Chinese Government pullback of solar plan leaves a glut on the market

When the Chinese government said last week that it plans to make multiple unfavorable changes for the compensation of solar projects in China, analysts have been scrambling to determine how this move by the world’s largest solar market will affect markets around the globe.

While there are still many unknowns, a few things are certain. The Chinese market will shrink this year, leading to an oversupply of solar panels. In the highly liquid global solar panel market, prices will fall because of a temporary oversupply.

For the U.S. solar market, which has been impacted by import duties under Section 201, this is good news. For U.S. manufacturers, including those who are building or buying factories, this new is a little harder to overcome in the short term.
 

There is a downstream boost to solar panel prices

If there is downward pressure on module prices, it is just great if you are downstream. But if you are creating the panels, then this is not good news. Some analysts are saying the price drops will certainly be substantial.

Some of the price drops could be so substantial that they revive commercial projects currently held off due to tariffs by the Federal Government. Many are saying these market forces will drop panel prices by more than anything the tariffs have added in terms of cost. The price drop is expected to hit later this year and extend into early 2019.
 

New prices make companies re-evaluate contracts

When the Federal Government enacted section 201, the tariff drove developers to attempt to lock in module supply, but now this dynamic may reverse.

Overall, the pending decline in China’s market may be bad news for global solar deployment, but companies buying those overstocked panels will fare well in the near future.

However, the outlook for manufacturing is not so rosy. This comes at a difficult time for a number of companies that were planning to either buy or build solar factories in the United States.
 

Downward cost trend in the solar supply chains

Circumstances that represent a loss for one portion of the solar industry can be a gain for another. The flood of solar panels that are coming also might influence the prices of installation. As it puts pressure on manufacturers, suppliers, and solar installers to compete with each other, economic principles of competition will apply and prices will fall as they all fight for business.
 
This is not a bad thing, because as prices fall and popularity of solar continues, more people will install systems on their homes, and those companies who had to charge less to compete, now have more business and more money.
 
These market forces will continue to have an impact, as well as local policies. If an area has positive policies toward solar, then more homeowners will install solar on their homes, which will lead to more business, and more solar businesses opening. Repeat this and soon you have a robust solar market. On the other hand, if an area does not have positive solar policies, then there will be less solar business. It will still be there, but the market won’t be as strong as the other areas.

In all, product gluts like this happen in all supply markets, and market forces correct them. Soon there will be an abundance of solar panels, but the price drop in those materials will not influence the overall installation price much at all. Those panels still have to be mounted, installed, and connected to the grid, and those prices will not drop that much. The only thing that makes those prices drop is competition

A bigger influence on the price is what tax breaks are available because in a couple years the 30 percent tax break goes down to 25 percent. That alone would offset any price drop in the future. Also, if interest rates increase and you finance the panels, that payment will be bigger no matter how much the price on the panels drop.

If you are interested in going solar, you should do it today. We at hahasmart also have verified solar installers across the US, and I am not saying that our verified installers are going to have the best price, but they are definitely worth checking out. Compare them to other installer quotes in your area and see for yourself.

You can also find out what kind of solar system you can set up. Please visit the HahaSmart  Price Checker Tool yourself. You can not only see how much a solar panel system would cost in your area, you can find get help with every aspect of your project. Enter your information and see how much you can save in the next 20 years. 

For information relating to going solar don’t forget to visit our solar blog section for more handy guides and articles.