In a world with orderly market behavior with price easily explained by supply and demand dynamics, there would be little need for a discussion about price behavior because visibility would be clear. Unfortunately, markets are not orderly, and buying behavior is driven by multiple industry or product specific factors. In the solar industry, price visibility is far from clear.

Manufacturers of solar cells and modules must cope with buyer expectations that prices will decrease, which is not always true, that solar cells and modules have little differentiation and are thus commodities, also not true, and that gross margins of ~10% are sufficient, which is not valid.

Module prices differ by country or regional market, by tariff activity, by how much pain the manufacturer will absorb, and by outlier events such as 2018’s sudden slowdown of activity in China.

The industry is young, volatile, and filled with unstable markets all relying on a mechanism of some sort to stimulate demand.

In Europe, the MIP (minimum price) is no longer in effect, and while the EU hopes for a competitive domestic manufacturing base, individually, manufacturers know this is not possible.

True, Europe is experiencing strong growth, and though economic indicators for the continent are not stellar, there is no reason to assume a drastic slowdown for at least a couple of years. With demand for solar increasing in Europe and other countries, manufacturers in China have a ready market for excess capacity and can avoid the problematic US market with its tariffs and its bellicose trade war. Without the MIP in place, importers are free to price aggressively – good for developers, bad for domestic EU manufacturers.

Trade Games

Tariffs, minimum prices, quotas, et al., are tools in the tradecraft handbook that governments wield under the guise of protection. Meanwhile, back at the real motivation corral, the underlying motives are to punish another government, a misunderstanding of the advantages and disadvantages of protectionism, as a lever to gain something from another government, lack of knowledge about the protected industry, and sometimes, from a lack of understanding of how global trade works.

No matter the motive, the results are usually the same in that the protected industry becomes reliant on the protection while importers counterattack. Without a workaround, buyers pay higher prices.

Luckily for many buyers and sellers of solar components, workarounds abound. To get around tariffs and other punitive trade mechanisms such as minimum prices and quotas importers can:

  • Transshipment: ship the product through a different country on the way to its ultimate destination. In this case, the product is sometimes minimally altered during a brief stop and shipped. In the case of modules, manufacturers from China have expanded to many other countries, and this option is used quite option. Taxes, VAT for example, are sometimes absorbed by the shipper.
  • Absorb the tariff, a common practice available for all but the smallest buyers and the reason tariffs on modules have little impact.
  • Refund a portion of the payment in cash or other goods such as trackers, inverters and other mounting, an option used often in the EU during the MIP (minimum price) era.
  • File for an exemption claiming that the uniqueness of your product or your commitment to the market makes you to special to be the subject of a tariff or quota.

The moral of the trade war story is that no matter the restriction a workaround or exemption will be found in most cases. In a perfect world, which of course does not exist, trade actions would correct the inequity.

Bad behavior happens to both unregulated and regulated markets. In most cases, bad market behavior comes from side industries that spring up to take advantage of suddenly hot markets. There are many examples from history of side markets and side players following booming, young markets. During the US gold rush, snake oil salesmen sought to cure anything with what was, in most cases, poison. Closer to solar-home, during Spain’s briefly booming market of 2007 and 2008, the cost of doing business skyrocketed as speculative side businesses bought up permits and created administrative roadblocks and problems, all solvable, for a fee.

Average Module Prices 2019

Globally, expect the 2019 ASP in the range of $0.40/Wp. Individual markets will behave in distinct to that particular market with module prices in the US likely to average $0.48/Wp for the year, prices in Europe at $0.42/Wp, and prices in India at $0.40/Wp depending on the application, of course.

Prices in the US were down at half year, but are ticking up as tariffs (on multiple countries) take a toll.

India has a problematic manufacturing base. Its cell manufacturing is out-of-date. Its module assemblers need to upgrade their quality. Downward pressure on tender bidding, unrealistic expectations concerning outcomes, unreliable auction mechanisms, and a costly administrative infrastructure has resulted in low participation in some tenders. Now that the US has removed its special importer status, its manufacturers will need to focus on their domestic market pushing prices down.