{"id":13988,"date":"2013-07-07T14:26:50","date_gmt":"2013-07-07T11:26:50","guid":{"rendered":"https:\/\/add-energy.ro\/no-rise-in-sight-for-solar-prices\/"},"modified":"2013-07-07T14:26:50","modified_gmt":"2013-07-07T11:26:50","slug":"no-rise-in-sight-for-solar-prices","status":"publish","type":"post","link":"https:\/\/add-energy.ro\/en\/no-rise-in-sight-for-solar-prices\/","title":{"rendered":"No rise in sight for solar prices"},"content":{"rendered":"

\n\t          Low  margins  for  photovoltaic manufacturers have a history:  until 2004 most PV manufacturers had low to no margins on cell and module sales. The price function has  historically  been  controlled by demand participants  (system integrators,  installers  et  al)  and this group was not price elastic –  nor,  as  their  own  demand function was a struggle, did they need to be.<\/span>\n<\/p>\n

\n\t           Pricing  in  the  solar  industry has   traditionally   only   had   a glancing relationship   to   cost. Before  2004  aggressive  pricing situations were common  (for example,  2000 through  2003), with the sole purpose of gaining share towards the day that demand would boom.<\/span>\n<\/p>\n

\n\t           Germany’s  Renewable  Energy  Act,  the  EEG,  changed  the low-to-no-margin  paradigm  within  which  PV  manufacturers  did business, though change did not happen overnight. Germany’s solar incentives progressed steadily from capacity-based to the modern feed-in tariff (FiT), defi nitely not at lightning speed (except through the prism of memory) and with the end result hard-fought by many, including German MP Hans-Josef Fell, father of the modern FiT. 2004 began a period of increasing margins for PV manufacturers despite a polysilicon shortage that led to extremely high spot market prices for c-Si necessary start up material.<\/span>\n<\/p>\n

\n\t            Figure  1  (above) offers pricing data from  1992 through  2012. These data are based on annual survey effort that dates to the mid-1970s and represent average global module selling prices to the first buyer. The fi rst buyer in the market can be another manufacturer. Figure 1 includes the 2012 average selling price (ASP) for inventory. Prices for inventory confuse the overall pricing data. Despite the signifi cant decrease in module ASPs  (to the fi rst buyer) decreased by a compound average of 9% for the 20-year period refl ected in Figure 1.<\/span>\n<\/p>\n

\n\t            Figure 1: Average Module Selling Prices, 1992 – 2012<\/span>\n<\/p>\n

\n\t            During the most recent fi ve-year period module ASPs decreased<\/span>\n<\/p>\n

\n\t            In  an  historic  view  of  industry  pricing  and  shipment\/demand<\/span>\n<\/p>\n

\n\tgrowth from 1975 through 2011, we may compare periods of high and low incentives with market development during these periods:<\/span>\n<\/p>\n

\n\t            1975-1985:  The  environment  during  his  decade  can  be considered high incentive.   During this period ASPs decreased by a compound average of 21% while shipments\/demand grew by a compound annual 69%. 1985-1995:  The  environment  during  this  decade  can  be considered  low  incentive.  <\/span>\n<\/p>\n

\n\t            During  this  period  ASPs  remained relatively fl at, decreasing by a compound average of 3%, while shipments\/demand grew by a compound average of 14%. 1995-2005:  This decade began with a low incentive environment transitioning  to  a  high  incentive  environment  by  the  end  of the 1990s. During this transition decade, prices decreased by a compound average of 3% with shipments\/demand growing by a compound average of 35%. 2005-2011:  During  this  transition  period  the  industry  began moving from a high incentive environment to a low incentive environment. <\/span>\n<\/p>\n

\n\t            ASPs decreased by a compound average of 15% with shipments\/demand experiencing a CAGR of 60%.<\/span>\n<\/p>\n

\n\t            Economic  market  theory  holds  that  strong  demand  typically leads  to  periods  of  price  increases.  Realities  are  always  more complex than are theories. Industries such as solar that operate in an environment with many substitutes and, in particular, substitutes that  enjoy  accepted  subsidies  and  with  the  expectation  of  low prices, are not in control of the pricing function. Aggressive pricing for shares in such a vulnerable industry environment can, and did, lead to bubble-like behaviour.<\/span>\n<\/p>\n

\n\t            THE HERE, THE NOW, THE LOW MARGINS Figure 2 (see page 22) highlights 2012 quarterly ASPs to the fi rst point of sale, for high effi ciency technology to the fi rst point of sale and inventory ASPs.<\/span>\n<\/p>\n

\n\t            Unlike the historic period, when PV manufacturing was primarily supported by large multinational organisations or utilities, current manufacturers have primarily (with some exceptions) chosen to be self-suffi cient. In just a few recent years the rush to public company status opened the curtains on the mechanics of an industry that was probably too young to support such visibility. <\/span>\n<\/p>\n

\n\t            Despite the weakening viability of many public solar companies, downward price pressure towards the end of achieving grid parity has been particularly harmful. As conventional energy technologies can and will likely continue to enjoy subsidies, the achievement of grid parity is unlikely to prove a bellwether of success.<\/span>\n<\/p>\n

\n\t            Current low prices for PV technology (cells and modules) have driven  photovoltaic  technology  manufacturers  either  to  the  brink of insolvency or over the brink. In some cases, such as Hanwha’s acquisition  of  Q-Cells,  innovation  will  continue.  In  other  cases, Uni-Solar and Evergreen for example, the potential for innovation in   manufacturing   costs,   conversion   effi ciency   and   product development had come to an abrupt stop. Industry pioneers, Schott Solar for example, have exited.<\/span>\n<\/p>\n

\n\t            Remaining manufacturers in most  cases have pragmatically chosen to cancel expansion plans and idle existing lines, though a few have chosen to ramp up despite mounting evidence that prices will not increase or simply stop falling in the near to mid-term.<\/span>\n<\/p>\n

\n\t            Figure 3 (see page 23) presents ASPs to the fi rst buyer, inventory ASPS along with First Solar’s published manufacturing costs. Using First Solar as an example, the data in Figure  3 serve to highlight the  diffi cult  competitive  position  faced  by  thin  fi lm  technology manufacturers in the current pricing environment.<\/span>\n<\/p>\n

\n\t            During the period depicted in Figure 3, ASPs to the fi rst buyer decreased  by  a  compound  annual 25%  and inventory ASPs decreased by a compound annual 30%. CdTe  technology manufacturer First Solar, for several years  the  acknowledged  low  manufacturing  cost leader, decreased costs by a compound annual 7%.<\/span>\n<\/p>\n

\n\t            The  learning  curve  progress  experienced by  First  Solar  during  this  period  follows  a normal  pattern  and  is  indicative  of  progress, whereas    the    steep    decreases    of    fi rst buyer  ASPs  is  indicative  of  a  market  out  of pricing equilibrium.<\/span>\n<\/p>\n

\n\t             2013: ANOTHER ROLLERCOASTER YEAR Shipment activity ticked up at the end of 2012 (particularly  in  December)  for  at  least  two time-honoured reasons:<\/span>\n<\/p>\n\n\n\n
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\n\t           a) As  the  end  of  the  year  approached manufacturers  wanted  to  rid  themselves  of inventory at any price (inventory is a cost);<\/span>\n<\/p>\n

\n\t           b) The  downward  slide  in  prices  is irresistible and is assumed to be a better hedge against future price increases than waiting for reductions.<\/span>\n<\/p>\n

\n\t           A short-term increase in shipment activity may  or  may  not  be  indicative  of  industry recovery or increased growth, and is simply a behaviour that should be observed over time.   A true recovery for the solar industry would include<\/span> margin recovery and there is no indication that<\/span> this is imminent.<\/span>\n<\/p>\n

\n\t           At  the  beginning  of<\/span> 2013,  capacity  to<\/span> manufacture technology is at  ~35 GWp, with<\/span> module assembly capacity about 1 GW higher.<\/span>\n<\/p>\n

\n\t           Figure 3 (see page 23) offers a snapshot of PV industry metrics in 2012 moving into 2013. The state of the industry in 2012 set the landscape within which 2013 will evolve.<\/span>\n<\/p>\n

\n\t           For example, at the end of 2012 there was signifi cant  inventory  on  the  demand\/supply sides  of  the  PV  value chain.  This  inventory will hold prices down in  2013. Installations in<\/span>\n<\/p>\n

\n\t           2012 were higher than shipments because of the preceding year’s inventory lag. Historically in  the  PV  industry,  most  years  have  ended with inventory.<\/span>\n<\/p>\n

\n\t           In  the  aggregate,  supply  and  demand data operate much like an accounting ledger in that both sides of the ledger (debit and credit) must equal at the end of the period. Essentially,  if  a  megawatt  was  shipped,  it  was  purchased.  That same megawatt may not be installed in the calendar year it was shipped, and it may be resold. Though in the aggregate shipments and demand equal, each market exhibits its own behaviour.<\/span>\n<\/p>\n

\n\t            Europe  and  the  US  have  become  import  markets,  while manufacturing  in  the  two  regions  is  slowing.  Japan  and  China continue as export markets with strong domestic installation bases. Shipments  and  demand  for  Europe,  the  US,  Japan  and  China from  2006 through  (an estimated)  2012 were defi nitely not equal.<\/span>\n<\/p>\n

\n\t           Figure 2: 2012 Quarterly ASPs<\/span>\n<\/p>\n

\n\t           European demand rose steeply as shipments plateaued, while in China  shipments  climbed  steadily,  as  did  demand  after  spiking sharply in 2010.<\/span>\n<\/p>\n

\n\t           Rumours of low prices are inappropriate vehicles on which to base a price strategy.   Currently, the PV industry’s pricing behavior is volatile with prices held down and decreasing due to high levels of inventory, high levels of capacity, buyer  expectations  of  low  price levels and continuing decreases, and low incentive levels. There is an emerging trend to set PPA\/FiT prices by tender for the markets for   utility   scale\/multi-megawatt installation. This trend encourages buyers for this category to insist on the lowest price for hardware.<\/span>\n<\/p>\n

\n\t           Given   the   market   conditions, buyers  have  control  over  the price paid for modules with the caution that long term contracts, never  stable  instruments  in  PV, are   highly   unstable   for   both buyers  and  sellers  under  the current circumstances.<\/span>\n<\/p>\n

\n\t           Given the current conditions of, again, high levels of inventory and  capacity  and  a  changing incentive landscape, price forecasts are highly unstable. In sum, the industry environment is not appropriate for spot price forecasting unless care is taken to defi ne which price point (inventory, fi rst buyer, high effi ciency, and thin fi lm) is being studied. Other categories include cell technology manufacturer to module assembler and onward, and distributor to secondary buyer, and buyer levels (small to multi-MW).<\/span>\n<\/p>\n

\n\t           Figure 3: First Buyer Inventory ASP & First Solar<\/span>\n<\/p>\n

\n\t           Figure 4: 2013 First   Buyer ASP & Inventory ASP Estimate<\/span> Each designation exhibits a specifi c buying behaviour. Currently, all<\/span> buyers can access the lowest prices. Figure 4 offers an estimate of<\/span> 2013 ASPs for fi rst buyer and inventory modules. The accelerated<\/span> forecast currently has the highest probability of accuracy.<\/span>\n<\/p>\n

\n\t           ONCE MORE UNTO THE BREACH, DEAR FRIENDS Daunting times are here to stay for a while – but the solar industry will not just survive, it will continue innovating. Realistically though, the pain will continue for some time and it will be diffi cult to watch industry pioneers and new entrants suffer.<\/span>\n<\/p>\n

\n\t           The  PV  industry  overbuilt  its  manufacturing  capacity  on  the fallacies that the FiT incentive would continue relatively unchanged and that costs would improve to the point that grid parity could be achieved. The reality that the FiTs might drive too much deployment too  quickly  and  lead  to  overheated  markets  was,  by  and  large,<\/span>\n<\/p>\n

\n\t           Also  ignored  was  the  reality  behind  low  prices.  In  the beginning these prices were regarded as hallmarks of progress  now they are transparent margin disasters<\/span>\n<\/p>\n

\n\t           Paula Mints is founder and chief market research analyst at SPV Market Research, a partnership with Strategies Unlimited<\/span>\n<\/p>\n\n\n\n\n\n\n
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\n\tTo register your Company as ADD ENERGY PARTNER , please access   \"register_now_2\"<\/a><\/span>\n<\/p>\n

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\n\t <\/p>\n","protected":false},"excerpt":{"rendered":"

          Low  margins  for  photovoltaic manufacturers have a history:  until 2004 most PV manufacturers had low to no margins on cell and module sales. The price function has  historically  been  controlled by demand participants  (system integrators,  installers  et  al)  and this group was not price elastic –  nor,  as  their  own  demand function was a … Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[376,33,349,250,46,49,262,31,91,282],"tags":[],"class_list":["post-13988","post","type-post","status-publish","format-standard","hentry","category-global-statistics-blog-stile","category-informatii-din-presa-internationala","category-international-press","category-news","category-statistica","category-statistica-la-nivel-global","category-statistics","category-stiri-utile-noutati","category-tipuri-de-energie-regenerabila-solara-termica-fotovoltaica","category-types-of-renewable-energy-solar-thermal-photovoltaic"],"_links":{"self":[{"href":"https:\/\/add-energy.ro\/en\/wp-json\/wp\/v2\/posts\/13988","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/add-energy.ro\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/add-energy.ro\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/add-energy.ro\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/add-energy.ro\/en\/wp-json\/wp\/v2\/comments?post=13988"}],"version-history":[{"count":0,"href":"https:\/\/add-energy.ro\/en\/wp-json\/wp\/v2\/posts\/13988\/revisions"}],"wp:attachment":[{"href":"https:\/\/add-energy.ro\/en\/wp-json\/wp\/v2\/media?parent=13988"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/add-energy.ro\/en\/wp-json\/wp\/v2\/categories?post=13988"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/add-energy.ro\/en\/wp-json\/wp\/v2\/tags?post=13988"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}