From the Price Chapter of the Report: The subject of price in the photovoltaic industry is easily misunderstood and often assumed to be synonymous with the cost of manufacturing. Misunderstandings are typically over the difference in inventory pricing, pricing from distributors and pricing directly from manufacturers. Spot prices for modules can fall into any of these three categories and are thus highly uninformative. Observing so-called spot prices daily, weekly or monthly price fluctuations without understanding whether the module comes from manufacturer inventory or is being resold from developers from failed projects does not aid in coming to an understanding of current pricing trends.
The subject of cost is also significantly misunderstood. Observers assume that prices for PV cells and modules relate directly to the cost of manufacturing these products. This is not the case. In many cases significant subsidization of domestic manufacturing completely obscures the true cost of manufacturing cells and modules without subsidies. In some cases manufacturers purposely obscure the true cost of manufacturing in order to appear both more profitable and more efficient. China is the most recent and most significant country to both subsidize its domestic PV manufacturing and thus obscure the true cost of this manufacturing but it is by no means the only government/country do so. Among the other countries that have supported domestic manufacturing by offering incentives and subsidies for manufacturers are Germany, Japan and to a lesser degree the U.S.
Many times the assumed cost of manufacturing is arrived at by back-engineering from a price point using methodology that assumes a gross margin of, for example, 20%. This method of arriving at an assumed cost of manufacturing typically yields incorrect data for cost that continues to support prices that are too low.
In 2004, the global PV industry entered a period of prolonged accelerated growth stimulated by the European feed in tariff incentive which spread quickly from Germany to other countries. In its early iterations, this incentive was simple and profitable and as such invited investors to take risks on non-commercial technologies. The utility scale (multi-megawatt) application was an outgrowth of investor interest in seemingly stable FiT returns. During the early 2000s capacities to produce technology increased significantly while prices decreased significantly; for example, prices decreased by 42% in 2009 over the previous year, by 16% in 2010, by 23% in 2011 and by 45% in 2012. Unfortunately, these price decreases were misunderstood as a sign of economies of scale and it was widely assumed that the industry had reached grid parity. These assumptions were largely based the misunderstanding that price was closely correlated with cost and that price decreases represented progress.
During this period of strong activity, manufacturers in China entered with aggressive pricing strategies that rapidly drove PV manufacturers into a prolonged period of negative margins, company failures and consolidation.
In 2001 global shipments were 352-MWp and China’s photovoltaic manufacturers had <1% share. In the mid-2000s the market for solar deployment accelerated, driven by the feed-in-tariff incentive model. Between 2004 and 2009 accelerating demand for solar deployment met with a severe shortage of polysilicon starting material and therefore crystalline module product. Prices for modules increased and smaller markets outside of Europe had trouble sourcing module product. In 2004 China’s manufacturers had a 1% share of the global shipment total, 1.1-GWp. By 2007, China’s manufacturers had a 21% share of global shipments. By 2010 China’s manufacturers had a 38% share of global shipments.
How China’s manufacturers accomplished this feat has been and still is debated. On one hand the country’s manufacturers enjoy significant and generous incentives and subsidies from the central government as well as local governments. Initially labor was far cheaper in China than it was in other countries and other costs, such as electricity were also less expensive. Debt has always been a murky topic concerning China and its manufacturers expand, in some cases, using grey market debt (shadow lending).
China’s astounding and rapid success and domination of photovoltaic manufacturing also owes a lot to the market reform of Deng Xiaoping. Under Deng Xiaoping in the 1990s a new breed of businessperson came into being laying the groundwork for the country’s PV pioneers in the mid-2000s.
Aside from significant government support, China’s pseudo-capitalists operate like free market capitalists and, as long as they do not run afoul of the central government as Suntech famously did in 2013, are free to succeed relatively margin-free. China’s PV manufacturing sector is less risk adverse than in other countries and more willing to move rapidly past historic PV industry norms such as, in some cases, pilot scale manufacturing. There are also fewer manufacturing regulations.
Much has been written recently about the relationship of the US stock market to the rapid growth of China’s photovoltaic manufacturing sector. Suntech filed its IPO in 2005; Trina Solar filed its IPO in 2006 while Yingli and LDK filed their IPOs in 2007. It cannot be denied that the proceeds from the IPOs fueled rapid expansion for many of China’s PV manufacturers however, it is equally true that the foundation for success for all its manufacturers were grants as well as loans at favorable repayment terms from the central government and local governments.
Recent rapid expansions of manufacturing capacity in South East Asia that are, in some cases, relocation of equipment from China to Thailand, Vietnam and Malaysia, are the result of high levels of manufacturing capacity and price pressure significant enough to finally give the minimum price (MIP) in Europe and tariffs in the US some weight.
PV industry pricing began recovering in 2013 for many reasons including recovering economies and government price intervention in Europe, the US and other countries.
In Q3-2016 prices for photovoltaic crystalline cells and modules decreased dramatically driven downward by an unfortunate stew of overcapacity, vulnerable markets as well as aggressive pricing (China) and defensive pricing (India).
In Q1 2017 manufacturers began selling future production of modules in the $0.30/Wp to $0.40/Wp range. Though this range is typically only available to larger buyers it coincides with inventory sales from manufacturers and distributors that has dipped into the $0.20/Wp to $0.30/Wp range.
This situation, sales of future production, cements the current low pricing phase while potentially increasing prices to the smaller buyers.
The average price (ASP) includes a wide range of price strategies and differs country by country. The average prices for modules in 2016 by country were:
- U.S., $0.61
- Japan, $0.62
- Europe, $0.61
- China $0.47
- Taiwan (primarily for cells), $0.22Wp
- Malaysia $0.53/Wp
- South Korea $0.76/Wp
- Singapore $0.65/Wp
- Philippines $1.47/Wp
- India $0.44/Wp
- Vietnam $0.43/Wp
- Thailand $0.51/Wp
- Global Module ASP: $0.54/Wp
- Global Cell ASP: $0.22/Wp
- Global Multicrystalline ASP $0.44/Wp
- Global Monocrystalline ASP $0.67/Wp
- Global High Efficiency Monocrystalline ASP $0.86/Wp
- Global Thin Film ASP $0.59/Wp