Best stock to invest in – What Just Happened: Solar Module Prices Drop To New Lows

Best stock to invest in

2016 was a wild year and not just for solar and after decades of
reliance on government incentives, subsidies and mandates the
global solar industry may be inured to unpredictability but the
industry as a whole should be wary of global trends.  Solar
PV expert Paula Mints looked at a number of the developments for
solar companies in the December edition of  SPV Market Research’s Solar
Flare.  Adapted for, this series of
articles is reprinted with permission.

Over 60% of global PV cell and module manu-facturing is either in
China or owned by Chinese manufacturers. At ~30-GWp China’s market
for PV deployment is over 44% of global demand.

A parable of what happened to module prices in 2016 is as follows: A
company has one primary customer. This customer buys close to 50% of
the company’s product. The customer cuts its demand for the
company’s product suddenly also indicating that demand the following
year will be 50% of its previous level. Suddenly demand for the
company’s product has fallen by 50% with the promise of a further
significant decrease in demand the following year. The company has
several choices: A) sit on inventory, B) find new customers to
absorb the excess production, C) sell the product at a sig-nificant
discount and reduce capacity to serve the current level of demand or
D) all of the above.

Late in 2016 China’s government moved to control demand and several
gigawatts of product flooded into the market at historically low
prices. Manufacturers outside of China and some Chinese
manufacturers reduced staff. The rapid drop in price was, as usual,
celebrated by some as an example of progress. The chart above offers
average module prices (ASPs) from 2006 through 2016 as well as the
low and high module prices during 2016.

What it means for solar: Prices have already ticked up slightly but
full price recovery depends on another record year for solar PV
deployment in China. Meanwhile other manufacturers face some tough
decisions concerning pricing strategy for 2017. It’s a bad time to
be a PV cell and module manufacturer.

Previous articles:

Paula Mints is founder of SPV Market Research, a
classic solar market research practice focused on gathering data
through primary research and providing analyses of the global
solar industry.  You can find her on T
witter @PaulaMints1
and read
her blog here.

– Best stock to invest in

Learn How To Be #1 on Google Results

Source link