Section 201 Could Bring Slowing In For Solar Purchases In Short-Term

Due to a massive withdrawal of backing for the nation’s solar PV market, Bloomberg New Energy Finance (BNEF) has foretold a 34% decline in multi-crystalline solar module prices in China.

This decline would appear similar to the fall in module prices in 2016 and only surpassed by the 40% fall in prices in 2011.

Due to China being the world’s largest solar market, this is expected to spread globally. “Oversupply is universal,” states a note by BNEF, written by four members of the organization’s Chinese staff.

BNEF gives a benchmark monocrystalline module cost of US$0.37 per watt for the fourth quarter of 2017, and expects this to drop to only $0.24/watt by the end of the year.

Supply Side

The summary predicts “market panic” in the short term, and for developers to suspend installation entirely during the third quarter while waiting for the release of the new quotas and lower module prices.

For the supply chain, the implications of an abrupt halt to the Chinese market are stark. BNEF expects this to lead to “enhanced inventory,” with the organization regarding that large amounts of multi-crystalline wafers were already sitting in warehouses in May. The newly predicted slowdown in demand is expected to hit multi harder than mono, with the latter still profiting from demand through the nation’s Top Runner program.

BNEF expects the most critical consequences on polysilicon, due to the inflexibility of the material’s production equipment, and is expecting that prices will fall to $11-12 per kilogram by the end of the year. However, the company notes that the slowdown in demand will also affect non-silicon materials.

The slowdown will lower the price of module production, and BNEF anticipates that “best practice” module production prices will decline to $0.24 per watt, leaving very slim margins for module makers. However, some large Chinese PV makers are already expecting to draw down their costs below these figures by the first half of 2019.

Section 201

The influence on the U.S. market is unclear. In a global oversupply condition, if prices for PV made in Korea and Southeast Asia fall enough, the 30% Section 201 tariff will have less of an effect. This is especially true as the import duties are calculated as a percentage of the price of the modules.

As development is sensitive to price, this would spur additional project development, particularly in the utility-scale sector, which has been hindered by the Section 201 tariffs. But sustained low rates will also hit the margins of the new factories which are being planned, including Hanwha Q Cells’ 1.6 GW factory in Georgia and First Solar’s 1.2 GW expansion in Ohio.

JinkoSolar’s Jacksonville department is expected to be less affected given that all of this product is likely to go to the company’s 2.75 GW supply deal with NextEra. Furthermore, the Tesla/Panasonic mega-factory in Upstate New York is more insulated from global prices, given that both the Solar Roof and HIT modules it provides are premium products destined for the rooftop market, which is less price-sensitive.

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