Fleeting stability: Global solar market likely to see extreme volatility in 2017
By William Pentland
After a prolonged period of volatility, the global market for solar photovoltaic (PV) panels is beginning to stabilize, according to a new study by IHS.
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Credit: charlesa46741 |
"Compared to prior years, this period of strong growth in solar installation demand, coupled with tight supply, will support relatively robust pricing," said Edurne Zoco, senior principal analyst for IHS Technology.
The prospects appear to be the brightest for solar module manufacturers -- at least for the next 18 months or so. Solar panel makers are likely to see strong growth in 2016 driven by new capacity expansions, stable pricing and rising demand in several regions. Solar module shipments are projected to increase in 2016 by 10 percent compared to the previous year, pushing revenues for the year to a record high of $41.9 billion.
But the good times will not last forever. More specifically, global solar markets are likely to swing back into a state of extreme volatility in 2017, following the reduction of the federal investment tax credit (ITC) in the United States.
The decline in the ITC tax credit will significantly lower solar demand in the United States in 2017 and will likely contribute to a reduction in global demand for PV modules.
While the partially ITC-induced volatility is likely to harm solar panel manufacturers, it will cause a drop in prices for solar panels.
"This year and next year will mark a climax in the recovery of the solar PV sector, after a period of intense price reductions and margin compression, when average gross margins fell into the mid-single digits or lower," said Zoco said. "Even so, the predicted slowdown in global demand in 2017 – on the back of a decline in the United States -- is likely to challenge these suppliers once again, since manufacturing capacity additions are set to dangerously outpace industry demand. Competition will intensify, which will lead to accelerating declines in prices and gross margins, for the first time since 2012."
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