Market Analysis

Market Analysis May 2022 - May makes the world anew (or: the times they are changing)

The German saying in the title reflects current market development to a degree but, what I really wanted to express with it was how I "remade" the price index itself by tweaking the price categories. Continued advances in cell technologies and formats, particularly when it comes to steadily rising efficiencies, have necessitated some reshuffling so that specific price developments are reflected in the index more accurately in the future - but more about that later. First, we have to shed some light on the dramatic overall market situation for modules, and even more so for inverters and storage systems.

Whereas, last month, it still looked as if the supply situation for solar components would slowly-but-surely loosen up by mid-year, there is now no denying that supply problems have become even more critical and that no end is in sight. The effects of the ongoing lockdowns in China are slowly trickling down into the European market. The Ukraine conflict is also causing problems, especially in terms of disrupted supply chains driven by a lack of transport capacity in Europe. Meanwhile, nothing seems to be working the way it's supposed to. Wholesalers, whether they sell online or not, have stopped taking orders en masse, and even customers of big players like BayWa r.e. have not been spared. The main driver of this trend is that suppliers and manufacturers are failing to provide accurate availability information and binding price quotes, which is making life increasingly difficult for us wholesalers and our customers.

The major producers from China justify the current unsatisfactory situation with the following arguments. Polysilicon prices have risen steadily, by several percentage points, in recent weeks and will not fall in the foreseeable future due to high global demand. The same has been reported for solar glass, and especially for encapsulation material such as EVA and POE, which have seen price increases of up to 10 percentage points and struggle with shortages of feedstocks. Inverter manufacturers, on the other hand, are complaining of a severe shortage of electronic components, which is preventing them from finishing and shipping their products. There is increased talk of production stoppages for hybrid inverters and battery storage systems, and delivery dates are being postponed indefinitely.

Euro exchange rates against other currencies have also trended downward due both to the situation in Europe and to monetary policy in the U.S., making imported solar products even more expensive in Europe. The picture is rounded out by constantly fluctuating freight prices and transport capacities, which seems to have made it virtually impossible to make reliable forecasts of delivery quantities or dates. Manufacturers who can provide production and delivery forecasts for ordered goods accurate to within one or two months are considered to be at the top of their game right now!

Now, we are all faced with the challenge of maintaining our business operations as smoothly as possible, even though plannability is virtually nil. Every day, customers have to be put in a holding pattern as they wait for delivery of goods that were ordered sometimes months earlier. Out of sheer desperation, installers are placing duplicate orders with all the suppliers they know, only to meet with rejection or perplexity from nearly all of them. The suffering is especially keen among companies with large-scale projects and strict contract clauses in a market where no delivery promise can be regarded as hard-and-fast anymore.

But now, to the necessary changes in the price index. While we had a decade in the solar market up to around 2020, when mass production was ramped up by manufacturers and, most importantly, production technologies were improved and prices optimized, the focus in this decade has been and remains the optimization of cell technology and thus efficiency and energy yield. Polycrystalline cells are ancient history, but PERC technology and P-type cells are now also fading into obsolescence, since it is virtually impossible to achieve efficiencies above the 20 percent mark with them. Technologies such as TOPCon, HJT and IBC are poised for mass production on the gigawatt scale and will soon replace the monocrystalline PERC cells that still dominate the market. Nearly all of the major manufacturers now have such high-performance products in their portfolio, a fact that was plain to see at the recently concluded intersolar Europe trade fair in Munich. With high-performance modules containing N-type TOPCon cells, for instance, many manufacturers are already reaching efficiencies of up to 22 percent or more. This translates into an output of 420 watts-peak and higher for rooftop panels, and a whopping 660 to 700 watts-peak for panels used in ground-mounted systems.

To accommodate this development, all modules with efficiencies below or around 21 percent slip into the "Mainstream" category. For example, all products with PERC cells will go into this category, from now on, as well as all black modules containing such cells. In addition to the "All Black" index category, the "Bifacial" class will also disappear, as most cell types are now bifacial anyway. There are also hardly any price differences in the market between bifacial glass-glass and glass-film modules, making these types right at home in the "High Efficiency" category. This classification will continue to represent a pool of products with a relatively high spread in sales prices, but a more precise or clearer breakdown by region of origin or cell technology is impractical in this context. Price differences are often merely the result of different sales strategies and channels for the individual brands, which are not always so easy for outsiders to get their heads around. Over the next few years, it will become clear which of the especially high-priced suppliers will be able to hold their own over the long term against the increasing competition in high-performance modules.

Overview of price points broken down by technology in May 2022 including changes over the previous month (as of 18 May 2022). For continuity reasons, module prices for January and April were re-calculated, using the new classification system:

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