Solar Supply Glut Crushes Margins But Buildout Booming
Nov 23, 2023
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Solar industry faces supply glut, impacting prices and margins. China set to build as much solar this year as the entire world in 2022. Discussion on solar industry growth, US production onshoring, and role of solar in global renewables capacity tripled by 2030.
China is set to build almost as much solar this year as the entire world rolled out in 2022, contributing to the global solar supply glut and impacting module makers' prices and margins.
Solar installations are increasing globally, with China, Brazil, and African countries driving growth, but challenges like low margins and excess supply are faced by solar manufacturers.
Deep dives
Solar Market Outlook for Q4 2023
The podcast episode discusses BNF's Q4 2023 solar market outlook. The episode highlights the current dynamics of the global solar industry, including Europe's buying spree of solar modules and the status of solar mega-bases in China. It also touches on the impact of on-shoring solar manufacturing in the US on module prices. The episode explores the challenges faced by solar manufacturers due to low margins and a glut of supply, particularly in Europe. It also examines the booming solar market in China, driven by low module prices and government initiatives. Additionally, the episode delves into the growth of solar in Brazil, South Africa, Nigeria, and other parts of Africa. It concludes by discussing the goals of tripling renewables by 2030 at the upcoming COP 28 conference and the potential challenges of power price cannibalization in the solar industry.
Implications of Low Module Prices and Solar Installation Growth
The episode highlights the implications of low module prices and the high demand for solar installations. It explores how China is set to install a significant amount of solar panels, estimated at 240 gigawatts this year, surpassing the global installation numbers of 252 gigawatts in 2022. The episode emphasizes the impact of low module prices, which have reached 12.8 cents per watt, leading to a surplus of solar modules in the market. The guests discuss the challenges faced by solar manufacturers due to low margins and excess supply. However, the episode also acknowledges the positive aspect of solar installations increasing globally, particularly in China, Brazil, and African countries, which contribute to the growth of clean energy.
Concerns and Considerations for the Solar Industry
The episode addresses key concerns and considerations for the solar industry. It examines the potential impact of trade wars, with China selling solar modules at significantly lower prices than other countries. The episode also explores the issue of power price cannibalization, highlighting how solar's generation during sunny hours can lead to price drops and the need to find ways to integrate flexible demand and optimize solar power usage. Additionally, the episode discusses the importance of diversifying the energy mix with wind power and addressing grid connectivity challenges in various regions such as the US and Africa. It also touches on the goal of tripling renewables by 2030 at the COP 28 conference and the need for countries to customize their renewable energy plans based on individual contexts and resources.
Outlook on Solar Growth and Challenges
The episode provides an outlook on the future of solar growth and explores the challenges faced by the industry. It emphasizes that solar will continue to see significant growth globally, but cautions against blindly extrapolating exponential growth projections. The episode highlights the need to factor in negative feedback mechanisms such as power price cannibalization and the integration of other renewable sources like wind power. It also discusses the potential market implications for publicly traded solar companies, which may be affected by high supply levels compared to demand, leading to lower stock prices. Overall, the episode underscores the importance of balancing solar growth with grid infrastructure development, diversified energy sources, and strategic planning to ensure a sustainable energy transition.
It’s a good news, bad news situation for solar right now. On the one hand, annual installations are continuing to break records, with China set to build almost as much solar this year as the entire world rolled out in 2022. But on the other hand, the industry is suffering from a supply glut, weighing on the prices and margins of module makers. What is driving China’s boom and will the global momentum continue? Are there any underestimated threats to growth beyond grid bottlenecks?
On today’s show, Dana sits down with Jenny Chase, lead solar analyst at BloombergNEF. Together, they discuss the latest outlook for solar, the onshoring of US production and whether its modules can be competitive against cheaper foreign producers, and the role solar can play in ambitions to triple global renewables capacity by the end of the decade.
Complimentary BNEF research on the trends driving the transition to a lower-carbon economy can be found at BNEF<GO> on the Bloomberg Terminal, on bnef.com or on the BNEF mobile app.
Links to research notes from this episode:
Global PV Market Outlook, 4Q 2023 - https://www.bnef.com/insights/32793
