Making Sense of the Solar Market in 2018

Photo by Adrian Infernus

While recently there have been several developments that will decrease the global capacity for solar manufacturing in the short-term, such turbulence is considered normal in an industry that is experiencing astronomical growth.

Top Industry News:

Trump administration imposes tariffs on foreign solar panels

China cuts back on subsidy programs for downstream solar installers

• Trump Tariffs: It’s a hot topic in the solar community where we debate how it could potentially impact the industry. President Trump’s newly imposed 4-year tariffs place 30% duty on imported solar cells and modules in the United States. After the announcement of tariffs in January, several downstream players in the U.S. have taken measures to reduce installation plans. Over $2.5 billion in large installation projects have been stalled or canceled, as well as the estimated loss of 23,000 jobs. What does it mean for US manufacturing: while foreign companies like Hanwha Q cells and Jinko Solar have announced plans for opening module manufacturing plants in the U.S., analysts are unsure about the long-term positive impact on US manufacturing.

• China’s Solar Incentive Cuts: In a surprising turn of events, China announced its rollback of government incentives for solar. As the biggest promoter of solar energy for the past decade, China surpassed 100GW in cumulative capacity in 2017, firmly positioning itself as the world’s biggest solar producer. Following the announcement of subsidy cuts, we saw an immediate production halt in most upstream manufacturers in China and a sharp decrease in module prices (caused by the expected oversupply of modules). What does it mean for solar installations elsewhere: The lowered module costs could take the “sting out of the Trump tariffs” by alleviating the detrimental effects from the Trump tariffs and help the US solar installers pull in more utility-scale projects. A global oversupply of modules is expected to benefit projects in other emerging markets such as Mexico and Brazil.
• In other news: SunPower acquires SolarWorld Americas (SolarWorld Americas was one of the two companies who filed a Section 201 trade case, which led to the Trump tariffs). Tesla lays off 9% of its workforce (or 3,000 employees), largely in residential solar sales.

While developments such as these may signal turbulence in the short-term, there are reasons to believe this latest setback is just a bump in the road to further growth for the solar industry.

1. Solar technology is churning out higher efficiency than ever before. The latest development in Solar R&D has the PV efficiency at a record-high level of 25.2%. Compare that to 10% in 1959. In layman terms, almost a third of the sun rays shining on the solar panels is converted into electricity. Furthermore, as energy storage solutions for solar systems become more widespread in use (this McKinsey report estimates the energy storage market to be a 2 billion-dollar market by 2020), we expect to have more consistent energy output for homeowners and utility companies.
2. Going solar makes sense economically. While the current market instability might cause some companies to go bankrupt, the falling prices across the solar value chain are becoming increasingly attractive for the project developers as well as the end-consumers. In fact, the largest oil companies in the US are heavily investing in renewables as they are convinced of the attractive financial returns from solar projects. The U.S. installed more solar energy than any other source of electricity in the first quarter of 2018. For an average American household, the total savings are estimated to be $10k to $30k over a 20-year horizon upon switching to solar.

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Justin Jeehoon Park is a Business Analyst at Targray focusing on Solar and Energy Storage. Graduated with an M.B.A. from McGill University- specialization in Data Analytics and a B.A. in Political Science from UCLA. He previously founded an initiative that provides employment resources for newcomers and conducted research on North-South Korea Relations. In addition, he is a returned Peace Corps volunteer (Cameroon 2013–2015) and worked with Syrian refugee youth in Canada.