By Gerard Wynn
LONDON May 10 The latest round of company
financial reports suggests that solar module selling prices will
continue to fall, although more slowly than previously.
The impact of proliferating proposed import duties is a
major unknown, however.
Solar panel, or module, prices have fallen sharply in the
past five years, in response to global over-supply coupled with
falling subsidies and the economic crisis in the world's biggest
Falling prices for the raw material polysilicon, which
reached record lows last November have sapped prices for the
finished modules, say manufacturers.
These factors have narrowed module manufacturing margins and
cut solar power generation costs for end users, in turn leading
to a pull-back in subsidies which has further limited module
demand and prices, combining to pose the question: when will
China's Yingli, one of the top module manufacturers
by volume shipped, pointed to a stabilisation of prices in an
upbeat assessment which was not specific on timing.
"We expect that the prices of PV products, including PV
modules, may gradually stabilize or increase slightly due to the
increased demand caused by the quick development of new and
emerging markets and the rationalized supply of PV products on
the market," the company said in its latest annual report
published in March.
It seems likely that price falls will slow, but rises soon
are unlikely given data which show a continuing fall in
manufacturing costs and selling prices.
Average selling prices for silicon-based modules, as
reported by top-10 manufacturers, have fallen from around
$3.5-$4.5 per watt in 2008 to $0.7-$0.8 per watt last year (See
Price falls can be attributed both to competitiveness
pressures and structural falls, the latter following advances in
technology and benefits from growing economies of scale.
"We price our standard PV modules based on the prevailing
market prices at the time we enter into sales contracts ... and
our silicon-based raw materials costs," said China's Trina Solar
, in its latest annual report.
Solar panel prices have fallen quicker than manufacturing
costs, showing the impact of competitiveness pressures.
Yingli's quarterly and annual reports show average annual
manufacturing costs per watt fell 35 percent in 2012 versus
2011, compared with a 46 percent drop in average selling prices.
Future module prices will be set by a combination of factors
pushing in different directions.
Arguing for a levelling off in module prices, gross margins
have narrowed sharply in the past two years, and these are in
some cases now negative. (See Chart 2)
And average selling prices across manufacturers have
converged, suggesting companies are now operating at the limit
of available technology. (See Chart 1)
Some manufacturers point to stabilisation in prices over the
course of last year.
"Since the first quarter of 2012, the price of PV modules
has remained at a relatively stable level primarily due to the
shake-out of certain uncompetitive production capacity and
increased demand worldwide," said Yingli.
Arguing for continuing price falls, manufacturing costs are
still falling quarter on quarter, show data from Yingli,
Canadian Solar and JinkoSolar. (See Chart 3)
And module prices fell last year on an annual basis.
Perhaps most importantly, over-capacity remains.
The big unknown is a raft of mooted trade protection.
Threatened duties could separate the global market into
silos, where each jurisdiction would favour local manufacturers,
leading to higher selling prices as a result of less competition
and the effect of the duties on import prices.
However, prices could fall, if trade restrictions deepened
local over-capacity by constricting demand.
It is too soon to predict the outcome, as Europe awaits
confirmation of rates, litigation continues in the United States
regarding duties confirmed last year, while China mulls duties
on solar raw materials and India weighs in with its own
threatened trade protection.
The reaction of Chinese manufacturers underlines the threat
which features highly in the "risk factors" section of their
"If as the result of such investigations the European
Parliament imposes anti dumping and countervailing tariffs or
other trade protection measures, our exports to the European
market may be materially and adversely affected," said Yingli,
40 percent of whose revenues are from Europe.
"The imposition of the AD (U.S. Anti dumping Duty Order) and
CVD (Countervailing Duty Order) and any increase in the rate of
AD or CVD or their respective deposit ratios will significantly
increase the price of our products, negatively affect our sales
in the U.S. and adversely affect our results of operations,"
said China's Hanwha SolarOne