July 20, 2016: With the oversupply condition building up in photovoltaic module manufacturing in China, particularly for the second quarter of 2016, it is expected that the solar cell prices will drop drastically across the market, according recent reports by Bridge to India, a renewable analysis firm. As against 15 gigawatt of solar capacity in 2015, China has plans to support 18 gigawatt of solar set ups in 2016.
China had already installed 13 gigawatt of solar capacity was in the first quarter itself, which means that the demand is likely to fall in a sharp manner throughout the second quarter of 2016. PV installations in China in the third quarter of 2016 might fall by a whopping 80%, according to industry analysts. As far as global sales are concerned, module prices shipping in Q4- 2016 have already reduced by over10%.
Opportunity to improve returns
The solar price reduction in India will further be aided by a noteworthy reduction of the Chinese Yuan against the Indian rupee .As a result of which, solar project developers in India will be pleased to see the solar price decline in a drastic manner than expected, which will provide an opportunity to improve returns regardless of insistent bidding.
In the first half of 2017, It is likely that the tier-1 module prices will drop to Rs 27.50/Wp for shipments, a noteworthy decline of about 10% in less than a year. Solar project developers in India will greet the steep collapse in prices, which will offer the needed support following the intense price bidding seen of late.
As near term trends indicate market stagnation in China and Japan, along with trade restrictions continuing in Europe as well as US, India has come out as a chief expansion market for the Chinese dealers. Unless EU gets rid of its trade barriers against Chinese suppliers or there is a modification in Chinese demand response, the industry analysts are expecting that the solar prices will remain soft at least for the coming few quarters.
Following the demand slowdown, tier-II and tier-III Chinese companies have reduced prices owing to their overexposure to the local market. Hence, tier-I companies are now required to narrow the gap. The price drop comes at an ideal time for solar market developers in India since Q1-2017 is likely to be a major quarter for new capacity addition till date.