Right now, all signs point to a buyers market for solar modules in the residential and commercial & industrial (C&I) segments. Supply is ready and waiting. Prices are lows, and wattages are high. So, what comes next? What are installers looking for (and are people buying)? To wrap Module Month on Solar Builder, let’s take stock of the PV module market for solar installers right now.
Solar module surplus
The PV module market is in a much different place in January 2023 than it was through most of 2022. This biggest reason why is Q4 2022 saw a lot of inbound supply that was met with a sales slowdown (due in part to inflation and a rising cost of loans). Meanwhile module importers unaffected by the AD/CVD tariff or UFLPA detentions (more on this later) cranked up imports to warehouse modules in the U.S. starting in late summer and early fall. And those warehouses remain pretty full.
“We went from a massive constraint to actually an oversupply situation overnight it feels,” says David Dunlap, VP of product strategy with BayWa r.e.
Dunlap doesn’t see that resolving just yet.
Meanwhile, module companies that have had modules detained under the UFLPA are starting to see releases (most notably JinkoSolar, with LONGi expected to see releases soon).
On Jan. 10, Philip Shen of ROTH Capital Advisors hosted a webinar with Charlie Cao, current VP and former CFO of JinkoSolar, and Cao sounded confident in the company’s ability to ship modules to the U.S. in 2023, with “meaningful volumes” already released from UFLPA detentions. Shen now sees “UFLPA risk is diminishing for the company, and we highlight that the situation is starting to materially improve for JKS specifically. Post-Q3 results, we had already increased our estimates a fair amount. Given the poly price collapse, we see upside potential to margins ahead and plan to update our model following JKS’s upcoming Q4 results.”
Modules made with polysilicon from Hemlock and Wacker have been cleared by Customers, and Shen believes 60 to 70 percent of JKS’s fully integrated SE Asia capacity may contain Hemlock or Wacker poly, which serves the U.S. market. The company has 6-7 GW of capacity in SE Asia so this could represent ~4 GW that could be shipped to the US in 2023.
“Another positive sign is that JKS has been increasing utilization rates in SE Asia to 80-90% and should be at full utilization sometime in 2023.”
Prices coming down
Meanwhile, the PV market dynamics are shifting and maybe headed back to normal. Global prices are dropping.
Freight costs, for example, are at almost an all-time low. Dunlap has seen price quotes for certain shipping containers drop from a high of $20,000 a container a year ago to less than $2,000.
For years, the status quo expectation is for modules prices to continue to fall over time. That trendline is getting back on track, judging by the polysilicon and wafer prices. The poly pricing has been falling week over week and is expected to keep falling in the first half and then stabilize in the second half.
Module pricing is currently 23c/W, and Amy Fang, senior solar analyst at PV InfoLink, said on a ROTH Capital Advisors webinar, that she estimates this could fall slightly to 20-22c/W in Q2 2023 and to 19-20c/W by year-end 2023.
“Amy stated that module margins have increased to 10-15% in Q1 and expects margins to remain in the low teens in 2023,” Shen reports. “Price premiums for N-type modules range from ~1.5-2 c/W for TOPCon modules and ~3-4 c/W for HJT modules. Bifacial modules have an incremental ~0.4c/W premium. By YE’23, PV InfoLink estimates module production capacity could be 873GW with utilization rates at 40-50% for Tier-2 manufacturers and 50-70% for Tier-1.”
“The U.S. market is a little bit insulated from some of those commodity prices because of our policies, but with all that inbound supply and a whole bunch of Tier 1 and what I consider to be Tier 1.5 and Tier 2 suppliers having been able to bring product stateside without having to go through a UFLPA inspection, there’s all kinds of product out there,” Dunlap says.
400 W or bust buying
Technology wise, the market is quickly becoming “We want 400 W or don’t talk to me.”
“We’re now at that stage on the resi side for the 400 W,” Dunlap says. “Everybody wants a 400 W. I don’t care if it’s bigger; 395 W is not interesting anymore. It is only five Watts different, and people weren’t clamoring for a 380 instead of a 375, but all of a sudden 400 is this threshold. So if you’ve got a 390, 395 W, nobody wants it.”
For module manufacturers, this means a shift away from mono PERC. PV InfoLink estimated on the ROTH webinar that market share of N-type cells could increase to 30-35% in 2023 vs. 9% in 2022 and potentially ~50% in 2024. “TOPCon capacity expanded faster than expected and now is targeted to reach 271 GW in 2023 vs. 82 GW in 2022.” That would be close to 230% growth year over year. HJT is also expected to grow 269 percent this year (48 GW in 2023).
The next question is how willing installers will be to go with those Tier 1.5 and Tier 2 brands. For solar installers and their customers, this looks like a great time to buy, except for the aforementioned higher loan prices. Which is why Dunlap and Shen both think we could see a rise leases.
“The commoditized lowest cost of ownership model — that often goes hand in hand with a lease financed model,” Dunlap notes, because that arrangement is less about the module warranty and brand strength and more about the installer’s service model.
“The lease model was extremely successful seven, eight years ago, and then for a long time it’s been out of favor, and we were at something like 80/20 loans, and I think that’s changing back,” Dunlap says. “Some people are saying maybe it’ll be a 50/50 model again, and I think that’s what we’ll see on the equipment front is more commoditization supporting the lease models and more brand preference supporting the loan models.”
Either way, solar installers are, at the moment, back into the old groove of calling up their distributor and having four or five options to choose from.
The next market blip?
It is key to note though that any module company going through the UFLPA process — even when that paperwork is prepared and shows what Customs needs to see — will still see about four to six weeks at the port to process the paperwork. Other importing vendors are getting cleared in 24 hours.
Dunlap points out that most of the inbound imported product in this current surplus is not being run through the UFLPA documentation proof process – but do not take that to mean, they’ll never be asked for that paperwork under the UFLPA. They just aren’t right now. Could be something to monitor going forward.