Market Analysis July 2019 - Module bottleneck in the offing – time to stock up!

The indications and rumors are mounting that a year-end rally is ahead, complete with module shortage. But should we really take the warnings to heart, given that over the past eight to ten months the supply lines have been flowing just fine? A look at the prices shows that everything is still quiet. The price points of all the module technologies have been fluctuating around a support level for months without permanently breaking through it. At present, there is still an ample supply of high-efficiency monocrystalline modules on the market, and only mainstream multicrystalline products are finding their way to Europe less and less frequently. Yet, demand does not seem to be much higher than supply.

So what is the point of forward-looking planning or even stockpiling?

We should start by taking a brief foray into the inverter market, which is known to be more strictly organized and therefore far less volatile. Nearly all of the manufacturers lowered their prices in the first half of the year and have issued new price lists. SMA and KOSTAL are increasingly facing pressure from major Chinese suppliers, while other European brands like KACO are seeking to join forces with deep-pocketed partners. Owing to the steady increase in demand, especially in the small-plant sector, most units in the mid-range capacity segment from 6 kilowatts to 25 kilowatts are now sold out and will not be available again until the end of August or in some cases until October. This has created problems for many installers. New projects have had to be put on hold, while projects that were already underway have been be delayed. Dealers with inventories may take advantage of the situation to jack up prices of the most sought-after models.

It is not easy to understand how this bottleneck could have occurred in Europe, as the forecasts for 2019 had predicted precisely this development. But storage systems for plants of this size are also in short supply, and long delivery times are simply a fact of life. At least this component does not depend on a timely grid connection - batteries can be added later. To prevent this predicament also occurring with PV panels, installers would do well to plan in advance and secure the necessary materials for the months ahead early on, whether by stocking up or through long-term contracts. After all, the latest news from China is not the only indication that we will soon be facing an unprecedented year-end rally. In a recent auction awards for almost 4,000 PV plants were handed out with a total capacity of some 22.7 gigawatts. At the same time, the projected new capacity figure for 2019 in China was increased to around 40 gigawatts.

But there is a good deal going on in Europe as well: Italy will also hold its first call for tenders at the end of September for a photovoltaic capacity of some 500 megawatts, and three more are planned for 2020, although the total volume seems almost laughable next to the scale of the Asian market. TrendForce expects global demand for modules to exceed 120 gigawatts in 2019, an increase of 20 percent over last year. In Europe, installation figures will rise from 11.9 gigawatts in 2018 to 18 to 21 gigawatts in 2019, according to analysts. This would be an increase of 50 percent or more. In addition to Europe, there are also emerging markets in other regions of the world, such as South America, the Middle East and Africa, where at least two to three countries could each achieve a gigawatt-scale increase.

Tenders for PV plants and feed-in tariffs for distributed power generation continue to be the driving forces behind the construction of new PV installations in Europe. But government programs aside, the market for non-subsidized solar projects in countries such as Spain, the UK, Italy, Portugal, Germany and even Denmark, Bulgaria and Greece continue to gain traction. Spain alone has a project pipeline of an estimated 10 gigawatts, in addition to the 3.9 gigawatts of unbuilt PV systems already awarded in the 2017 auctions and to be completed by the end of 2019. The latest royal decree of 6 April 2019 also finally introduced consumer-friendly regulation of private consumption systems. The surplus energy can now be fed into the grid at a fair rate. According to the Solarpower Europe industry association, an additional 19.5 gigawatts will be installed on the Iberian peninsula by 2023. In terms of its expansion forecast, Spain is thus once again one of the 15 leading photovoltaic markets worldwide.

The Netherlands also saw no small increase last year - a total of 1.4 gigawatts of new PV capacity was installed. This year, the Dutch solar market is expected to grow to more than 2 gigawatts, which is considerable given the size of the overall market. In addition, there are still up to 7 gigawatts of approved solar projects slated for implementation within the next three to four years. By comparison, development in Germany is downright leisurely. But there is also a lot going on here, not least thanks to continuous pressure from the "street" (Fridays For Future and other initiatives). Although many politicians are on a summer break, the climate cabinet and the Chancellor have announced a whole series of new legislative measures for September that will affect climate protection.

The European PV market also appears to be on summer vacation, especially since the weather and temperatures in many places are making installation on roofs difficult. Those who do not want to fall into the same trap as in previous years and be helplessly at the mercy of a supply bottleneck, however, would be well advised to plan the second half of the year in advance. It is still not too late to go on a shopping spree, negotiate conditions and conclude contracts. Soon your regular supplier could again be saying: "Sorry, but we can only deliver the components you requested in x months ... unless you'd be willing to pay a bit more!".

Overview of the price points by technology in July 2019 including the changes over the previous month (as of July 19, 2019):

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