Solar battery prices will fall sharply

EnergyTrend, a subsidiary of the Taiwan investigation firm TrendForce, announced on March 10 that after the Spring Festival in China, the global market for solar cells has been declining. Because the peak period of photovoltaic power generation equipment installations in the United States and Japan is over, and the business of grid-connected photovoltaic power generation equipment in China will be completed by the end of June, the corresponding demand will gradually decrease.

According to Corrine Lin, an assistant manager of new energy research at Jibang, “The solar cells manufacturers in mainland China and Taiwan were the first to be affected by the reduction in demand. Most of the orders to these manufacturers were vertically integrated companies in mainland China.”

The price of solar cells manufactured in mainland China has been reduced since the Spring Festival. Taiwanese manufacturers have also started to cut prices in order to get as many orders as possible.

Taiwan’s solar cell manufacturers, like the top manufacturers in mainland China, have previously exported products to Europe and Japan. However, in order to save construction costs, Japanese operators replaced Taiwan’s solar cells with lower-priced products produced by vertically integrated companies in mainland China. The result was allegedly that in 2015, Taiwan’s solar cells exported to Japan were almost halved.

Demand in the European market has stagnated for a long time. Therefore, Taiwan’s solar cell industry has once again begun to rely on orders from major customers in mainland China and OEM partners in Southeast Asia in order to increase the remaining capacity utilization rate.

“The shortage of solar cells in 2015 was mainly due to the construction of photovoltaic power plants in mainland China. If the demand in mainland China weakens, it will affect the price of Taiwan's solar cells” (Lin).

If major customers in China, such as Trina Solar, Jingke Energy Holdings, Atos Solar Power, and JA Solar Holdings decided to reduce the purchase of solar cells, Taiwanese manufacturers will immediately face large-scale overcapacity. In this case, as long as there is a price cut, other manufacturers will follow closely, and the "price competition domino effect" will be extended to the entire industry.

Due to the expansion of manufacturers' production capacity, there may be oversupply

Although solar cell manufacturers in Taiwan have made solemn representations with downstream customers, the average price of solar cells produced in Taiwan has dropped from a level of 0.342 U.S. dollars per watt or more to about 0.335 to 0.338 U.S. dollars per watt in the past two weeks.

In addition, solar cell manufacturers under the second group of mainland China are also trying to obtain orders to maintain the operating rate of the manufacturing plant, the price competition is intensifying. The average price of solar cells made in mainland China has dropped from 2.45 yuan/W before the Spring Festival to about 2.3 yuan/W. It is estimated that this downward trend will continue.

Jibang New Energy predicts that China's solar cell demand in 2016 will be significantly lower than previously forecasted of 20 GW according to several factors.

First of all, due to the revision of the subsidy and other preferential systems, the prediction of the Chinese market will be affected. Second, there is an upper limit on the amount of photovoltaic power that can be connected to the grid in mainland China, and photovoltaic power that cannot be connected to the grid will be gradually increased. Moreover, many solar cell manufacturers have expanded their production capacity, so the problem of oversupply is expected to become more and more serious.

Solar cell batteries in Taiwan and China have fallen by more than $0.01/W in March. It is said that if solar cell manufacturers want to maintain their profit margins, they must negotiate a reduction in the price of silicon wafers.

Solar cell manufacturers may experience losses in the second quarter if they do not formulate more flexible business strategies.