Market Analysis

Market Analysis June 2020 - A new boom, or the same old?

With the Covid-19 crisis having left the solar market relatively unscathed, in Germany at least, it looks as if the final hurdles in the way of an urgently needed photovoltaic boom have been cleared. In the evening hours of 18 June, the time had finally come: the German Bundestag resolved to eliminate the EEG's 52 GW cap on PV. Although the corresponding decision in the lower house of the German parliament - the Bundesrat - was still pending, this is usually a formality. Still, the industry reacted cautiously to the good news. Telephones have not yet started ringing off the hook. Nevertheless, demand in Germany is expected to pick up significantly in the coming weeks.

Many EPCs and installers in the small to medium-sized segment can boast impressive project pipelines. The only factors likely to slow the current boom are the approval authorities, which are still not operating at full capacity due to the pandemic, and the continuing degression of feed-in tariffs, which is making purely EEG-financed PV plants increasingly uneconomical. At the current rate of new plant construction, this shrinks feed-in tariffs by 1.4% per month, which quickly puts the squeeze on prices for materials, planning and installation services.

Fortunately, recent weeks have brought considerable price adjustments from module and inverter manufacturers. Price reductions that had already started showing up in May have now finally reached the market in June, at least for current orders with delayed delivery dates. And that brings us to the crux of the matter. Anyone expecting to pay the same price for panels delivered today as those quoted for modules with delivery in the fourth quarter will likely be sorely disappointed. Although there are currently no bottlenecks - products from all technology sectors and numerous brands are sufficiently available - the modules currently available often have production dates that lie far in the past. In recent months, it has taken modules much longer than usual to travel from Asia to Europe - courtesy of the corona virus. In the spring, however, raw materials prices were still significantly higher and the shutdown and ramp-up of production has entailed considerable additional costs. The potential for price reductions for these goods, which are now available at short notice, is therefore severely limited.

Now that the virus problems have been solved – for the time being at least – prices are falling for all technologies, especially for monocrystalline modules (high efficiency, all black and bifacial). For all appearances, the index price for high efficiency panels is only 3% below the previous month's price, but this is due to a necessary change to the range of products included in this class - it now starts at 310 W, rather than 300 W. Otherwise, all price corrections are in the range of 4 to 6%. Reference values also had to be adjusted because more and more module formats are being introduced to the market, resulting in higher outputs per module but without a significant increase in efficiency by area due to the larger surface of these panels. Supposed price reductions per watt-peak are therefore more cosmetic in nature (see also Market Analysis May 2020 - Is size all that matters?).

Leading the renewed fall in prices are the top six producers in the industry, measured by reported production capacity. Trina SolarHanwha Q CellsCanadian SolarJA SolarJinko Solar and especially LONGi Solar are continuously increasing production capacity and module size while aggressively marketing their products at attractive prices that no one thought possible until recently. It is highly doubtful whether many of the smaller manufacturers will be able to withstand this price war. We are likely to see the beginning of a market shakeout in the second half of the year, particularly among Asian producers.

Hanwha Q Cells is still hoping to gain the upper hand over some of its competitors in its patent dispute on cells with back emitter passivation, even though the first round of court proceedings in the U.S. has ended in defeat. However, the company has now scored interim success in a German court. It is still unclear whether this victory will have any impact on the market or products of the defendant competitors LONGi Solar, JinkoSolar and REC Group. In a press release immediately following the ruling, JinkoSolar stated that it would no longer produce or offer for sale cells and modules affected by the patent lawsuit. At the time of writing, the other defendants had not yet issued statements.

What expectations can be placed on the second half of 2020?

All of the conditions are in place for a hard-charging market - high demand, good availability at attractive prices, and a stable policy framework. Right up to the last minute, however, the German solar industry was shaking in its boots and worrying whether the government would act before the 52 GW cap was reached and implement the policy change it had announced many months ago. After all, the summer recess for the government and parliament will soon begin. Now, although the decisive step has been taken, a painful ending may yet be in the offing. A further amendment to the EEG has been definitively announced for the fall. It remains to be seen what "dirty tricks" german politicians will come up with by then to make life unnecessarily difficult for solar activists. We've already been on so many rollercoaster rides, and we've had to weather so many heavy seas that the belief in calm waters has almost completely evaporated. Please surprise us this time, dear Grand Coalition!

Overview of the price points by technology in June 2020 including the changes over the previous month (as of June 22, 2020):