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IMS Research Analyst Blog
UK PV Module Price Watch - Supply Chain Prices Respond to Feed-in Tariff Chaos
Date: 11 January 2012
Supply Chain Prices Respond to Feed-in Tariff Chaos
Although the UK saw record demand for PV modules up until the December 12th Feed-in tariff cut, on average December saw module prices in the UK decline in response to the heavy cuts that took place, albeit temporarily. Although the high court ruled that the changes to tariff were unlawful just over a week later and reversed the cuts; confusion over what the decision means for the industry, mixed with slow demand due to the Christmas break, means that prices have not yet had a chance to re-adjust to the news that the previous highly generous incentive levels appear to be on offer again - for the time being.
Average Supplier Prices Decline
Although December’s FiT cut forced some to pay inflated prices to secure modules via distributors before the FiT deadline, average prices for modules purchased direct from manufacturers declined by 6% over November’s level. The decline came as prices were adjusted to reflect the planned new incentive levels, and distributors and wholesalers cleared stock levels in anticipation of demand evaporating after the FiT cut.
Chinese Tier-2 Pricing Declines to £0.66/W
Given the huge oversupply of PV modules that currently plagues the global PV industry; a spike in demand in the UK offered suppliers around the globe a much welcome opportunity to shift some of their bulging inventories and often at very attractive prices for their customers. This was particularly the case for Chinese Tier-2 manufacturers, who offered crystalline PV modules as low as £0.50/W during December, and average prices for these modules (purchased direct from manufacturers) fell to just £0.66/W during the month.
Despite declining by 15% in December, average crystalline module pricing direct from Japanese manufacturers remained significantly above their competition and over 30% higher than the market average. The long standing high-quality reputation of Japanese suppliers as well as the popularity of high efficiency products (e.g. Sanyo’s HIT module) in small roof-top installations which dominate the UK market, has allowed them to command a premium price.
Rush to Purchase Modules Causes Spike in Distributor Pricing
Distributor pricing remained close to 25% higher than direct-manufacturer pricing in December as installers for small projects continued to favour purchasing in small quantities from local distributors and supply struggled to meet demand.
Although average prices from both distributors and manufacturers declined in December, a desperate rush to complete installations prior to the December 12th deadline, combined with a relatively short supply, saw some customers paying extremely high prices. Prices as high as £2.76/W were recorded for small orders from distributors and the range of prices (difference between highest and lowest prices) offered by distributors increased from £1.39 in November to an incredible £2.16 in December. In comparison, the range of prices offered directly by manufacturers remained fairly stable, as their longer lead times (due to modules not generally being located within the UK) meant that they were less able to provide modules in time to install before the FiT cut.
Prices To Continue Declining in January – Or Perhaps Not?
The pricing survey also asked respondents how they expected January’s prices to compare to December’s. As the majority of responses were received before the FiT cut was reversed, it is not surprising that the overwhelming majority were expecting prices to continue declining in January. Over 90% of survey respondents were expecting prices to decline in January, with almost 80% anticipating that prices would decline by over 5%. A weighted average of all responses suggests that average prices will decline by 5.5%, making average crystalline manufacturer prices around £0.82/W in January.
At the time of writing this article (3rd January 2012), the industry is not only experiencing the same ‘first few days back after Christmas’ calm as many industries, but demand is currently stalled by confusion over what the high court’s ruling means for the industry - rather than the low tariff rates that people had previously expected would put the brakes on the market. As the month goes on, clarity will hopefully be restored and demand is likely to return, although some nerves from potential investors over future changes will prevent it reaching the levels that it did in November and early December. As end of year incentive reductions in other major European markets have pushed module prices in Europe lower still, prices in the UK are still predicted to decline this month.
January and February will certainly be important months for the UK PV industry as it attempts to adjust once again to the ever changing business environment that relying on government subsidy schemes inevitably brings, and with volatile demand will almost certainly come volatile pricing!
By Sam Wilkinson
Senior PV Market Analyst
The above pricing data is based on surveys conducted by IMS Research and Solar Power Portal. The pricing data reflected in this article includes only PV module sales where the customer is located within the UK.
Monthly reports on Global PV module pricing are available from IMS Research. You can receive a free summary of this report by completing a pricing survey. For more information, please contact email@example.com or www.pvmarketresearch.com
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