The global pandemic has had an adverse effect on the demand and supply of various commodities and services. This in turn has hit the prices of both, the intermediate, as well as the final goods. One such commodity that has been hit hard by the pandemic is PV modules, which is one of the most important components of a Solar PV Plant, and forms more than 50% of total Project Cost.
At Amplus we keep monitoring the trends of materials, thus, ensuring our supply chain stays optimised. This gives the organisation a competitive edge. We perform analysis using our market intelligence gained from external stakeholders along with data and reports from various reliable market indexes and independent research organizations. Here are the few observations and thoughts on PV Module price trends.
The Global demand of PV Modules is driven mainly by five markets, which include, Mainland China, USA, Europe, India and Japan. In order to counter rapid increase in the cases of Corona Virus, these markets have been shut for quite a long time halting various development activities of solar power capacity addition. As a vital part of solar projects, modules have faced a negative demand shock, and in fact, it is predicted, that the total demand in year 2020 will contract by more than 5% as compare to 2019 (as per Bloomberg NEF report).
The decrease in demand has resulted in a decrease in price of around 6-8% as compared to the month of February.
As opposed to a reduced demand, there is abundant supply, with major manufacturers adding new capacities. This has resulted in a disequilibrium, and in my opinion will result in fall in prices supported by Upstream, that is, Polysilicon and Wafers Prices. The module prices may take a downward spiral till the third quarter and reduce further by around 3-3.5%.
However, a bullish buyer should keep watch for the following scenario.
- National Energy Administration (NEA), China has come up with a policy on subsidy for 2020. This has increased the expectations by many folds, and it is expected that China’s domestic market will add 35-40 GW of new projects. With construction of these new projects anticipated to happen in Q4 2020 and Q1 2021 triggering China’s domestic demand during this period.
- Major developers in India also have been shifting their delivery requirements to Q4 and Q1 owning to extension provided by MNRE.
- Also, it will be interesting to note if the markets of Europe & US pick up during this period.
Above mentioned market dynamics may again alter the global supply-demand picture which may result in increase in prices or may cause price stabilization. It is suggested to stay vigilant during these times and not fall prey to the price volatility in the market. Since module price can impact project cost substantially. So, it is strategic decision which every organization should make after thorough market research with due diligence.