Power Electronics
Solar Industry Set for New Overcapacity and Shake-Out Cycle Image courtesy of Thinkstock

Solar Industry Set for New Overcapacity and Shake-Out Cycle

Ash Sharma, senior research director, and Edurne Zoco, senior manager at IHS Technology say that solar PV installations in China in the third quarter of 2016 will fall by 80 percent, triggering a sharp global slowdown in global demand and an oversupply, particularly solar modules.

Their latest analysis shows nearly 13 gigawatts (GW) installed in China in the first six months of this year. The rush in installations in the first half of this year, driven by the feed in tariff (FIT) cut on June 30, 2016, will result in a major slump in demand in the third quarter, with installations falling 80 percent.  Installations will recover somewhat in the fourth quarter, but they will still be limited by the Chinese government's intent to keep installations beneath the 20 GW threshold for the full year. This pattern in China, which differs significantly from previous years, will drive a global slowdown in installations in the second half of this year and trigger a sharp adjustment in pricing.

Pricing throughout the module value chain has already started to drop sharply, for products that will ship in the second half of 2016. Offered prices for modules are now significantly lower than in the first quarter, as suppliers seek to shift volume ahead of the slump in demand in China. In addition to the slowdown in the domestic market in China, the expansion of production capacity that has been ongoing for some time is also putting pressure on pricing, as suppliers seek to keep utilization levels high, and inventory low. 

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