We at PVO International are constantly on the alert for market intelligence that can help our clients. The past few months brought an unprecedented flood of critical information. Never have we seen such a dynamic market. As International Business Developer for PVO, I wanted to share some of the topics I see as critical for your business in 2021.
It is no secret that nearly all industry is dependent on China. The economic health that drives society’s well-being is bound directly to global trade. Industry lives and breathes in the margin between supply and demand and solar is truly an example of this.
My colleagues and I at PVO International are constantly monitoring the solar supply chain from the raw material mines to the warehouse capacity in Rotterdam. As you may have read in our previous communications our goal is to determine the impact of challenging supply and demand situations so we ultimately can inform our clients. In all my years of solar experience, I cannot recall so many threats jeopardizing our livelihood.
It is difficult to pinpoint the driving factors that will shape 2021 for solar. For the purpose of this writing I will focus on three threats. One is certain and two are probable.
First the certain information. The shockwaves created by COVID-19 are crushing the shipping industry. While Chinese manufacturing has mostly recovered, the rest of the world has not. This is driving a slowdown of containers and raw materials returning to China. Confirmed reports say that for every three containers leaving China only one comes back. Further, major unloading delays at ports worldwide have increased ship turnaround times an average of 25%. Shipping companies are struggling to meet their contracted deliveries.
The impact to all industry is quite clear. First, the spot price for China to Rotterdam delivery is up 500% on average from 1500 USD to 7500 USD. Second, expect delays and reduced quantities for all shipbound deliveries from now through the end of Q2 2021. Third, price of all non-subsidized goods (not just solar) should increase 10 to 15%.
All major solar producers announced dramatic manufacturing capacity increases recently. Additionally, technology innovation promises greater efficiency than we ever dreamed. These announcements were met with applause and a sense of relief that the panel manufacturers will be able to meet demand.
The reality appears more cloudy. The innovation of cell sizes 182mm and 210mm appear to be the greatest challenge. The wafer production capacity in China is expected to expand by 70% to 357,3GW in 2021. However, the current production slots of large cells are sold out. Also, the forecast is that 55% of the panel supply in 2022 will use 182mm or 210mm wafers. Once again, there is a disconnect between supply and demand. The panel manufacturers are scrambling to buy cells in the short term and this should keep prices elevated.
Along with the cell uncertainty, the raw material shortages continue. Glass remains a major bottleneck. Demand for glass is quite high and the prices have nearly doubled over the past six months. Planned expansions in production capacity take time. The current forecast is that glass supply will meet demand in mid-2022. On a more positive note, we are seeing a short term easing in the price of polysilicon as the production facilities are back online. However, this is offset by the cell capacity expansion detailed previously.
It is difficult to come up with an industry more affected by politics and economic policy than solar. From tariffs to minimum import price to environmental impact; the health of the solar industry is determined in legislative chambers around the world.
Every region in the world is predicting double-digit install growth in 2021. Looking at the major players, the Chinese demand for solar modules is again the largest. The Chinese expect to install nearly 55GW of solar projects in 2021. This is over one-third of forecasted global installs. Many subsidies and PPA agreements require installations be built in the first half of 2021. If we take this information together with the shipping shortage it makes sense that a large portion of the Q2 supply should stay in China.
The overall European market is forecasted at 26GW. This is a 30% increase over 2020. India’s 2020 installations were severely restricted. The industry is expected to rebound with 100% growth to 10GW in 2021. The African region is similar. An expected 100% growth target is in place with 7GW of 2021 installs.
The wild card this year is the United States. Pre-election forecasts for 2021 solar installations were at 27GW; a 30% increase. The shifting of power to a political party historically in favor of renewable energy could boost America’s demand. As a start, President Biden re-committed the USA to the Paris Climate Agreement. This puts targets in place that the USA cannot ignore.
In addition, the solar installations in the USA should receive a boost either through tariff adjustments, investment policy or both. Tariff adjustments certainly will be reviewed, however no promises yet. Renewable energy investments are a platform the Democrats campaigned on. Legislation should be enacted quickly. The impact to the supply chain could be felt in the beginning of Q3 2021 and should come earlier if tariffs are lifted.
In short; all regions are growing rapidly. The question remains who gets the supply? It appears there is not enough to go around.
Historically, solar has experienced price easing and supply spikes in the early summer months. This year has unique challenges that point towards sustained price levels and uncertain supply through Q3 2021. Raw material constraints, technology advances, shipping shortages and substantial demand are all pointing to upward price pressure.
Many are asking when the mid-2020 days of historic low prices are returning? My PVO colleagues and I think they are gone until mid-2022 or later. The market could well settle into a €0,01Wp +/- range for the year. A greater price drop in 2021 would come as a surprise to us. Of course predicting the solar market is a risky business. Let’s keep our eyes open and be quick to make adjustments if necessary.
International Business Developer