L R AS Published on Saturday 2 March 2024 - n° 478 - Categories:European countries
Is the European PV market sensitive to panel prices?
The development of the photovoltaic market in Europe has had its ups and downs since 2007. Some fear that an increase in the price of PV systems is only a potential threat to the development of photovoltaics, with the increase in the price of PV systems coming mainly from the use of components manufactured in Europe and reducing solar installations.
The state of the European PV market
It has grown strongly in recent years, with almost 55 GW installed last year, thanks to the development of Germany, Italy and other small countries. It increased sharply after Russia invaded Ukraine. The 2025 target (320 GW) will be reached in 2024. Only 50 GW per year would be needed to reach the 2030 target.
Could these targets be met if European product prices were higher than Chinese imports? For the moment, Chinese overcapacity is leading to industrial consolidation. After that, prices will rise in the medium and long term to provide profitable panel prices.
If the global PV market were to remain weak, consolidation would take longer. Some studies indicate that production overcapacity in China would be double the size of the market in 2023, and that it would take several years for the market to absorb this surplus. Perhaps this is why China has increased its domestic demand to 260 GW from 106 GW in 2022, in an attempt to compensate for the 'weakness' of the global PV market. The non-Chinese PV market has reached 130 GW in 2022 and will reach 160 GW in 2023.
The current market price considered unsustainable will not last once the 150 GW in stock stabilises or is reduced.
Is the market really influenced by these low prices?
The market in Europe did not wait for prices to fall before developing, even though prices began to fall significantly in 2023 and especially after the summer (see above). However, the lead time for developing large-scale photovoltaic power plants is generally around a year. So what was installed in 2023 was decided in 2021 or 2022, when panel prices were much higher.
While the acceleration of the market in the second half of 2023 would have benefited from very low market prices, the momentum has been there for several years: as has been mentioned many times, even the COVID pandemic failed to halt the PV market in Europe and worldwide.
The sharp rise in prices observed in 2021 and 2022 for photovoltaic panels, due mainly to the disruption of value chains in China and the increase in transport costs, will not be enough to offset the impact of the crisis.It has continued to grow significantly. Since then, developers have been extremely cautious about the prices of photovoltaic panels, and are considering higher values in their business plans.
Would photovoltaics remain competitive in Europe with higher panel prices?
The current low prices cannot be considered the new norm. The increase in LCOE is limited compared to sustainable Chinese production costs (as published in the recent ETIP-PV report). The impact of increasing PV panel prices on the LCOE of PV electricity in Europe to support European products is both limited and could be offset by incentives reducing the cost of capital for large-scale projects.
Conclusion :
Current market prices cannot be considered the new normal as they are well below production costs and cannot represent a decent and profitable path for the PV industry in China. Any comparison with European producers must be made on the basis of sustainable production costs and company margins.
To assume that an increase in PV panel prices would harm the PV market, based on current unsustainable market prices, is intellectually flawed. Photovoltaic electricity is and will remain competitive with more expensive photovoltaic panels manufactured in Europe. The increase in the cost of photovoltaic electricity resulting from the rise in the price of photovoltaic panels is, in most cases, limited and sustainable.
Certain policies that would reduce the cost of capital for new photovoltaic power plants would completely offset the additional costs of local production. Administrative simplification, particularly in France, would also play an important role in further reducing the cost of photovoltaic installations.
https://www.pv-tech.org/would-an-increase-in-pv-modules-prices-impact-the-european-pv-market/
PV Tech of 26 February 2024