Those of you familiar with the history of the international solar industry will be well aware of the fabled booms and busts. Since 1977, when the cost per Watt was more than US$77, there have been four periods when prices rose, according to date from Bloomberg New Energy Finance.
Aside from these brief increases, the story of PV prices is very much about the lows not the highs. In addition to the technological advances and, latterly, the growing scale of manufacturing, prices are also susceptible to demand. The UK solar market knows all too well how cycles of boom can become periods of bust. Demand, when driven by government policy, can be extremely fickle.
The story of the UK market’s recent nervousness about the pricing of modules has a lot to do with end market demand in the far-flung solar sectors of China, Japan and the US.
An anticipated rush to deploy projects in the States before a key tax credit expired failed to materialise after an extension to the support scheme was backed by Republicans and Democrats alike. In China, deadline to connect and register projects before a drop in subsidy support triggered a rush of completions (sound familiar?). What followed was a dip in demand. Japan meanwhile is looking to replace its own generous subsidies with an auction based system (that sounds familiar too). All in all, three of the largest solar end-markets were presenting signs of weak demand. Inevitable talk of manufacturing overcapacity started up. A host of manufacturing capacity additions didn’t help. Specifically in Southeast Asia from where Chinese firms have retained access to European and US markets. Prices began to slide beyond the rate technical improvements alone can deliver.
Back here in Blighty, this was potentially good news. The industry was getting to grips with reduced tariffs in the residential and commercial sectors and a rapidly closing door on the sub-5MW utility sector. A drop in module costs would surely be a welcome boost to project economics. However, the minimum import price (MIP) applied to Chinese cells and modules means there is an artificial floor on how low that price could fall. A quirk of exchange rates and the way the level of the MIP is set was blamed for holding UK prices higher (see box).
But with global prices falling by around 15% in the first half of 2016, and even US manufacturers like SunPower and First Solar impacted, surely reductions in prices paid by UK firms should have dropped, even with the MIP in place. SunPower revealed in November 2016 that its average selling price (ASP) for its modules had fallen by a whopping 25%.
This article originally appeared in issue three of Inside Clean Energy magazine. To view the article in full, and to read the rest of the magazine, fill out the form below to download the entire issue for free.