Cautious Demand = Lower Solar Energy ASP’s

solar energy supply chain & raw materials

The Crystalline PV Supply Chain - Downward Pressure Throughout. Source: Yingli Solar

Average selling prices (ASP) were down for just about every component in the PV industry supply chain at the end of this week. Continuing a 10 week long slide, an informal survey of entities throughout the supply chain suggest that the lower global demand signal, as a result of government subsidy reductions in EU countries, continues to have an impact. A sampling of spot market ASP’s from the first week of this month to today shows :

  • 7% reduction in polysilicon (polysi) to $76.98/kg
  • 6% reduction in crystalline solar cells to $1.11/W
  • 6.5% reduction in crystalline modules to $1.51/W
  • 4% reduction in thin-film modules to $1.23/W
  • 12% drop in inverters to $0.25/W

Of particular significance is that many of the mid-tier wafer and cell suppliers are running very narrow margins at these prices. Pressure to sideline production capacity should mount if the downward trend continues.

Polysilicon

Another interesting crystalline supply chain development is the downward margin pressure on polysi refiners who have the ability to set price as result of their top of the supply chain position. The majority of solar polysi supply comes from 10 large providers who dominate the market. As polysi companies are enjoying margins in excess of 40%, downstream wafer and cell companies with razor thin margins are pushing for lower polysi prices. This should prove to be an interesting situation should demand continue to weaken.

Solar Thin-film has been declining, but stabilized in the last few weeks. Declining crystalline module price puts pressure on thin-film module suppliers as the technology’s lower efficiency, additional array space requirements and higher balance of systems cost requires at least a 25% differential in the module price between the two categories for thin-film to remain attractive to project developers.

Solar energy & the utilities

Solar as a Nuclear Replacement - a Large Variable

The big question is when do these prices stabilize given the myriad of offsetting variables in the market, which are changing every few weeks. Examples include rumors of new or enlargement of solar programs in Japan, China, India and the Middle East countries continue. Replacing nuclear with renewable energy in many countries as a result of the Japan nuclear crisis. Continuing PV system wide price reductions along with rapid increases in fossil fuel provided energy which is leading to grid parity quicker in many locales than was anticipated a mere 2 years ago.  Major PV manufacturers are ramping productions capacities to 2GW and greater. Transmission capacity is a major PV industry bottleneck in many developed and developing countries.  An on and on.

Global electricity demand (the peak hourly rate at which energy is delivered to loads and scheduling points by generation, transmission, and distribution facilities) continues to outstrip capacity by 20X according to the EIA. Perhaps this is the best lens to view the future of the PV industry.

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