The energy crisis brought by the Russia’s invasion of Ukraine in 2022 and countries’ rising awareness of renewables result in robust solar market, with global module demand reaching as high as 280 GW in 2022, up 56.5% from the preceding year. As energy transition continues across the globe in 2023, InfoLink projects the global demand to increase 21.6%, hitting 338 GW.
Compared with last year, the global market growth will be weaker this year, due to higher base period and the fact that last year’s stronger-than-expected growth was mainly ascribed to the Russia’s conflict with Ukraine and surging energy prices, meaning that if there is no such significant event this year, the solar market would not grow as markedly as last year. Worldwide, countries with bigger market size face unfavored policies, such as the U.S.’ Uyghur Human Rights Policy Act and India’s Basic Customs Duty (BCD), which limit imports, as well as Brazil’s imposition of grid fee on distributed generation projects. Overall, these policies make it difficult for the global solar market to sustain the same growth as last year. Having said that, the market on the whole is expected to add 60 GW more of demand this year despite lower growth rate. Demand may grow further if there’s policy changes, which, could help push global demand to 398 GW under an optimistic scenario.
Compared with demand growth, capacity expansion across the supply chain is significant. In 2022, there was only 294 GW of polysilicon capacity at the beginning of the year, falling short of 280 GW of demand. Consequently, prices stayed high across the supply chain until the fourth quarter, when new polysilicon lines started coming online, with total capacity exceeding 500 GW at the end of the year. This allowed prices to dip— polysilicon and wafer prices both plunged deeper than expected, while module prices also slipped along with the upstream, from USD 0.265/W (RMB 2/W) in early November to USD 0.235/W (RMB 1.8/W) in January 2023.
Based on the existing expansion plans, capacity will remain surplus across the supply chain this year, with the capacity in each segment surpassing 800 GW by the end of 2023. Among which, capacity of Tier-1 manufacturers is enough to meet demand, and the increasing concentration may make it difficult for Tier-2 and 3 manufacturers to retain market share in the low season. The competition is growing fiercer, while leading companies’ vertical integration and overseas expansion plans will impact the landscape markedly. While capacity is expanding across the supply chain, whether supply of BOM used for the ingot segment, such as quartz crucible, and POE resin for bifacial modules, can catch up with large-scale of expansion in the high season is also worth noting.
Looking at demand by quarter, the first quarter is the traditional low season in Europe and China. Europe’s weakened inventory draw at the end of last year due to stockpiled inventory may continue into early this year. India, which used to see fiscal year-driven demand at the beginning of every year, saw demand shrink due to the BCD. As a result, the global market is rather sluggish in the first quarter; demand may gradually recover in the second and third quarter as prices continue to decrease in the supply chain, and peak in the fourth quarter, when China connects a large amount of projects to the grid at the end of the year as module prices drop.
In terms of prices, manufacturers’ adjustment of utilization rates may cause a short-term price movement, but overall prices are going down due to excess supply. InfoLink estimates that the average module prices will sit at USD 0.214/W (RMB 1.673/W), down significantly from last year’s average of USD 0.266/W (RMB 1.929/W). Last year, many utility-scale projects were deferred due to lofty prices, with installation of ground-mounted PV in the U.S. decreasing by 37% compared with that in 2021. The installation rush in China was also less active than previous years. This year, as prices in the supply chain fall, projects postponed last year will reinitiate, pushing up demand from the ground-mounted PV sector.
The solar industry will turn from short supply to surplus this year, driving down prices and benefiting short-term demand growth. While demand outlook seems optimistic so far, there are uncertainties, including India’s and the U.S.’ policies that are contradictory between safeguarding local capacity and developing market, and potential impact of Europe’s economy changes and measures on forced labor on the solar market. In China, the lifting of Covid-19 restrictions and changing industry landscape may change supply dramatically in the short term. In the long run, the market will continue to grow as energy target deadline approaches and governments push energy transition.