PV Module Forecasts Rise Sharply Thanks To Chinese Demand

Chinese demand for low-cost PV cells and modules is driving the global PV shipment forecast higher while creating spot shortages in some regions says IHS Senior Research Manager for Solar & Energy Storage, Sam Wilkinson

Renewable energy analysts are increasing their 2017 photovoltaic (PV) module installation forecasts led by a surge in Chinese capacity growth. IHS Markit now forecasts that China will install 45 GW of capacity this year while total global PV installations should reach 90 GW"”a 14 percent increase over 2016.

The overcapacity, price instability and industry consolidation that characterized photovoltaic (PV) production in 2016 seems like a distant memory. While 2017 had been forecast to be somewhat more even than 2016, providing modest growth and less price instability, demand from the People's Republic of China surpassed even the most optimistic of last year's projections, paving the way for surprisingly strong demand in 2017.

In the IHS Markit "New Global Forecast for Solar Installations," researchers point to the heft that China brings to the global PV market. By the close of 2017 IHS expects China to have installed half of the 90 GW of PV capacity the world is expected to install this year. Based on an analysis of official Chinese connection statistics along with inverter and module shipments IHS Markit estimates that 26 GW of installations were completed by China in the first half of 2017; another 12 GW is set to be installed by the official close of third quarter, leaving 7 GW to be installed before 31st December.

Researchers have observed that the boom in Chinese demand erased any surplus that carried over from 2016 and is consuming a large part of new global supply as it leaves factories across China and elsewhere. This is leading to increased prices and longer lead times, they noted, along with short-term and regional shortages in countries closest to China that tend to rely primarily upon Chinese modules for domestic PV requirements. The shortage of Chinese modules is not impacting United States supplies and installers as heavily as other regions. This is true largely because the rush to procure modules ahead of any potential trade action (arising from the Suniva and SolarWorld Americas petitions before the US International Trade Commission) focuses on securing tariff-free modules manufactured outside of Taiwan and China.

The surprising spike in demand for PV modules across China occurred for several reasons including moves to take advantage of lower prices and oversupply. PV appetites were also fueled by positive revisions to governmental policy support aimed at meeting China's growing demand for power with PV instead of coal-fired plants; this helped lead to greater-than-expected first half installations. There was also no substantial second half installation fall-off as some had predicted, and the pace of installs early in fourth quarter appears sufficient to deliver the 45 GW of increase that analysts expect for the year. IHS Senior Research Manager for Solar & Energy Storage, Sam Wilkinson, noted that in addition to the very strong PV growth in China, the world's residential markets are also undergoing substantial change that will create new and different opportunities than have existed up to this point.

The discontinuance of Feed-in-Tariffs (FiT) in most countries, the dramatic drop in major PV system component prices during the last five years, continual increases in quality and a globalized manufacturing base have all had substantial impacts. See the details of how residential PV is changing in the complimentary IHS Markit report: "The Evolution of Residential PV: The biggest trends and most important developments in the smallest solar systems."

"The fact that it is now cheaper in most countries for people to generate power from PV systems on their roofs than to buy electricity from the grid brings about some important changes to the market. This is the one of the fundamentals that is driving change in the electric power system," Wilkinson said.

Dramatic price decreases in PV generation (levelized cost of electricity/LCOE), has come at a time when new fossil-fueled power plants are not being built at the same pace as in previous years, showing the resilience of renewable energy and underscoring its potential to change the way people obtain power.

"In previous years, people installed residential PV systems as a simple investment, as they received guaranteed FiT income for as much as twenty years, offering an attractive return. With incentives now slimmed down to much less generous amounts or removed altogether, and the cost of PV systems fallen by incredible amounts over the last five years, people are now installing PV in order to reduce their electricity bills and increase their autonomy from the grid. This brings about important changes to the dynamics of the market, and is also one of the major factors behind a growing trend towards a more decentralized power system," he remarked.