Overview of Solar Module Manufacturing

This video forecasts production and market trends of solar modules, specifically the impact of subcomponent supply on module manufacturing, with Joseph Johnson, Manager of Market Intelligence at CEA. Be sure to check out the entire webinar on PV Solar Demand.

Video Transcript

“And finally turning downstream to modules, even though utilization rates for module suppliers are shrinking quite quickly, we still see module producers continue to manufacturer and build inventories, really counting on an end of year rush from the Chinese domestic market.

2021 Available Module and PV Raw Material Capacity vs Forecasted Installations

Solar Module and Subcomponents Demand and Supply

And even though current module manufacturing is exceeding demand by a significant margin, suppliers are banking their materials and their inventory, their modules and inventory for that end of year Q4 rush, which they will then continue to sell at a high price burning through inventories of those higher cost input modules.

PV Solar Raw Material Price Forecasts (Copper, Silver, Alloy, Glass, EVA, POE, and Freight Costs

And unfortunately for module makers, some of the inputs will continue to rise over the course of 2021. On the upper half of the screen, we have a couple segments which we expect will continue to increase in costs for your end of module product throughout the next two quarters. And then in the bottom half of the screen, there are a couple of factors, which in good news for module producers are declining in cost and will eventually allow module makers to start offering lower product. Unfortunately, in the short term, within the next one to two quarters, cost increases from those mostly metal raw materials are expected to outweigh any sort of cost savings from falling glass or encapsulant prices. What we're looking at on the upper screen is that with rebounding production, after a COVID lockdown, as many parts of the world start to become vaccinated and open up much more quickly, we’re seeing metal demand for, from all industries and commodity demand really start to increase, which is affecting some of the more metal inputs in your end module. And logistics continues to remain an uncertain point in shipping where different producers do not know when logistics costs will finally normalize. And there's likely still a period of increasing shipment costs on the horizon.

Glass Production Cost Forecast

Glass, turning to the cost factors, which are expected to improve over the next two quarters. Glass is already nearing January 2020 levels and is expected to dip below January 2020 levels within the next quarter, as a significant amount of glass production capacity has come online sooner than expected. And glass capacity is expected to be oversupplied for the solar industry into Q3. And this includes glass for your new format modules. Previously there was a bit of a transition period as smaller format glass lines had to be either scrapped or upgraded as the industry moved to needing new glass dimensions.

Back Sheets, Junction Boxes, and Other Subcomponent Production Cost Forecasts

Encapsulant back sheets, junction boxes, other multiple components are also falling in costs. But the falling cost of those components is still not expected to outweigh cost increases in other segments, at least over the next two quarters.

Module Demand in Chinese Market

And turning to our last slide on where module makers are really banking their demand on this year.

This is the China market outlook with demand by quarter and what we're seeing just like last year, there's going to be a very strong end of year rush in the Chinese market, which will contribute to some seasonal upswing, some module pricing, which one of the other key reasons why we think module pricing will either hold constant or increase towards the end of the year. And again, even as polysilicon pricing is expected to fall in Q4, Q4 module demands and installations will be serviced with additional modules manufactured in earlier periods in Q1, Q2, and Q3 with a lot of the higher cost inputs. So even in the domestic market, higher cost modules will be used in final projects, and that is still slightly acceptable to project developers in China, they are accepting lower rates of return for their projects. And many are state owned or state adjacent entities are, which are still following government directives to bring on a sizable amount of renewable energy capacity over the next couple of years in order to service China's renewable and climate neutral objectives by 2060.”

About the Presenter

Joseph C. Johnson is a Manager of Market Intelligence for Clean Energy Associates (CEA). At CEA, he studies PV market trends, technology, upstream supply chains, and supplier quality as part of CEA's Technology and Quality and Market Intelligence departments.