Market Analysis

Market Analysis September 2021 - Is there an alternative to 'made in China'?

Module prices are at a level we have not seen since last fall, a fact that is mainly down to very high transport costs for container shipments. This is an insight I shared in my column last month. Whether and how bolstering local value creation through European cell and module production could lead to an end of dependence on Asia and break the upward cost spiral is what I would like to discuss this month. But first, let's have a look at the current price trends.

Module prices have stabilized in recent weeks and have even come down somewhat for most technologies. I attribute this to a drop in demand due to the summer holidays on the one hand and the approaching end of the quarter on the other. Over the past few days, some larger volumes of modules have been released onto the market, which means that availability is currently good, and prices are generally coming under some pressure as a result. Given that this is inventory adjustment and thus a short-term effect, I expect an upward correction in the coming months. It is therefore unlikely that we will see the price increase of some 6 to 9% since the beginning of the year that is still holding in most of the index values. The price that has been unchanged since January is in the low-cost category - low-power modules, factory seconds and second-hand panels - as these are usually local offers which are generally not tied to container shipments from Asia.

But how can we step back from the large manufacturers in China in the other product groups as well and break free from the prices dictated by the shipping companies and freight forwarders?

Since Asian manufacturers began their conquest of Europe more than a decade ago, all previous attempts by domestic producers to present and establish a competitive mass-market solar module have failed. Even the EU Commission's protectionist measures, which heavily regulated the import of cells and modules from China from 2013 to 2018, could not save the domestic industry. Today, there is no longer any serious production capacity in the EU beyond final module assembly. Silicon, wafers, cells, glass, films, frames, cables and junction boxes - most upstream products - now have to be sourced from Asia or outside the EU to keep the end product affordable. Some formerly respected German brands limit themselves to the words "Engineered in Germany" or "German warranty" in their data sheets, since the complete module or at least the finished laminate comes from Asia and only the frame is pressed on domestically.

Such 'made in Europe' products are not much more expensive than purely Chinese modules, but they also have no transport cost advantage over them because all of the materials have to be shipped over from Asia. The situation is not much better for local module manufacturers who at least still do the laminating themselves - they, too, have to import almost all of their upstream products from Asia. Today, module production itself is highly automated, which means that personnel costs are not a major factor. The only disadvantages over Chinese production are energy costs and environmental regulations. But these can also be eliminated with a little effort and innovation. The toughest nut to crack - at least over the short to medium term - is the procurement problem for pre-products. Vertical integration of a large number of production steps, if possible at one location, would be the ideal solution, as would a high production capacity to achieve economies of scale. But this is precisely the crux of the problem, which is why all European players have fallen by the wayside or never moved beyond the status of assemblers.

Whether Meyer-Burger, the latest candidate in the race for a seat at the table among the otherwise Asian-dominated manufacturers, will succeed in doing the seemingly impossible remains highly questionable. At least, I've been hard pressed to find anyone in the industry over the past few weeks who can imagine that the Swiss company will succeed in capturing a meaningful share of the market with their current setup and price structure. At present, the manufacturer is also struggling with the availability and cost of its raw materials, which has led to delayed delivery of module lots ordered many months ago and to prices that are nearly double those of the large tier-1 manufacturers. Even the company's claim of better module quality and somewhat higher yields through the use of heterojunction technology, as well as the local producer bonus, are not enough to justify much higher module costs, in my opinion.

The Swiss company may be betting on the outcome of the federal elections in Germany in September and an associated change of government, which will supposedly create significantly better market conditions for domestic, high-priced products. A much higher CO₂ price in the future, for instance, could be a game changer. The government would also have to sweeten the pot considerably with regard to infrastructure projects in the field of renewables to enable the reestablishment of a large-scale industry for silicon and wafer production. But it is unlikely that Germany will go it alone, and it is also questionable whether a change of government in Germany will have enough of an impact on European industrial and energy policy to give Meyer-Burger and other companies a better chance of survival. Very long staying power will certainly work to the Swiss firm's advantage, as will its handful of clever concepts, which are an improvement over what we have seen in Europe so far. Otherwise, China and its products will continue to dominate the local solar scene hands-down.

Overview of the price points by technology in September 2021 including the changes over the previous month (as of September 13, 2021):

pvXchange Solar Price Index September 2021