PV Modules Archives - Solar Industry Issue Library

Archive for PV Modules

Five Major Trends Of The Global PV Module Market

Posted by Edurne Zoco

· October 2, 2017

I started working as a solar industry analyst 10 years ago, and over the last decade, I have been a direct witness of the industry’s development and expansion. The growth has been extraordinary and surpassed the most optimistic forecasts, including my own!

Edurne Zoco

Back in 2007, less than 5 GW was installed globally; last year, it was almost 78 GW. At IHS Markit, we are currently forecasting that 90 GW of solar energy will be installed in 2017, and we could even reach the magic 100 GW threshold by next year, thus representing 20x growth within one decade.

Because the solar industry is remarkably dynamic, it would be impossible to summarize in 2,000 or so words everything that has happened in the last 10 years – in fact, we would likely need the entire October edition just to cover what has happened since the beginning of this year. Therefore, this article is intended to be a succinct overview of what, in my view, have been the five major trends shaping the global PV module market since 2007 to bring it to its current state.

1. China runs the solar show.

In the last 10 years, global PV manufacturing has moved from Western countries and Japan to China: Chinese manufacturers have become the indisputable leaders of most nodes of the supply chain. Of the top 10 module producers in 2016, seven were Chinese. For cell production, five of the top 10 were Chinese; for wafers, all 10 were Chinese. For polysilicon, there were five. Historically, the Chinese presence in polysilicon production had been less. However, the Chinese share has been rapidly growing since 2014 and is expected to reach 53% of total polysilicon capacity by the end of 2017.

This dominance at the upstream level has been accompanied by an astonishing growth of installations in China, making it the largest solar PV market. To illustrate, in 2007, PV installations in China practically did not exist, with the exception of some isolated systems mostly in Western Chinese provinces. This year, IHS Markit predicts that installations in China will exceed 45 GW, to be at least 50% of global installations.

2. Scale and cost reduction have made solar the most affordable source of energy in some regions.

The growth of solar demand during the last decade has allowed economies of scale to help reduce the production costs of solar modules, with lower prices generating additional demand. In quantitative terms, the annual module manufacturing capacity has multiplied by a factor of 20 since 2007 to respond to the explosion of demand.

C-Si module manufacturing capacity grew from 28.7 GW in 2010 to 116.4 GW in 2017.

During this period, the manufacturing costs for all players have declined significantly. This is mainly due to efficiencies of production, product and material innovations, and economies of scale. Automation of process technologies has increased the throughput of the lines within the factory, allowing more panels to be produced per year. On the material side, both the silicon and consumables have been reduced or lower-cost materials have been substituted to cut the material cost. Incremental technology improvements have been applied to the contact points on the cells or the lamination patterns on the modules to increase their performance. The average efficiency of commercial silicon modules has improved in the last 10 years by about 0.3 percentage points per year. All in all, in this very competitive environment, module production costs have declined by more than 70% in just the last six years.

3. Policy changes, trade disputes and legal barriers continue shaping the PV module industry.

The solar power industry has required, since its beginning, different forms of government support (such as feed-in tariffs or investment tax credits) to compete increasingly against conventional energy sources. To date, solar industry development is still greatly influenced by policy and economic regulations. 2017 is a very clear example of how much policy changes, trade disputes and legal barriers continue to affect the development of the global solar industry.

Trade disputes and legal barriers have had a great impact on the module manufacturing industry in the last two years after the U.S. followed Europe in imposing import duties to cells and modules manufactured in China and, since 2015, extended these import duties to Taiwan. Of the top 10 module manufacturers by shipment, eight are Chinese; to serve the U.S. and Europe, they needed to have access to cell capacity and production outside of China. It can be affirmed that the major trigger on building more than 13 GW of cell capacity by the end of 2016 in Southeast Asian countries was the presence of continuing trade disputes.

Not only module and cell manufacturers have been affected by these regulations. The polysilicon market has been equally affected by existing duties on polysilicon imports to the Chinese market, which has created a distorted and dual polysilicon market with different demand levels, product availability, and pricing inside and outside China.

4. Business models: from vertical integration to increased specialization.

Although Chinese suppliers are expected to continue to dominate solar module production, the industrial landscape is not set in stone. The business model of vertical integration, from wafer, to cells, to modules, was of great value in the early stages of the solar industry to balance fluctuating demand and supply and to reduce costs quickly through fully controlled in-house production.

Asian companies that followed this business model (e.g., JinkoSolar, Trina Solar, Canadian Solar and Hanwha Q CELLS) are now among the largest module makers. Yet, as the industry matures, a split-up into specialized areas is more likely to leverage scale and spend less capital; there have been movements in this area toward more outsourcing of the nodes that are most upstream (polysilicon, ingots, wafers) and a greater focus on internal expansion of both cell and module production capacity.

Moreover, the solar market offers long-term growth, which makes it interesting for investment. Despite the intense competition, new investors and business models might appear, and the list of top 10 module suppliers can continue to change as it has done so for the last 10 years.

5. The continuous search for high-efficiency modules.

At the technology level, c-Si modules have been confirmed as the main technology. While thin-film accounted for almost 10% of the total production market in 2007, it is forecast to reach only 6% in 2017. The major reason for this decline was the reduction of c-Si production costs in the last decade at the same time as cell and module efficiencies were quickly ramped up, which made c-Si the technology choice for most installation segments.

Within c-Si technology, Al-BSF cells have dominated the PV cell market for the last decade. IHS Markit forecasts that this technology will retain its leadership until 2020 because of its track record and lower production cost. However, it is facing increasing competition from other higher-efficiency cell technologies (e.g., PERC, HJT or IBC) because the module industry is changing to meet the increasing demand for products of higher efficiency. Thus, most expansion of cell production capacity is for high-efficiency products. IHS Markit forecasts that more than 50% of new capacity installed in 2017 will be high-efficiency (PERC and n-type) technology. PERC cell production capacity, which was only 5 GW in 2015, more than doubled in 2016 to reach 11 GW, and it is projected to increase to 46% of global cell capacity in 2020.

Another important trend is the rise of monocrystalline technology as suppliers seek higher efficiencies in order to differentiate themselves. IHS Markit forecasts that monocrystalline technology will account for almost 40% of manufacturing capacity by 2020, from 30% in 2010.

Future outlook: What is next?

Uncertainty continues to be the norm. After many years, one of the constants of the solar industry is that regardless of how mature it becomes, the level of instability and the lack of visibility remain high because of policy changes and big trade disputes that are not anticipated. They still have a very big impact on supply and demand.

In 2017, the market continues with antidumping and countervailing duties for Chinese and Taiwanese cell and module imports in Europe and the U.S., with a minimum import price, and duties in China for polysilicon imports. Furthermore, there is a new and ongoing trade case in the U.S., which could end up with additional import duties being implemented in the U.S. market.

On Sept. 22, the U.S. International Trade Commission ruled that a surge of imports did, indeed, cause injury to the domestic module manufacturing industry. Now, the commission is moving forward to the remedy stage of the investigation and will ultimately make its recommendation to President Donald Trump in November. In the worst-case scenario of a full implementation of the measures initially proposed by co-petitioner Suniva, IHS Markit estimates that PV demand in the U.S. could shrink up to 60% for the 2018-2021 period in comparison to its current forecast.

As of press time, India, the third-largest solar market, is also slated to decide whether to include additional taxes for imported solar components; there, modules manufactured in China account for more than 70% of the total installations.

Supply chain consolidation will be limited. Although thin-film supply has been consolidated in a few large players, c-Si supply (despite some important bankruptcies and companies exiting the industry) has remained largely unconsolidated. Because a large majority of manufacturing is based in China and the current high level of installation is projected to continue in the coming years, it is difficult to foresee any massive consolidation. As long as the Chinese market continues at this level of installation (at least 45 GW forecast in 2017), consolidation of the Chinese manufacturing industry will be rather limited.

Module and other system component costs will continue to decline, making solar more attractive in new markets. Module manufacturers continue to look for innovative ways to reduce their costs and are increasingly focused on improving their cell-to-module conversion rate. Most companies are now starting production of half-cell monocrystalline modules (both p-type and PERC) and modules with more busbars, which can increase module output by 10-15 W without incurring higher production costs on a per-watt basis.

Total module costs for industry leaders are forecast to continue to decline in 2018 after a very exceptional second half of 2017, when current high polysilicon prices are slowing down the original plans of module manufacturers to reduce costs to around $0.30/W for best-in-class p-type modules by year-end.

IHS Markit is currently forecasting at least 112 GW of annual installations by 2020. However, it should not come as a big shock if solar demand growth continues to surprise manufacturers, developers and analysts – all of whom have consistently underestimated demand, which will continue double-digit annual growth over the next 10 years. As long as the 80% of solar installations remains in a handful of countries – China, the U.S., India and Japan – sudden policy changes and the creation or elimination of commercial barriers will continue to make producing precise long-term PV forecasts one of the most challenging (but most interesting) jobs!

Edurne Zoco is research director of solar and energy storage at IHS Markit.

Categories :

Examining Module Tech And Pricing: How To Protect Your Investment

Posted by Jenya Meydbray

· August 1, 2017

Back in 2013, GTM Research’s Shyam Mehta suggested in his base-case estimate that in 2017 the cost (which is different than price) to manufacture PV modules could fall to 36 cents per watt. This prediction was forecast after a whopping 70-cent decline over the preceding several years. Since those cost declines were driven by manufacturer margin erosion and the bursting of the polysilicon bubble, surely this couldn’t be the case, right? The 2013 GTM Research analysis was indeed met with disbelief at the time. “Many on this site and others have expressed a mixture of consternation and disbelief at how apparently low this number is,” Mehta later wrote in a Greentech Media online article in June 2013. More recently, in 2015, the International Renewable Energy Agency (IRENA) published an analysis in the “Solar and Wind Cost Reduction Potential to 2025” report with factors such as continued efficiency increase, manufacturing scale, innovation in materials and vertical integration production. IRENA estimated costs could fall to the mid-30s by 2025. Similarly, these cost projections were considered very aggressive then. As we now know, by mid-2016, module selling prices hit the 40-cent price range and continued to plummet into the low 30s by early 2017!

One can’t be too critical of the analysts: Nobody saw this coming. The truth is that, thanks to financial innovation, manufacturing scale and technological innovation, the global solar industry consistently outperforms forecasts of price and installation volumes. This is a fantastic trend that we’d all like to see continue. However, in every industry aggressively falling prices likely means growing production volumes, lower-cost raw materials, increased efficiency, less labor or increased automation, or perhaps all of the above. In an evolving manufacturing process, quality control is a moving target.

Although market fundamentals and macro trends typically favor a declining price and growth in solar installations, policy and market dynamics can cause temporary disruption. There have been periods when the PV module price in the U.S. has temporarily increased. In 2008 and 2009, polysilicon, the primary raw material in most PV modules, grew to almost $500/kg. Today, the price has settled to less than 5% of that price (roughly $20/kg). In early 2013, soon after the initial SolarWorld-driven anti-dumping and countervailing duties were implemented, module pricing ticked up. This happened again in late 2014 after the second round of that process. More recently, Suniva and SolarWorld have filed yet another trade dispute asking for a minimum module price that is twice the market price and would apply to all imports into the U.S. Unwilling to take the policy risk, many manufacturers have stopped committing to 2018 supply, resulting in a rush to buy modules now for 2018 construction. This has caused near-term undersupply, which has increased module pricing in the market. If implemented, the Suniva/SolarWorld policy would obviously be detrimental to the industry and result in, according to GTM Research, the evaporation of tens of thousands of solar jobs and gigawatts of planned installations.

Keeping a global perspective and some wishful thinking on U.S. policy, let’s plan for continued pricing declines and explore PV module technology pathways to continue to drive that.

Mono PERC, glass-glass modules, multi-busbar modules, half-cut cells, bifacial modules, high-density modules, lower-cost raw materials – research and development (R&D) in the solar industry has never been busier. With each technological advancement (even incremental) come potential benefits and potential performance risks. These risks are exacerbated in a seller’s market, as the buyer does not always have sufficient leverage to require strict due diligence. When thinking about PV module expected service life, I like to remind myself that my five-year-old son will have graduated from medical school when my PV module warranty expires. The benefits of technological innovation are clear: reduced price and potentially improved performance. As efficiency levels increase, more watts are produced from the same investment in glass, frames, shipping, land, racking, manpower, etc., thereby reducing overall cost per watt. For example, Figure 2 shows the forecast module power for Jinko Solar mono PERC (passivated emitter and rear contact) technology. Generating 390 watts from the same inputs that generated 365 watts just a few years earlier would be an amazing technological advancement.

PERC cell-based modules are growing fast in market share and are forecast to take up more than half of the market within the next decade, according to the International Technology Roadmap for Photovoltaic Results 2016 report. Adding the rear-side passivation in the cell manufacturing process can boost efficiency and reduce the cost per watt. Controlling the process in high volume production is critical. Depending on the technology, a small variability in thickness or stoichiometry of the rear-side film may disrupt the performance. High levels of LID (light induced degradation) have been reported for mono and multi PERC modules. In fact, more efficient solar modules will naturally be more sensitive to various degradation mechanisms. Just like a race car, when the cell is well tuned, any deviation from optimal will lead to a steeper degradation of performance. Maintaining quality of processing and screening for serial defects becomes critically valuable.

Glass-glass modules replace the backsheet with another piece of glass. While this adds weight, it could actually reduce the module price and potentially improve reliability. However, a backsheet is “breathable,” which means vapor can slowly pass through. This could be good or detrimental. Moisture ingress in a module can accelerate some degradation mechanisms and corrosion of cell metallization and busbars. Unlike a backsheet, a piece of glass is not breathable. Any outgassing inside of the PV module caused by encapsulant degradation, interactions between tapes, and flux or any other residue can slowly seep out of a glass-backsheet module but will be trapped inside the glass-glass sandwich, potentially resulting in bubbles and delamination. Despite these risks, most glass-glass modules on the market today come with 30-year warranties.

Like the race to offer more blades in razors, solar cell manufacturers have increased the number of busbars over time. Back in the original standards-development efforts carried out in the JPL (Jet Propulsion Labs) Block Buys in the 1970s and 1980s, PV cells were produced with one busbar and the reliability wasn’t great. This quickly evolved to two busbars, and now four or five busbars are typical. Some are now pushing the limits with more than 10 very thin busbars, which requires a different cell-to-cell interconnect process and a more sensitive manufacturing process.

It could seem a bit counterintuitive that just cutting cells in half will result in increased output. The incident light intensity and surface area of the solar cell is what defines the current, and the number of cells in series is what defines the voltage (roughly 0.6 volts per cell). The power loss due to heating in a circuit is proportional to the square of the current (power loss = current^2 *resistance). So, reduce the current flow and thereby reduce the power loss in the module. Simple! However, when cells are cut in half, the number of solder joints in a module roughly doubles. Bad solder joints are a leading cause of failures and degradation in PV modules, so one needs to be careful with adding solder joints.

Another critical consideration with all of these advanced modules is accurately modeling the energy output. PV module manufacturers sell watts under optimal conditions; power plant operators sell kilowatt-hours under a wide range of conditions. Low light performance, thermal coefficients and angle of incidence response are all impacted by these technological advancements, as well as relative degradation over time.

In addition to these few technological advancement efforts, there are many more under way in R&D labs. So, how can module buyers or power plant investors stay ahead of the curve and protect themselves in such a dynamic landscape?

In 2012, PV Evolution Labs (now DNV GL Laboratory Services) launched the Product Qualification Program (PQP) through which downstream players such as financiers, developers, EPCs and insurance companies could gain access to detailed reliability test reports and PAN files (used for energy modeling) at no cost. The PQP now supports over 180 downstream partners spanning North America, Latin America, India, Asia (China, Japan and Singapore), Europe, and Australia to help manage their approved vendor lists. Manufacturers similarly see value by accessing tens of gigawatts of annual selling potential through this program. Over 50 manufacturers across more than 300 various individual bill of materials (BOMs) have participated in the program to date, resulting in one of the largest consistent data sets of PV module reliability and performance test data. Similar programs exist for PV inverters and energy storage systems.

Recently at Intersolar Europe in Munich, DNV GL released the third edition of its PV Module Reliability Scorecard Report, which summarizes some of the findings of the testing performed in the PQP over the past year. Figure 3 shows performance degradation after PV modules were exposed to 600 thermal cycles, three times the duration called for in IEC or UL certification. Each bar represents a different product identified by its BOM. Several manufacturers demonstrate degradation that isn’t measurable, while others degrade substantially – well beyond 5%. Some even exhibit complete failure. Only Kyocera and Trina Solar have been named as top performers in the thermal cycling test for all three PV Module Reliability Scorecard reports.

Additional tests performed in the PV Module Reliability Scorecard report are damp heat for 2,000 hours, humidity freeze for 30 cycles, dynamic mechanical load testing, and potential induced degradation testing.

Although there is no truer test of a module’s reliability than real-world experience, accelerated lifetime tests are the best-known proxy to evaluate PV component quality today. Very few PV module technologies on the market are old enough to be qualified as “proven.” When they are, choosing them is generally at the cost of lower performance compared to newer module types; the power output of modules increases by about one power bin every six months.

Some developers and investors may believe that selecting their modules from the largest companies ensures quality modules. However, one of the results described in the 2017 DNV GL Module Reliability Scorecard is that this criterion is not a good proxy for quality. On average, large manufacturers make good modules, but we have also observed high degradation rates in modules manufactured by large companies. And the history of PV is full of world-leading manufacturers going bankrupt.

Similarly, other developers and investors rely on country of origin as a proxy for quality. It’s tempting to assume modules from Europe or the U.S. are “good.” Unfortunately, according to the latest data collected and published in the 2017 Scorecard, this does not provide investors with the protection from potential long-term underperformance they are seeking.

One of the best ways today to increase the probability of quality and long-term performance of components is through accelerated lifetime testing. In order to guide procurement managers, DNV GL has developed procurement best practices, described in Figure 4.

The guidelines include the following elements:

Product Qualification Program: Triggered typically at the beginning of the lifecycle of a product, the PQP, described previously, is a set of extended accelerated lifetime tests that are much tougher than what is required for module certification. For instance, the PQP calls for 800 thermal cycles, which is four times the IEC 61215 minimum duration required in some markets. This set of tests probes the BOM and the manufacturing process for capability to produce high-quality modules. DNV GL’s reliability test database allows the PQP data to be leveraged to effectively manage approved vendor lists by setting degradation thresholds (e.g., 5%, or top 20%, of the PQP or Scorecard participants).

Production oversight and statistical batch testing: Modules are produced in very large quantities, and even if a fixed BOM is built in the same factory, some variation of the quality during the manufacturing process is inevitable. Many quality deviations stem from mistakes in the manufacturing process rather than fundamental design flaws. DNV GL typically tests a pallet of modules per batch to ensure that this variability does not bring the quality below basic standard levels. Just flash testing and visual inspection are simply not sufficient to ensure that the modules sold are free from latent defects that can cause long-term underperformance.

On-site electroluminescence (EL) imaging: Even if production is performed to best-known practices, shipping and installation may be damaging for the modules delivered to a project site. EL is the technology of choice to detect microcracks in the PV modules. Microcracks can be a signature of mishandling. They may have a limited effect on maximum power at commissioning; however, research has shown that the presence of microcracks can increase the degradation rate over the years.

These guidelines are already followed by several big players in the industry, including developers, financiers and even manufacturers.

Continued technological innovation is the lifeblood of the solar industry. It will enable manufacturers to continue down the cost curve and keep beating analyst forecasts. It is amazing what manufacturers are able to accomplish at such minimal pricing levels. Buyers who do their homework in module selection and quality management are procuring and installing very reliable and highly efficient modules at cents-per-watt prices in the low to mid 30s today. As prices continue to come down, we must all continue to stay vigilant to maintain product quality.

Jenya Meydbray is the vice president of strategy and business development for DNV GL’s Laboratory Services group.

Categories :

How Will The PV Module Market Fare In 2017?

Posted by Edurne Zoco

· March 1, 2017

Edurne Zoco

The second half of 2016 was a roller-coaster ride for the global solar PV industry. Although the third quarter of 2016 was marked by oversupply with slow demand, strong price decline, and high inventories throughout the module supply chain, the fourth quarter presented more balanced supply and demand with higher module shipments, stabilized pricing and lower inventory levels. The principal explanation for this radical change in the solar industry was the announcement in September by China’s National Energy Administration (NEA) of the new 2017 feed-in tariff (FIT) proposal. Although the 2017 FIT proposal was not officially released until late December, the widely anticipated FIT cuts, uncertainty about the extent of the grace period allowing projects to be connected in 2017 and fear of a further limiting PV target contributed to the end-of-the-year rush in China.

Since its beginnings, the global PV module industry has required different forms of government support (e.g., FITs and tax credits) to increasingly compete against conventional energy sources; therefore, solar industry development is still greatly influenced by policy and economic regulations. The NEA announcement and the subsequent reaction throughout the supply chain revealed once more how dependent the global solar industry is on the largest upstream and downstream solar market.

According to the IHS PV Demand Tracker, installations in China represented close to 40% of global installations in 2016, and China is home to the majority of solar manufacturing. Thus, for most suppliers, utilization rates, pricing evolution and inventory levels are highly interlinked with demand in China. In China, 35 GW were connected to the grid in 2016, according to official statistics. Based on IHS Markit analysis, only 30 GW of the 35 GW were actually installed in the same year.

From the first week of October, after the announcement of the new 2017 FIT proposal, module demand reactivated in China and caused a reduction in the high inventories of many module suppliers. For a few weeks, it also caused the price of cells and wafers, which had hit bottom in the third quarter, to stabilize and slightly rise. There is now very strong demand in China for monocrystalline modules and high-efficiency modules. Tier 1 and Tier 2 module suppliers have maintained high utilization rates since October, and inventory levels have been considerably reduced throughout the supply chain. In the case of polysilicon, the peak in demand and limited global capacity of polysilicon (aggravated after the closing of some operations by key suppliers) reduced the existing high polysilicon inventories and contributed to increased prices from November.

What kind of year will 2017 be?

After two years during which global PV installations grew over 30%, 2017 and 2018 are forecast to be years of moderate growth (+3% and +4%, respectively), with quarterly shipments and pricing dynamics continuing to be severely shaped by policy changes in the largest solar PV markets – most notably in China, India and the U.S.

According to IHS Markit, the top four markets in PV installations in 2017 will continue to be China, the U.S., India and Japan, with more than 55 GW and 70% of total market installations.

There are two major policies that will impact the development of the solar industry throughout 2017. First, in December, China’s National Development and Reform Commission (NDRC) published the new FITs for PV systems to be installed in 2017. The final version of the 2017 FIT implies a softer cut than initially proposed in the first draft proposals announced in September 2016. However, developers are still racing to install eligible PV systems within the grace period in order to receive the higher 2016 rates. IHS Markit projects China will add 15 GW in the first half of 2017, followed by a decline to 10 GW in the second half. In fact, the NEA’s proposed restrictions to new approvals to PV in 2017 in certain Chinese provinces could result in a steeper decline after the grace period.

The second major policy change impacting the solar industry in 2017 concerns the Indian market, which is forecast to grow the most in 2017 (+70%). The introduction of a comprehensive indirect tax regime under the Goods and Services Tax (GST) in India is likely to be delayed from April to September 2017. A side effect of the GST introduction is that the tax exemptions for PV systems will most likely end. As a result, India’s Ministry of New and Renewable Energy estimates that the total cost to install for grid-connected solar PV will increase by 12%-16%. As of this writing, there are still some uncertainties surrounding how and when the GST taxation will be finally applied.

In addition to these two major policies, there are additional questions concerning the potential political impact on solar development as a result of the new U.S. presidency. The new presidency has generated considerable uncertainty for the U.S. energy sector, but there is little concrete evidence that the new administration will have a major impact on the near-term growth trajectory of PV in the U.S. market. One of the first topics that stirred up the PV industry following President Donald Trump’s election was the risk of losing the federal solar investment tax credit (ITC). However, as of this writing, there is no indication that the new administration plans to eliminate or reduce the tax credit earlier than the incentive’s scheduled phase-down. Even under a scenario where the ITC could be eliminated or significantly modified, supportive state-level clean energy policies, including renewable portfolio standards, solar renewable energy certificates, state tax credits, net energy metering and other incentives, would continue to drive PV demand in most developed U.S. markets, albeit at a slower pace than projected under the ITC.

Quarterly trends in 2017

Throughout the supply chain, the two biggest concerns right now are what will happen to demand in China after the installation grace period ends in June 2017 and the degree to which another sharp decline of shipments in China will affect global pricing.

IHS Markit estimates that it is increasingly likely that the quarterly dynamics of the solar industry in 2017 will replicate those seen in 2016. In other words, module shipments will remain high in the first two quarters, stabilizing pricing throughout the supply chain, but demand will considerably slow in the third quarter, putting additional pressure on module pricing and on manufacturers’ balance sheets.

The major difference from 2016 lies with module demand from India. IHS forecasts that if the GST is delayed for a few months until September, the introduction of the GST scheme will extend the window to install PV systems at lower tax rates and will impact the quarterly distribution of module shipments to the Indian market. Thus, shipments to India, where four out of five modules installed are imported from China, are forecast to grow from the end of the second quarter of 2017 and peak in the third quarter, just when shipments within China will start slowing down. Even with the GST, India will be able to absorb only some of the decline in China, but not all, triggering another cycle of demand contraction, module oversupply and price erosion.

Module manufacturing in 2017

How is the module manufacturing industry reacting to the low-demand market predicted in 2017 and 2018? The first reaction has been a considerable reduction in the number of capacity expansions announced in the last few quarters. According to the IHS Markit PV Integrated Tracker, C-Si module manufacturing capacity grew by 21% in 2015 and 17% in 2016, but it is forecast to grow by only 5% in 2017. China and Southeast Asia continue to be the preferred regions for module capacity expansions, and India is one of the markets generating more interest for manufacturing expansions, from both local and international companies.

Second, the market is increasingly demanding higher-efficiency products, and the module industry is evolving to satisfy this growing demand. Most of the new capacity expansions on the cell side are being done on high-efficiency products. IHS forecasts that more than 50% of new capacity installed in 2017 will be high-efficiency lines of either passivated emitter rear contact (PERC) or n-type cell technologies. PERC cell capacity, which represented only 5 GW in 2015, more than doubled in 2016 to reach 12 GW, and it is projected to increase to 28% of global cell capacity in 2020.

Finally, concerning solar module manufacturers’ profitability, it is remarkable that despite sharp price declines in the third quarter of 2016, third-quarter earnings calls of Asian Tier 1 module suppliers showed higher-than-predicted gross margins (15%-20%). This highlights how successful most industry leaders in China and South Korea have been in reducing production costs and operating expenses to cope with the challenging pricing environment of the third quarter of 2016. Manufacturers with the lowest cost structures are benefiting the most from the current strong demand from China and India and will be well placed to face 2017. Although fourth-quarter 2016 gross margins are predicted to be lower than in the third quarter, gross margins for most module producers are forecast to recover in the first half of 2017; however, uncertainty remains for the second half of 2017, when another cycle of oversupply is predicted to add pressure throughout the supply chain.

Total module costs for industry leaders are forecast to continue declining throughout the second half of 2017 to reach around $0.30/W for best-in-class p-type module costs, thereby widening the gap in cost structure between lowest-cost producers and other producers and affecting gross margins and profitability throughout 2017.

Edurne Zoco is director for the solar research group at IHS Markit.

Categories :