How cheap will modules be this year? For years the solar industry was used to rapidly falling module prices – no way would price ever increase. Nope. Buyer business models evolved around the expectation that there was always a lower price right around the corner.

Design a system for one manufacturer’s modules, find a lower price, pay a redesign fee and move on. In 2019, though the average module price was $0.36/Wp – the low was $0.21/Wp. At the time, most people expected that 2022 prices would be headed below $0.20/Wp. Figure 3 presents average module prices from 2010 through 2020. From 2010 through 2012, module prices decreased significantly before hitting some speed bumps from 2013 through 2015.

Figure 1: Average Module Prices 2010 through 2020

In 2020, despite supply chain hiccups and shortages of some materials, average module prices decreased by 8% to $0.33/Wp from $0.36/Wp in 2019.  At the beginning of 2021, industry participants expected another 8% to 9% decline.

Price decrease expectations ran smack into supply chain realities, and Q2 2021 saw buyers all along the solar value chain enduring upticks in prices for polysilicon, wafers, and cells, along with price hikes for trackers, other system components, and shipping. Delivery delays compounded the problem, with developers forced to make adjustments. Figure 4 offers quarterly polysilicon and average module prices for 2021.

Figure 2: Quarterly Average Polysilicon and Module Prices 2021

Since mid-last year, module buyers have endured force majeure contract changes on everything from delivery dates to price and even terms. Prices have increased on almost a monthly basis.

 The problems are particularly acute for US buyers, who, along with tariffs, face custom delays over bans on goods produced using forced labor.

Meanwhile, reports of future price decreases, while giving many reasons to hope, are wearing thin in the face of reality because, at this point, truthfully, visibility is low and the likelihood of continued volatility high. In addition, buyers should expect a host of new fees to crop up, including those that ensure delivery to the project, safe passage through customs in the US, and likely price guarantees set as a fee on the negotiated price – still subject to force majeure, of course.

Resilience Fatigue

Resilience is the ability to bounce back after adversity – but bouncing back again, again, and again is exhausting. Contract or no contract, module sellers are passing costs onto buyers. Developers and others likely cannot do the same. Renegotiating the same contract, again and again, is at the least frustrating and frankly, infuriating.

For years buyers believed they had price control – this was an illusion. There is relatively little polysilicon, wafer, cell, and module manufacturing that is not China-owned. When you have one seller, and the product is crucial, that seller can set any price they want. As buyers are learning, just because prices decreased for over a decade doesn’t mean they always will.

There are no quick answers. Stronger contracts? Nah. Fees to guarantee prices? Nah.

There will be an overcapacity of polysilicon by late Q3 2022, along with an overcapacity of wafers, cells, and module assembly. In a non-pandemic world, this would force significant price decreases – and, depending on the market – it may. But, more capacity will not help with tariffs, shipping delays, the cost of shipping, and customs delays.

Buyers are more than fatigued. Many a business model was built on the switch to solar and other renewables – and this is still a good bet. Getting through 2022 requires patience, but patience won’t salvage supplier-buyer relationships.

Down the road, low visibility or not, overcapacity will do its work, and there will be a shift. When this shift comes, manufacturers may find themselves negotiating with the long memories of buyers subject to one too many force majeure contract changes.

In the solar industry, contracts are made to be broken, and there is a lot of precedent for this – MEMC’s abandonment of their contract with BP Solar being high on the list.

Seller beware. Buyers won’t forget and will have their day.