Solar PV shakeout deepens.

This article catalogues the continuing woes of PV panel manufactures being driven by the recent new wave of cost reductions in China covered in this earlier blog post. European and most US manufacturers disappeared several years ago during the first wave of dramatic price reductions. The two remaining US companies, SunPower and First Solar drastically reduced production and hunkered down for the long haul late last year. Now most of the Taiwan manufacturers have followed suit. Even within China, less efficient producers are shrinking despite continuing local government support to prop them up. Soon, all that will be left will be the few very large scale, most efficient producers in China. These companies are running with very low gross margins in the 10% to 15% range and are not paying off their capital costs.

Despite overcapacity back in 2012 when manufacturing capacity was 60GW/y, China continued to expand capacity to beyond 80GW/y driven by local government competition. The current price war was a consequence of demand reduction in China driven by reduced central government subsidies. While China may increase demand from current depressed levels in 2017 it is unlikely to grow significantly beyond 2016 levels. The US market is set to decline in 2017 after a stellar 2016. Global PV demand is predicted to decline in both dollar and GW terms in 2017 and the overcapacity will kill profitability and investment in more efficient plant and equipment.

Where this will all end is anyone’s guess. Trump’s anti China stance could well throw a spanner in the works. China has become almost the sole source of PV panels. The market has very unstable characteristics that could easily lead to sudden and dramatic change.
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By Edmund Kelly