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Solar cell prices to fall as China produces more than demand

Solar cell prices to fall as China produces more than demand


China is poised is to do solar photo-voltaic cell manufacturing what it did to steel, aluminium and coal. Produce so much that it leads to oversupply and prices crash. According to Bridge to India, a renewable analysis firm, recent market reports suggest that an oversupply situation is building up in photo-voltaic module manufacturing in China, especially for the second half of 2016 and this is likely to lead to significant price corrections in the market. “China has a target of supporting 18 gigawatt of solar installations in 2016 against 15 gigawatt of actual capacity addition in 2015. It is estimated that 13 gigawatt of solar capacity was installed in the first half itself. As a result, demand is expected to slow down sharply in the remaining part of the year,” Bridge to News said in a recent report.

Analysts from IHS research believe that PV installations in China in Q3-2016 may drop by as much as 80%. For global sales, module prices shipping in the fourth quarter of 2016 have already declined by as much as 10%, since the first half of 2016. Price reduction in India is being further aided by a significant depreciation of the Chinese Yuan against the Indian rupee Indian solar project developers will be relieved to see prices coming down much more sharply than expected, providing an opportunity to improve returns despite aggressive bidding

In the midst of this demand slowdown, tier-II and tier-III module suppliers from China have lowered prices due to their over exposure to the domestic market and tier-I companies are now being forced to narrow the gap. IHS noted that module prices for Q4-2016 have already declined by as much as 10% since the first half of 2016 (refer). Fall in prices comes at a perfect time for Indian solar market as Q1-2017 is expected to be the biggest quarter for new capacity addition till date.

Bridge to India estimates new capacity addition of around 2 gigawatt in this quarter. Price reduction in India should be further aided by depreciation of Chinese Yuan against Rupee by about 3-4% over last year. “As a result, we expect tier-1 module prices to fall to Rs 27.50/Wp for shipments in Q1-2017, a significant decline of almost 10% in less than a year. Indian project developers will welcome the steep fall in prices, which will provide much needed relief after the intense price bidding seen recently. Projects from the Telangana state allocations are expected to be biggest beneficiaries of this price drop as they have relatively better tariffs and a bulk of the projects are likely to be commissioned in Q1 2017,” the Bridge to News report said.

With near term trends pointing to market stagnation in China and Japan as well as trade restrictions continuing in US and Europe, India has emerged as a key growth market for the Chinese suppliers. Unless there is a change in Chinese demand sentiment or EU removes its trade barriers against Chinese suppliers, we expect prices to stay soft for the next few quarters.

Source: Economics Times
Anand Gupta Editor - EQ Int'l Media Network


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