Market Analysis

Market Analysis January 2023 - A new year in PV – Part 2: What PV installers expect from 2023

Solar module prices have fallen continuously again this month, and there is still no end in sight. The main drivers impacting prices are lower shipping rates from China and the further recovery of the Euro-US Dollar exchange rate. Other effects such as slowly falling energy costs or polysilicon and wafer prices, which are in free fall, will further strengthen the trend in the coming months.

There is currently a slight distortion in the module market due to a recent patent infringement lawsuit in the Regional Court of Düsseldorf, this time filed - and won, for the time being - by Hanwha Q Cells against Trina Solar. As a result, Trina has suspended shipments of modules with affected PERC cells in Germany and is now pulling out all the stops to ramp up its production of products with TOPCon cells and delivering replacement modules with cells not affected by the lawsuit. Trina Solar has promised that any resulting delivery delays will be within reasonable limits. Many other Asian producers who also use PERC technology are not yet involved in legal disputes with Hanwha Q Cells, but there can be little doubt that other major competitors such as JA Solar, Canadian Solar or Risen Energy will not be spared much longer.

But let's turn now to what system installers and planners expect for the solar year ahead - will the solar turbo announced and fueled by various changes in the German Renewable Energy Sources Act (RES) 2023 kick in, or will the market acceleration be merely modest after all? Again, I have put the question to a number of market players.

Stefan Kutscher, managing director of the wholesaler and installation company SK Solar, believes that the amendments to the RES do not go far enough to significantly improve in the situation. He welcomes the elimination of the levy but describes the rest of the regulatory changes as insufficient. Specifically, the promised reduction in bureaucracy is sketchy at best. The time-consuming procedure for getting required plant permits is still a major obstacle in the overall process, although the time pressure has been eased somewhat. Instead of radically simplifying the now overly complex set of regulations, the responsible authorities have in some cases introduced new ambiguity and formulations that leave a great deal of room for interpretation. The best example of this is the issue of the sales tax adjustment for small private systems. For months, the industry has been puzzling over how the new regulation in the annual tax law is meant and how it is to be implemented. At least there has now been an initial attempt at clarification from Germany’s finance ministry.

Efforts to find real solutions to problems of grid access, connection conditions and certification of medium to large photovoltaic systems have been in vain so far, says Michael Reck, project developer at GME clean power AG. Developers still face major hurdles that can hinder the rapid implementation of planned projects and call into question their economic viability. Nevertheless, he thinks that improved availability of the required components and falling module prices, will leave enough profitable projects in the pipeline for this year and over the next few years. The average construction costs expected for this year in Germany would, he believed, ensure remuneration rates of between 8 and 10 Euro cents per kilowatt hour in most cases, which would be sufficient to give investors an adequate return on their investment over the calculated 20- to 25-year plant service life. A moderate cap on remuneration, even for non-subsidized plants, or the threat of the government skimming off of additional revenues should therefore do little to diminish the attractiveness of larger photovoltaic projects and therefore not prevent an uptick in generation capacity.

Reck's colleague Gerald Wotruba, CSO at GME clean power, speculates that the elimination of a verification requirement at the module level will increase the potential for repowering existing projects with below-average energy yields. As a result, sites that are already developed could be better utilized and the output of existing plants could even be increased up to the legal limits. He sees an ongoing string-inverter shortage, which will probably only slowly resolve itself in the second half of the year. In addition, there is a shortage of skilled workers, which is particularly evident among nationally active EPCs. Installation crews traveling all over Germany or even Europe, mostly with installers from Eastern Europe, are now hard to find. What little capacity is available has to be locked in early on or booked well in advance for an extended period.

Florian Meyer-Delpho, CEO of installion GmbH, agrees that there is an urgent need to remedy this situation if we do not want to fall flat halfway through the energy transition. Meyer-Delpho is part of a high-level delegation of energy industry representatives who recently informed Chancellor Olaf Scholz of the acute need for skilled workers as part of the Alliance for Transformation and, in cooperation with the ministries and associations involved, aim to develop solutions to the acute shortage of skilled workers. At least the problem of the lack of installers and electricians for the rapid expansion of renewable energy has been recognized and addressed by a task force. The next step is to provide a sufficient budget, a suitable infrastructure and find training providers. What has recently worked well in Germany in the acute emergency situation with vaccination centers or refugee reception centers could certainly also be organized to tackle the shortage of installers if the political will is there.

Overall, all those interviewed paint a very positive picture of the future for the PV industry. The high demand for small systems in particular will continue for quite some time and will offer plenty of work for installation companies. The days of panic buying and consumers blindly accepting quotations, as we saw in a few cases last year, are probably over. As far as installers are concerned, a little more competition will revive business and make it more transparent, and system prices will stabilize. But industry representatives also see solid growth in medium to large PV projects, especially in non-subsidized systems. With forward-looking component purchasing, sound costing and quality-conscious implementation, investors can look forward to rising returns and commercial businesses to a lasting reduction in energy costs.

Overview of price points broken down by technology in January 2023 including changes over the previous month (as of 10 January 2023):

Overview of price points broken down by technology in January 2023 including changes over the previous month