Market Analysis

Market Analysis November - 2020 was off to a good start, and then ...

I’ll kick off this year’s retrospective with a line that sounds like it’s right out of a German pop song: last spring, it all felt so right... And yet, what followed was not only one of the hottest years since global temperatures were recorded but also one of the craziest years we’ve seen in recent decades. This month and next, I’ll look back at how the German and European PV markets developed under the pall of the pandemic and the climate crisis with a special focus on the antics that have kept us on the edge of our seats in this country thanks to the latest iteration of our Renewable Energy Act (EEG).

Mild weather rung in the new year and business was excellent at installation companies everywhere. The result, however, was a looming threat that the upper limit of PV capacity eligible for incentives under in Germany’s EEG would quickly be reached – some forecasts projected that this would happen as early as the second quarter of the year. That, in turn, triggered a race to install the final few megawatts of PV capacity eligible for subsidies. At the same time, module availability in the early part of the year was poor and available capacities for qualified installers were tight. A bad situation was made worse by the reluctance of decision makers in Germany’s Grand Coalition of CDU and SPD to lift the 52 GW cap for photovoltaics stipulated in the EEG. Unfortunately, the governing parties took no substantial steps toward fulfilling the promises they made in the climate package they passed in 2019. The industry was confronted with very little planning security prompting their battle cry: the cap must go!

Following devastating forest fires in Australia, the spread of the lung disease known as COVID-19 began to dominate daily media coverage in China, and then in Europe. At that time, nobody could have imagined how severe the long-underestimated pandemic, which probably originated in the Chinese city of Wuhan, would be for the global economy and the consequences we would have to bear. The negative impacts were initially limited to factory workers in China being sent on compulsory leave or being prevented from starting work after the Chinese New Year holidays. As a result, the supply chain for urgently needed raw materials virtually collapsed, with the result that Asian cell and module production, among other things, came to a standstill.
The emerging bottleneck led to fears that short-term module prices would increase by up to 20%, fears which fortunately proved unfounded – the maximum price increase for individual module technologies and brands was 10% for a brief period. However, the emerging COVID crisis was a wake-up call for the solar industry and underscored our dependence on the “Chinese workshop”. The upshot was an uptick in plans to build new European production facilities for PV modules, energy storage systems and rechargeable cells.

As the global pandemic progressed, more and more parallels emerged with the omnipresent threat of advancing climate change. In the media excitement about the virus, however, the climate crisis increasingly receded into the background and was overshadowed by other problems which seemed much more pressing. To curb the rate of infection, heads of state and regional politicians ordered increasingly drastic measures with each passing day, including a complete lockdown. Unfortunately, the Fridays for Future movement also fell victim to these restrictions: the Friday protests, which had been held regularly for more than a year, could no longer take place. Although the protests “went digital” and continued in social networks, they did not have the same impact as the mass rallies in the streets and squares.
Nevertheless, I believe that we can learn a great deal from our experiences with the COVID pandemic and how to cope with it and that we can draw conclusions for future crisis management. We were made painfully aware of the instability of some non-system-relevant industries and our global economic system as a whole as well as how quickly they can be thrown off balance by an event for which we are inadequately prepared. We have seen how entire branches of the economy based only on sports, entertainment and enjoyment, which thrived financially and were so influential in a society of abundance, reached the verge of collapse within a few weeks and can now only be saved with massive government assistance. Whether we will we learn from this or quickly revert to our old patterns of behavior is a question that will certainly occupy us for some time to come.

In April and May, the trend towards ever larger module formats began among Asian module manufacturers. More and more producers issued press releases announcing new module capacities north of the 500-watt class. Of the better-known brands, Longi Solar and Trina Solar led the way, with the trend culminating in JA Solar's unveiling of an 800-watt module last August. This increase in PV panel surface area was made possible by the use of ever-larger wafers and cells - the classic 6-inch cell with an edge length of 156 millimeters finally became obsolete 15 years after its introduction. However, 166 to 210-millimeter cells could no longer be processed at their full-size. So-called half-cut cells became more common. Some manufacturers even divided their cells into thirds or quarters, using shingle technology in their modules. However, this development took place almost exclusively in the area of monocrystalline cells, with multicrystalline products increasingly disappearing from the market.
The question arose as to whether modules of this size would become established on the market, but since buyers do not pay for the module itself, but for the output, continuing to increase individual output per module was the obvious choice for manufacturers. This meant that more and more money could be demanded for a solar panel at the same unit cost, even as the watt-peak price stayed the same or fell. In fact, after almost a year of stagnation, wholesale prices for high-efficiency modules slowly started to come down again.

In the evening hours of June 18, 2020, the time had finally come; the German Parliament, the so called Bundestag, decided to remove the 52-gigawatt cap on PV installations from the EEG. The subsequent Bundesrat decision was a mere formality. The cap was lifted at the last moment. Had the government waited just a few more weeks, the upper limit would have been reached, and no new PV systems would have been eligible for the statutory feed-in tariff. The only reason that subsidies were not stopped much earlier was the delay in new installations caused by the COVID pandemic and the associated restriction of supply chains. At the same time, however, the German government announced a more comprehensive revision of the EEG for the fall.

We had to wait until October to realize with horror the "dirty tricks" that our politicians had come up with in this context. You can read about these and other events of the year that is drawing to a close, as well as a brief outlook for the coming year, in the second installment of my year in review in December.

Overview of the price points by technology in November 2020 including the changes over the previous month (as of November 17, 2020):