Surplus in solar panels to cut prices
Prices for solar power equipment are likely to resume their decline later this year as production exceeds demand, according to energy executives at an industry conference in Xining.
A major clear-out of excess inventory - from polysilicon to panels - by producers pushed prices down by 20 to 40 per cent across the supply chain in the past five months.
'I believe solar component prices will stabilise in the next three to four months before they resume their downtrend,' Liu Junfeng, deputy director general of the National Development and Reform Commission's Energy Research Institute, told the CBI China Solar Industry Leadership Summit.
He said analysts were projecting this year's global demand for panels to reach 18 gigawatt to 20 GW, up from earlier estimate of 15 GW to 17 GW. Last year's installation was 16.6 GW. One GW of capacity is enough to meet the needs of around 800,000 mainland households for a year.
Liu's optimism is shared by analysts at Fitch Ratings. Increasing demand for clean and safe energy, the improved efficiency of solar panels and lower equipment prices will spur demand in the medium term, the rating agency said.
The silicon-based solar industry has a long supply chain that begins with the manufacture of polysilicon, followed by wafers, cells and panels.
Polysilicon prices have fallen 21 per cent between the end of last year to June 8, according to a Macquarie Securities research report. Meanwhile, wafer prices slumped 39 per cent, cell prices slid 31 per cent and panel prices fell 19 per cent.
Uncertainties around Italy's government subsidy for panel installation and possible cuts in German subsidies in July caused buyers to delay orders and producers to dump excess inventory in the past five months. Germany installed 7.4 GW of solar panels last year, accounting for 45 per cent of global demand. Italy was the second-biggest market with 2.3 GW of installations.
Mainland solar power equipment makers are affected most by European subsidy policies, since they together supplied 48 per cent of the world's solar panels last year.
Panel production capacity is expected to exceed demand by between 13 GW and 35 GW in 2015, based on the projections of 15 industry research organisations, said Lei Ting, vice-president of Jiangsu province-based Suntech Power Holdings, the world's biggest maker of solar panels.
The oversupply explains continuous equipment price declines, which could mean solar power will be as cheap as coal-produced electricity in a few years in Europe.
On the mainland, this may not happen until the end of the decade due to low state-set prices for coal-produced power.
Germany earlier considered cutting subsidised prices for solar power by up to 15 per cent starting in July, but did not do so since demand fell short of a threshold for a reduction under a law passed in January.
Such subsidised prices are higher than those of conventional pollution-prone energy, in order to allow developers to make a profit even though they bear the more costly investment costs of solar panels.
The Macquarie report said that brisk demand from Germany following the steep price cuts in the past few months could stimulate installations, which could reach 7 GW in the 12 months to September this year.
The projected large installation volume could trigger an 18 per cent to 21 per cent cut in German solar power prices in January next year, it said.
In Italy, the government last month announced caps on subsidised panel installations, as well as gradual solar power price cuts for the next five years, to put a ceiling on the government's financial burden.
The price per unit of generating capacity, in US dollars, for installing solar panels, according to The Guardian