ensure that order processing and material distribution speeds will fall short of customer expectations for a long time to come.

Jan Brunner, CSO at Krannich Solar, is currently seeing a decline in module shipments from China. This indicates slackening demand; either that, or market participants are reluctant to add to the already large stocks of panels amassed in Europe before first emptying their warehouses, as has been the case in previous years. At the same time, consumer interest continues unabated, at least for small and medium-sized PV systems. The desire for independence from fossil fuels and the associated cost control it brings, even in the long term, apparently outweigh the need to save money and concerns many have about their livelihoods. Investor money is still plentiful and gravitating towards sustainable products, especially as potential returns on PV installations are still good, even in the commercial sector, given the right marketing model for the electricity. Early material planning is advisable to avoid the same supply problems in the coming year that occurred in 2022. All players would do well to submit reliable forecasts to their suppliers well ahead of time.

On the supply side in particular, the market for modules will again soften considerably over the coming year, and there may even be excess supply, according to Frank Niendorf, General Manager for Europe at JinkoSolar. At present, silicon prices are declining markedly again. The costs for container shipments from overseas are also almost back to pre-covid levels. In addition, the Euro-US Dollar exchange rate has again moved in favor of the Euro - and these are all factors that influence module and system prices. Although some materials are still in short supply, some of these factors are only impacting the production price for now. It often takes months before the reduced costs reach the end customer. Nevertheless, all indications are that solar panel prices will not rise in the year ahead, but instead will tend to fall steadily from the second quarter onwards, at the latest. We will not know how exactly the Asian producers will price their products until the end of January following the Chinese New Year.

Overview of price points broken down by technology in December 2022 including changes over the previous month (as of 12 December 2022):

Overview of price points broken down by technology in December 2022 including changes over the previous month