The European Union’s tariff on solar panels and modules manufactured in China will impact the electronics market on several fronts. For manufacturers in the solar business, prices will stabilize or increase due to lessened competition from Chinese vendors. Buyers, however, may experience the opposite: prices for the subassemblies that make up a solar system may increase.
In terms of installed base, the EU is the world’s biggest market for solar energy. That is set to change, according to analysis firm IHS. The solar photovoltaic (PV) industry is on the brink of what IHS analysts call the post-subsidy market. Incentives that drove installations in the EU are on the decline, and the solar PV market is realigning itself on several fronts. Geographically, demand is now being driven by China, Japan and the US, and not by the EU. Markets are also becoming more fragmented: in 2010, the five largest markets in the world accounted for 83 percent of solar PV installations. That’s dwindled to 69 percent in 2012.
So overall, according to market research firm TrendForce, Chinese manufacturers will take a short-term hit in the EU. In the long run, though, they may make up for lost ground.
According to TrendForce, a “pricing” deal will be implemented between China and the EU. “This new mechanism will bring stable development to the EU solar energy market and avoid dumping,” TrendForce said in a release. Observations byEnergyTrend, a research subsidiary of TrendForce, noted Taiwanese manufacturers’ orders might be affected in the short term since the new EU-China agreement temporarily removes anti-dumping duties, but forecasts Taiwanese manufacturers will benefit in the long run.
The new agreement will add roughly 10 percent to the EU’s current price per watt, which is less than one euro. China should still be able to remain competitive. TrendForce estimates Chinese manufacturers have cell and wafer products that allow them to keep minimum product costs at US$ 0.54 /watt. In comparison, non-Chinese manufacturers’ lowest product costs are about US$ 0.66/ watt. From current market information, due to few changes in pricing, the effect on system investment costs is about 5 percent, which can be compensated by adjusting other production segments, such as inverters.
From a short term perspective, the EU’s removals of punitive tariffs will greatly lower the momentum of Chinese orders transferred to Taiwanese manufacturers. However, EnergyTrend believes Taiwanese manufacturers will benefit in the long term. With the European market’s continual reduction of subsidies and termination of subsidies to large ground-mounted plants, it will be increasingly difficult for manufacturers to maintain Internal Rate of Return (IRR) by reducing costs. Hence, taking investment efficiency into consideration, the market might quickly turn to the roof top market.
In the roof top market, TrendForce reports, manufacturers have to be even more precise with investment costs and power efficiency, due to limited installation area. Demands for high-efficiency products will hopefully surge as a result. However, these products have not entered mass production due to poor market acceptance.
Demand for these products has increased this year, said TrendForce, and with new manufacturing process in place, the products can be introduced and manufactured from existing product lines. The products are estimated to enter mass production in 3Q13, as the end of depreciation and amortization of current product lines are expected to bring good product profits.
Although the new agreement will be of little help to Taiwanese manufacturers in the short run, from a long term perspective there will be a chance to establish market structure, said EnergyTrend. In addition, as the European market speedily transits into the roof top market; Taiwanese manufacturers can utilize advantages in cell technologies. In the future, Taiwanese manufacturers will be able to compete with other manufacturers in the European roof-top market if they can integrate module manufacturing process, and improve cost structures.