According to International Energy Agency statistics, the year 2019 has witnessed cumulative global solar installations crossing 600 GW, with roughly 115 GW of new capacity addition. This marks a 12 per cent increase in annual capacity addition over 2018. Globally, China, the US, India and Japan have emerged as leaders in terms of annual capacity installations. To meet the rapidly growing demand for solar PV modules, a race is on to develop the most efficient and cost-effective PV technology. This has led to unprecedented technology advancements in monocrystalline solar, with impressive reduction in its cost. It has become the technology of choice for many developers across the globe, with a 66 per cent share in the total PV production in 2019. This is a significant increase compared to a 45 per cent share in 2018. Against this backdrop, Renewable Watch assesses the demand and growth trends for monocrystalline PV in the leading solar PV markets worldwide…
China has led the solar PV capacity addition in 2019, with 30.1 GW installed, of which roughly 12 GW was completed in December alone. However, this was a 32 per cent decline compared to 2018 installations. The decline in capacity addition in 2019 was probably due to policy uncertainty as the country has been trying to shift from uncapped feed-in tariff (FiT)-based projects to subsidy-free deployment. Thus, no new approvals have been given for subsidy-laden projects from May 2018 onwards. Moreover, the significant increase in module exports has prevented a decline in domestic module prices. This led many developers to put their capacity deployment plans on hold.
China leads the monocrystalline market and has been working extensively towards its research and development, and manufacturing expansion. While the cost decline and high performance of monocrystalline would have ultimately made it a favourable option, the Chinese government’s Top Runner Programme mandated the use of high efficiency solar products in government projects, thereby helping in the monocrystalline growth. China has also been working towards the standardisation of wafer sizes to help optimise the use of resources as till now, due to the absence of a common standard, companies have adopted wafers of varying sizes, resulting in an increase in manufacturing costs throughout the entire industry supply chain. In fact, in June 2019, seven solar equipment manufacturers (all Chinese except Canadian Solar) came together to establish the new M10 silicon wafer standard size (182 mm x 182 mm). These are LONGi Solar, JinkoSolar, Canadian Solar, JA Solar, Runyang Yueda Photovoltaic Technology, Lu’an Solar Technology and Zhongyu Photovoltaic Technology.
To capitalise on the global demand, Chinese companies have been planning extensive capacity expansion of their manufacturing facilities. In fact, even in 2020, when Covid-19 has been ravaging economies and delaying investment plans, China’s PV industry witnessed an astonishing number of capacity enhancement announcements from manufacturers. Although production facilities were shut down initially for two to three months, they were quickly brought online and manufacturing was restarted. According to media reports, roughly $17 billion worth of investment commitments leading to 111 GW of cell and 104 GW of module production capacity have been announced in the first half of 2020 alone. This highlights the unprecedented scale of PV production that Chinese companies expect in the years to come. Most of the expansion is focused on monocrystalline, particularly p-type PERC, which has become the most popular PV technology over the past year. More advanced technologies like heterojunction and bifacial formed a smaller share of planned investments.
China has dominated the global solar PV supply chain since 2011 and the trend has continued in 2019 as well. An estimated 123.5 GW of cells and modules have been shipped worldwide in 2019, with the bulk coming from Asia, mainly China. In fact, 80 per cent of the cell or module capacity shipped by the top 10 global suppliers has been supplied by Chinese firms. In recent years, monocrystalline cells and modules have become a major export component for China.
The total solar installations in the US reached 75.9 GW, with 13.3 GW of capacity addition. The US solar market has seen significant growth in 2019, led by the utility-scale sector, which accounted for the bulk of the growth. Similarly, the residential space has witnessed massive scale-up in installations. However, non-residential installations have declined due to policy issues in certain regions. There has been a frenzy to install solar projects in the US in 2019 to capitalise on the 30 per cent federal investment tax credit, which was set to reduce from 2020 onwards.
Further, most of the solar installations in the US were crystalline modules, with a sizeable share contributed by mono PERC solar modules. However, there is still a difference in the module prices of polycrystalline and monocrystalline, with the former being roughly $0.20 per watt cheaper. This could be due to the fact that the US, like many other countries, has been trying to restrict solar imports and increase its domestic manufacturing capacity. Global crystalline solar imports are affected by Section 201 tariffs, which starteds with 30 per cent duty, and currently stand at 20 per cent. It was set to decline to 15 per cent in four years, but might be further increased according to recent government announcements.
India has witnessed 9.9 GW of capacity addition in 2019, taking its total solar installations to 42.8 GW. However, in recent months, there has been a slowdown in capacity addition due to regulatory uncertainty, issues in land and transmission availability, lack of contract sanctity, delays in payments and financing concerns. This has been further exacerbated by the Covid-19 crisis. However, the situation is expected to improve soon, owing to government interventions across various aspects of the power value chain, including a renewed focus on domestic manufacturing of solar cells and modules. Thus, safeguard duties have been extended for two more years and Indian players have announced extensive manufacturing capacity plans.
Regarding the prevalent PV technology, Indian developers have traditionally preferred the cheaper polycrystalline. However, the global decline in monocrystalline prices, combined with cost efficiencies and less sensitivity to high temperatures, have led to its increased deployment even in India’s highly price-sensitive solar market. Thus, although multicrystalline modules continue to retain a significant share in the Indian market owing to their lower prices, monocrystalline PERC modules are witnessing a strong growth, which is likely to continue. This is corroborated by the recent slew of tenders for the procurement of monocrystalline solar modules by agencies such as Central Electronics Limited, Kerala State Electronics Development Corporation Limited and Bharat Electronics Limited.
Japan has added 7 GW of new installations to reach a total installed solar capacity of 63 GW. However, similar to China and India, solar installations in Japan too are witnessing a slowdown due to grid constraints, issues in raising affordable finance and high manpower costs. Further, Japan has significantly high solar power prices and the government has been gradually bringing the FiT rates down, with plans to finally eliminate them. This decline in FiT rates could also have led to lower capacity addition. In fact, even the size of projects has been decreasing, with utility-scale plants giving way to smaller rooftop and distributed solar installations.
The advantage with the relatively high solar prices in Japan is that they attract premier high quality solar component manufacturers. Moreover, with the emphasis on quality and reliability, advanced PV technologies are preferred here. Combined with de-subsidising, there is greater focus on cost efficiencies to ensure a lower cost of energy. For this reason, monocrystalline has become the favoured technology in Japan, especially in light of the high growth set to occur in rooftop projects.
Outlook for the future
According to a recent report, “Global Solar Panels Industry”, the global solar panel market is estimated to reach $77.1 billion by 2027, growing at an annual rate of 9.5 per cent during 2020 and 2027. Monocrystalline solar, with an annual growth rate of 11.1 per cent is projected to reach $20.5 billion during this period, while its main competing technology, polycrystalline, is projected to witness a growth rate of 8.5 per cent.
Historically, China has been a leader in solar power both in terms of project capacity deployment and manufacturing. Its dominance in global cell and module shipments ultimately means that it has control over the prices of these components. It seems that this trend will continue even though countries such as the US and India are trying to restrict imports and encourage the use of domestic components. The Covid-19 crisis had originated in China and hit the solar supply chain severely, which further made these countries aware of the necessity of self-sufficiency. However, the fact remains that China has massive production capacities installed, with huge extensions planned in the future.
Since the bulk of this production capacity is to be based on monocrystalline, this PV technology will dominate global markets in the near future, with an expected significant decline in cell and module prices as competition intensifies. Thus, there is very little impetus for manufacturers to scale up the production of polycrystalline silicon, which is soon expected to take a back seat.