The problems of the solar supply chain, which began last year with high prices and shortages of polysilicon, persist into 2022. But we already see a sharp difference from previous forecasts that prices will gradually decline each quarter of this year. Alan Tu of PV Infolink explores the solar market situation and offers insights.
From pv magazine 05/2022
PV InfoLink predicts that global demand for photovoltaic modules will reach 223 GW this year with an optimistic forecast of 248 GW. It is expected that by the end of the year the total installed capacity will reach 1 TW.
China still dominates the demand for PV. Based on the policy, the demand for 80 GW modules will contribute to the development of the solar market. In second place is the European market, which is working to accelerate the development of renewable energy sources to wean off Russian natural gas. In Europe, 49 GW of demand for the module is expected this year.
Since last year, the third largest market in the United States has diversified supply and demand. Violated by the Exemption Order (WRO), supply is unable to catch up with demand. Moreover, the investigation against circumvention in Southeast Asia this year raises additional uncertainty in the supply of cellular and modules for orders in the US and contributes to low utilization rates in Southeast Asia amid WRO exposure.
As a result, during this year, supply in the US market will fall short of demand; Demand for modules will remain at 26 GW last year or even lower. The three largest markets together will provide about 70% of demand.
Demand in the first quarter of 2022 remained at around 50 GW, despite consistently high prices. Projects postponed since last year have started in China. While terrestrial projects were postponed due to high module prices in the short term, demand from distributed generation projects continued due to less price sensitivity. In markets outside China, India witnessed strong inventory inflows before the introduction of the Basic Customs Duty (BCD) on April 1, with demand in the first quarter ranging from 4 GW to 5 GW. Steady demand continued in the US, while in Europe there was more demand than expected, with strong requests and signatures. The EU’s commitment to raising market prices has also increased.
Overall, demand in the second quarter may be driven by distributed generation and some utility projects in China, while strong modules in Europe are increasing amid an accelerated transition to energy and stable demand from the Asia-Pacific region. On the other hand, the US and India are expected to reduce demand respectively due to the investigation against circumvention and high BCD rates. However, demand from all regions combined is 52 GW, which is slightly higher than in the first quarter.
At current price levels, China’s guaranteed installed capacity will stimulate the attraction of stocks from utility projects in the third and fourth quarters, while distributed generation projects will continue. Against this background, the Chinese market will continue to consume large volumes of modules.
The outlook for the US market will remain unclear until the results of the anti-circumvention investigation are published in late August. In Europe, there is still bullish demand, with no obvious high or low seasons throughout the year.
In general, demand in the second half will exceed the figure in the first half. PV Infolink predicts gradual growth over time, reaching a peak in the fourth quarter.
Polysilicon deficiency
As shown in the chart (left), the supply of polysilicon has improved compared to last year and is likely to meet the demand of end users. However, InfoLink predicts that supplies of polysilicon will remain short due to the following factors: First, it will take about six months for the new production lines to reach full capacity, which means that production is limited. Second, the time to release new capacity to the grid differs from manufacturer to manufacturer: capacity increases slowly during the first and second quarters and then increases markedly in the third and fourth quarters. Finally, despite continued production of polysilicon, the revival of Covid-19 in China has disrupted supplies, leaving it unable to meet demand from the plate segment, which has enormous capacity.
Raw material price and specification trends determine whether module prices will remain up. Like polysilicon, it seems that EVA particle production could meet demand in the modular sector this year, but equipment maintenance and a pandemic will lead to an unbalanced link between supply and demand in the short term.
It is expected that supply chain prices will remain high and will not decline until the end of the year, when new production facilities of polysilicon will be fully available. Next year, hopefully, the entire supply chain can be restored to a healthy state, allowing module manufacturers and system vendors to take a deep breath. Unfortunately, maintaining a balance between high prices and strong demand remains a major topic of discussion throughout 2022.
About the author
Alan Tu is a researcher at PV InfoLink. It focuses on national policy and demand analysis, supporting the compilation of PV data for each quarter and exploring regional market analysis. He is also involved in researching prices and production capacity in the cellular segment, reporting genuine market information. PV InfoLink is a provider of analytical data on the solar photovoltaic market, focusing on the PV supply chain. The company offers accurate quotes, reliable information about the PV market and a database of supply and demand in the PV market. It also offers professional advice to help companies stay ahead of the competition in the market.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of pv magazine.
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