Prices for all solar module types fell slightly again at the end of 2023 but that is the last time it could happen for a while and applies only to current European stock. Even panels currently in transit to Europe are being offered at prices €0.01 to €0.02 per watt higher. That is chiefly because of attacks on merchant shipping in the Red Sea, made in recent weeks by Houthi rebels in Yemen. The attacks have deterred ships from the Red Sea and Suez Canal with some instead travelling an extra 6,000 km around southern Africa. China-to-Rotterdam freight costs have almost tripled as a result.
Slow demand in Europe has partially offset such inflation amid cold weather in central and Northern Europe. Demand has also suffered due to political uncertainty in Poland, where newly-installed prime minister Donald Tusk is facing down protest by members of the old Law and Justice regime, and in Germany, where chancellor Olaf Scholz’s ruling coalition is still coming to terms with a court decision to prevent it devoting €60 billion of unspent Covid-recovery cash on green initiatives.
The second half of 2023 brought the solar component price falls anticipated by analysts - even further than expected, when it came to modules. That drove big installation figures, especially for small systems in Germany even if demand was still markedly lower than in the same period last year. German installers cleared their order backlog as the nation’s PV generation capacity rose from 7.5 GW to more than 14 GW.
Commercial and utility scale projects, however, are still awaiting a reduction in red tape promised by policymakers, slowing construction. Falling module prices have also prodded some developers into "wait and see" mode. While there is no lack of installer capacity at present, that old problem may recur as the market picks up this year. Quotes from last year are being revised down thanks to falling prices and stiff competition.
The Solar Package 1 legislation of Germany’s coalition government - postponed until late February 2024 thanks to that court decision, apart from three wind power regulations - could hold promise for photovoltaics. If the draft policy package is passed in its current form, renewables operators will have a right to lay connection lines from their projects to grid connection points, with landowners forced to accept payment of 5% of the market value of the footprint of any cable across their estate. Removing the current, often-lengthy negotiations with landowners could shave months off project completion times.
"Disadvantaged areas" - regions that are remote and where agricultural yields are particularly poor thanks to a low soil index - will also be better off under the draft law. A decision has already been taken to give preference to the construction of ground-mounted PV systems in such disadvantaged areas so that less high-quality arable land has to be used. Until now, however, disadvantaged areas were only open to the construction of ground-mounted systems under an opt-in system which required federal states to make use of their authorization to issue a decree under Germany’s renewables law, the Erneuerbare-Energien-Gesetz (EEG). In order to open up more potential areas for installation, Solar Package 1 proposes the regulation be reversed, in principle, opening up disadvantaged areas for solar. Federal states would instead be given an opt-out power to issue ordinances to close such sites.
The solar package includes provision for "special solar installations,"" opening up surfaces such as moorland, bodies of water, parking lots, and agricultural sites for PV. The high area efficiency of such special solar systems, which could benefit from multiple installations in built-up areas, meant such projects - including floating PV and agrivoltaics - were included in the EEG. Under Solar Package 1, the funding requirements for such systems would be determined competitively, via tenders. To that end, the solar legislative package provides a separate sub-segment for special solar installations in open-space tenders. This means that they would not have to compete on cost with regular ground-mounted systems. For 2024, the annual bid volume would initially be set at 500 MW and would increase to 3 GW over the next few years, thus amounting to at least a third of the total capacity put out to tender.
Last but not least is another important point in the solar legislative package. For rooftop installations, repowering of aging arrays should also be possible, beyond the current permissibility requirements of technical defects or damage to modules. In concrete terms, that would mean that for existing systems that have been connected to the grid for a few years, the old modules could be replaced with newer, more efficient panels without any red tape and without the operator losing their previous remuneration rate. Given that component prices are currently at an all-time low, that would open up considerable additional sales potential for suppliers, even if total installed capacity would of course not increase as a result - or only to a manageable extent, as a result of system expansion.
Overview of price points broken down by technology in January 2024 including changes over the previous month (as of 12 January 2024):
