Market Analysis November 2016 - Stop and go in the photovoltaics market and in climate protection

Once again the market is running circles around the politicians. A look at current module price development makes this imminently clear. While the European Commission continues its brooding over the question of whether Chinese manufacturers are still engaged in price dumping and whether market protections are still justified, module and cell prices have long since reached a level that is as much as 30% lower than the minimum import price.

Of course, effects such as year-end inventory clearance sales and overproduction in a faltering market again come into play, but even most European manufacturers are adapting to the general trend without complaining and reducing their module prices month after month. But where's the bottom line? That is a question dividing the various stakeholders and analysts. In any case, prices continue to fall, particularly for high-performance modules.

A continued decline in prices without any significant rise in installation figures in the German and European markets is expected in the final months of 2016. However, a more or less significant uptick in the market is projected for 2017, in Germany at least. Prices are expected to stagnate or rise slightly when market gains traction. The industry will have to adapt to the expected final draft of Germany's Renewable Energy Act (EEG) 2017. The final draft has been approved by the European Commission with regard to the new rules for tender procedures, which means that no more pushback from Brussels is expected. A boom in commercial-roof and ground-mounted systems up to 750 kWp is expected, since there is no tender obligation. Although EEG feed-in tariff levels for PV systems will initially remain unchanged in January, the adjustment mechanism has been adapted to react more quickly to changes in the market.

Remember that the EEG 2014 specified a gross expansion corridor of 2,400 to 2,600 megawatts per year and a monthly degression of 0.5%. The review and reference time-frame was 12 months. In the event that the corridor was exceeded by more than 900 MW, the feed-in tariff degression would increase to 1.4%. The rates would remain the same if less than 1.5 GW (2,400 minus 900 MWp) were installed. By the way, we have been in this mode since the fourth quarter of 2015. According to the old EEG, rates did not really start to climb until new installations fell short of the 1 gigawatt mark (2,400 minus 1,400 MWp). In the EEG 2017, the reference period has been shortened to eight months, and the steps have also been reduced. According to the new scheme, feed-in tariffs will be eligible for a rise of up to 3% per month after 1 February 2017 - a positive prospect indeed, and a solid support for the market growth desired.

Far less positive is a recent report that the European Commission's Directorate-General Energy is planning to eliminate the feed-in priority for photovoltaics and wind power in the new renewable energy directive. If this rumor turns out to be true, it would be a yet another crushing blow to the Renewables. They would have to compete directly with conventional power plants, which could result in a renaissance for coal and nuclear power in Europe. That would be a sure way to torpedo the European climate targets and miss them by a mile. Such a profound lack of understanding of the necessary consequences of one's own actions and depth of ignorance about the climate protection efforts of the member states is hard to imagine, even in Brussels.

For a while it looked as if the German environment minister Barbara Hendricks would fly to Morocco for the COP 22 Global Climate Change Conference without any concrete climate protection plan. Now, the German government seems to have gotten up to speed at the last minute and agreed on a common formulation. Nevertheless, the result cannot be regarded as anything less than a lazy compromise because there are still far too many concessions to business interests and no concrete date for pulling the plug on coal. The erstwhile front-runner of climate protection has become a tired old nag. That will be sure to trigger a few discussions and fuel plenty of misunderstanding with regard to the challenges that lie ahead. How clear do the signs have to be, how great the emergency before political elites are ready to follow up their high flying talk with meaningful action?

Overview of price points, broken down by technology, for October 2016 including the change over the previous month:

(The prices shown reflect average asking prices for duty-paid goods in the European spot market.)