Prices of solar modules, on a downward trajectory following the COVID-19 pandemic, have moved up sharply in the last few months. Mono-PERC module prices had fallen to a low of USD 0.18/ W in July 2020 but have since increased by more than 16% to USD 0.21-0.22/ W. Initially, prices rose due to a spate of supply side disruptions caused by explosions and flooding at various polysilicon factories in China. Subsequent surge in local demand towards the end of the year contributed not only to prices staying up but also shortfall in availability for the Indian market.

• Solar module market is undergoing a massive technological and supply side shift;
• Soaring global demand in 2021 means that outlook for module prices is unclear;
• The increase in prices has come at an inopportune time for the Indian solar sector with expected 2021 imports at an all-time high of 14 GW;

Solar module market is witnessing a frantic pace of technology and structural changes. Higher efficiency mono-PERC modules have almost entirely replaced multi-crystalline modules. Simultaneously, there is a push towards larger wafers and bigger modules, which has caused equipment shortages. Tier 2 and 3 suppliers in China, unable to invest in new technologies, have been squeezed out and leading suppliers are gaining market share at their cost.

Figure: Solar module prices in 2020, USD cents/ W

Source: BRIDGE TO INDIA research

Most supply side issues are expected to ease over the next two quarters. But on the other hand, global demand is expected to reach 145-150 GW this year, about 20% higher than in 2020, with sharp bounce back in demand across the US, Europe and China. Market consolidation in China and increasing global demand mean that outlook for module prices remains unclear.

Indian project developers, typically hard negotiators on prices, are facing a host of challenges including prices being renegotiated upwards by the suppliers and delayed shipments. Even freight rates have shot up 5-8 times due to container shortages. Fortunately for them, exchange rate has been moving in other direction with USD-INR easing by 6% to 72.90 from the annual high of 77.38 in May 2020.

Indian module import data shows volumes gradually picking up. But H2/2020 imports at 3.2 GW are still much lower than expected. 2021 should be a huge year for Indian solar sector with total expected installations of 13.5 GW (AC), equivalent to module demand of at least 18 GW. Setting aside about 4 GW supply from domestic manufacturers, total imports for the year are expected at 14 GW. The increase in prices has come at a distinctly inopportune time for the sector.