L R AS Published on Sunday 17 December 2023 - n° 470 - Categories:China
The difficulties facing the Chinese PV industry
Oversupply is hitting some solar manufacturers hard, but grid constraints and labour shortages are likely to hold back the solar industry in 2024.
While panel shipments have increased, Europe and Brazil
were affected by a massive stockpiling of panels in 2023. Lower prices are improving the internal rate of return on projects, but labour shortages, policy changes and project schedules are creating a time lag between production and installation. With excessive inventories, some manufacturers are cutting prices or moving panels elsewhere, incurring huge losses. Demand for installations should continue to grow in 2024, but will remain below production capacity. Oversupply will persist and limit new production capacity. Overstocked manufacturers will be more cautious about production, shipping and sales in 2024.
Even if solar power growth slows from 2024 onwards, due to a higher benchmark, grid issues and location trends, the market outlook remains positive as panel prices have fallen : Demand is expected to grow by 15-20% in 2024.
Reduced profits
In 2023, the silicon supply bottleneck eased, but the rapid expansion of solar generation facilities led to a large surplus. The price of silicon has fallen from RMB300 ($41.40)/kg at the end of 2022, to around RMB69/kg currently, while the price of panels has dropped from $0.245/W last year to $0.135/W. As supply will always outstrip demand for installation, prices are unlikely to rebound significantly, leaving more negotiating power to end-users.
The increase in production capacity is leading to increasingly fierce competition between manufacturers. Now that prices have fallen, many manufacturers no longer have much of a profit margin, forcing them to adjust their utilisation rates in line with demand. As a result, some older production lines have been phased out at a faster rate. Some new capacity plans have been cancelled because they are no longer profitable. Other expansion projects are due to be cancelled in 2024.
The solar supply chain remains concentrated in China, with Chinese production capacity for silicon, wafers, cells and panels amounting to 93%, 97%, 90% and 82% of the world total respectively. Production capacity began to be installed abroad in 2023, in particular in the United States and India, where facilities will be commissioned in 2024. InfoLink statistics show that annual panel production capacity outside China will have increased by at least 78%, reaching 270 GW from the beginning of 2023 to the end of 2024.
These overseas expansion plans mainly concern panels, given the barriers to entry posed by capital expenditure and technical difficulties for other links in the photovoltaic supply chain. It is unlikely that new cell and panel players will be able to completely free themselves from Chinese supply within the next two or three years.
The solar industry will continue to grow in 2024 despite the impact of grid capacity constraints and labour shortages on installations. Expanding production capacity and lower prices will effectively stimulate demand, offering bright prospects for solar developers.
https://www.pv-magazine.com/2023/12/12/competition-heats-up/
PV Tech of 12 December 2023
