By the end of 2012, installed prices for PV systems had fallen to $5.04 per watt in the residential market, $4.27 per watt in the non-residential market, and $2.27 per watt in the utility market. And while the price drops have prompted record numbers of installations, the sharp decline, due in large part to a global oversupply, has put a financial strain on PV module manufacturers worldwide.
Multiple factors—including overproduction by Chinese manufacturers and waning solar subsidies in Europe—drove the oversupply. Shrinking profit margins have caused solar companies across the globe to exit the market, either by closure, bankruptcy, or restructuring/acquisition.
Between the beginning of 2010 and early June of 2013, approximately 900 megawatts of module-manufacturing capacity in the United States has gone offline, according to Shyam Mehta, senior analyst with GTM Research, a solar market analysis firm based in Boston.
However, with some exceptions, most of the now-defunct solar companies are small- or medium-sized startups, such as Abound Solar, Evergreen Solar, and Solyndra, that focused on unique or specialized technologies, according to John Smirnow, vice president of trade and competitiveness for the Solar Energy Industries Association (SEIA).
“Because the global oversupply has driven profit margins down, it’s been hard for young companies to grow and take flight. These startup firms need time to get their costs down by scaling up manufacturing—and this competitive environment does not allow for that,” says Smirnow. “Solar companies, big and small, are having to sell below cost to survive, and most young companies simply can’t afford to do that.”
An ongoing trade war with China—the country that accounts for more than half of the world’s solar-module production, with the majority exported to the United States and Europe—has exacerbated the decline in stateside manufacturing. In the United States, the Coalition for American Solar Manufacturing (CASM)—a group of manufacturers led by SolarWorld Industries America—filed an antidumping complaint citing unfair competition from Chinese companies. Last year, a federal investigation concluded that the Chinese government provided unfair subsidies to its domestic producers and then flooded the market with low-cost modules to undercut U.S. competitors.
As a penalty, the Department of Commerce’s International Trade Administration created duties on solar imports of crystalline silicon solar products made in China. The tariffs were retroactively applied to all Chinese PV cell and module imports that entered the United States beginning December 3, 2011. However, a loophole in the tariff decision excludes Chinese modules made from cells manufactured in a third country. In February, CASM, led by SolarWorld, filed an appeal with the U.S. Court of International Trade in New York to compel the Commerce Department to close the loophole.
Whether the penalties continue to help stabilize PV pricing will largely depend on the accuracy of customs reporting and whether companies take advantage of the loophole. Meanwhile, global trade tensions continue to escalate elsewhere, with Chinese manufacturers facing antidumping investigations in Europe and India that may result in new tariffs on Chinese-made goods. In early June, Europe imposed provisional tariffs on imported Chinese solar products of 11.8% from June to August 2013. After August 6, the average import duty increases to 47.6%. The decision whether or not to make these charges permanent will be made in December. Additionally, Chinese manufacturers have filed complaints, prompting the Chinese government to launch its own antidumping and antisubsidy investigations into solar-grade polysilicon imported from the United States, European Union, and South Korea.
Since the tariffs went into effect, SEIA reports that Chinese module imports into the United States have decreased by 86.8%, but the effect on U.S. manufacturing and jobs is not clear. The Solar Foundation reports that U.S. solar companies lost about 8,200 manufacturing jobs last year (about 22% of the total) and are expected to regain about 2,600 this year. According to Solar Foundation stats, nearly half of the 119,000 U.S. solar workers are installing PV modules, while only a quarter are employed manufacturing them.
In the short term, there may be little relief for PV module manufacturers everywhere. GTM Research predicted that average crystalline silicon PV module wholesale prices were likely to drop to $0.61 per watt by 2015, and that, globally, as much as 21 gigawatts of PV module manufacturing capacity will go offline by 2015 as the market continues to reconcile the supply/demand imbalance.
Despite the declining number of U.S.-based PV module manufacturers, the United States accounted for 11% of all global PV installations in 2012—its highest market share in at least 15 years. According to the market data compiled by SEIA and GTM Research, PV installations grew 76% over 2011, to total 3,313 MW in 2012. This was driven in large part by utility-scale projects and the growing popularity of residential solar leases. SEIA and GTM Research forecast that 2.3 GW of PV will be installed in 2013, growing to nearly 9.2 GW in 2016.