From NOT A LOT OF PEOPLE KNOW THAT
By Paul Homewood
h/t idau
So much for cheap solar power then!
BRUSSELS (Reuters) – Europe’s solar power industry warned on Monday of a “precarious” situation for European solar photovoltaic (PV) manufacturers as solar PV prices reached record lows.
Industry trade group SolarPower Europe said in a letter sent to the European Commission that European companies risk bankruptcies, which they said would hurt the EU’s goal of reshoring 30 GW of the solar PV supply chain.
Prices of PV modules have dropped by more than a quarter since the beginning of the year, according to SolarPower.
“This is creating concrete risks for companies to go into insolvency as their significant stock will need to be devalued,” SolarPower Europe said.
Strong demand, combined with large investments and fierce competition among Chinese suppliers led to overcapacities in the market and a price fall.
The industry calls on the European Commission to buy up European companies’ solar module stockpiles, to set up a Solar Manufacturing Bank at EU level and to boost demand for solar PV in Europe among others.
“Europe’s solar industry warns of bankruptcy risk as prices drop”“Strong demand, combined with large investments and fierce competition among Chinese suppliers”
and then
“So much for cheap solar power then!”
doesn’t seem to follow
But that’s not what they’re saying at all. The Solar industry are demanding a buffer against these low prices – insurance against cheap competition and stockpiling for the future when prices go up again.
Yes, European manufacturers are suffering from Chinese competition. But for the people actually instlling PVs, it’s great. Low prices, Chinese suppliers competing to supply, and so strong demand.
Well actually it is not good for them. Simply speaking their stock has to be valued down meaning that they have paid high and have to sell low … they will go broke with their assets held in stock.
… and their ability to borrow against their assets is eroded.
But they are not selling, but installing.
“are not selling, but installing.”
So installing, without getting paid.
Leftist economics, writ large.
So very 6th form….
Mum, Dad…can you send me some money….
You don’t seem to understand the basic concept of a buyer. Buyers don’t get paid. And they like cheap prices, and provide the demand.
That works until your local suppliers go out of business and foreign competitors then have pricing freedom from the lack of competition. That is *exactly* what has eroded the manufacturing base in the US over the past 50 years. With no manufacturing base you become captive to those who don’t have your best interest at heart. The US has seen what the lack of manufacturing capability in steel, semiconductors, medicines, etc has done to the US and its national security.
Trump saved the US steel industry. He put tariffs on Chicom steel to prevent them from bankrupting American steel companies.
Trump didn’t want the US to become captive to those who don’t have our best interests at heart.
And who do you think paid those tarriffs Tom?
The importers, who were undercutting US manufacturers.
So the imported products eventually become price uncompetitive.
We (US Taxpayers) did. Do you think security or freedom is free?
Duh!
So weird.
Republicans against free trade.
Democrats against free travel.
Words have no meanings.
“Republicans against free trade”
Chicoms dumping artificially low-cost products on the world market to bankrupt the companies of other nations is not “free trade”.
Free trade: International trade free of government interference.
When have Republicans ever been against that? Virtual no trade with China is free of Chinese government interference.
International and interstate trade per the Constitution (Article 1, Section 8) is to be regulated by Congress. Republicans do not claim to be for or against free trade. They (non-RINO) tend to defend the Constitution. You’re conflating them with Libertarians, formerly called Liberals until Democrats redefined that word to mean fascism.
You completely misunderstand what is happening.
Installers stocked up their inventory on panels when prices were high. Now that prices have dropped they can only sell to buyers at market rate. They lose money on every panel they install.
Their inventory is worth less than they paid for it. When they sell, they lose money. If they don’t sell they lose revenue/money.
That isn’t what is happening. The quote in the article starts out
“Europe’s solar power industry warned on Monday of a “precarious” situation for European solar photovoltaic (PV) manufacturers as solar PV prices reached record lows.”
The manufacturers may have stockpiled goods they can’t sell at the price they want, but the basic issue is that they have been undercut by falling prices, due to Chinese competition. Stockpiling any kind of goods when price is falling has that hazard.
But the underlying industry is thriving. Price of panels to buyers are dropping, and so naturally they are buying more of them. And the sellers who sell seem to be doing OK.
I wonder whther those buyers have factored in the true maintenance cost, to replace those sub-panel sheets which are failing?
Leftists like Nick are very selective in the causes they support.
Nick lauds cheap Chinese panels, but casts away that mainstay concern of leftists –
workers’ rights, pay and conditions.
Exactly. The gotcha is not the cost of replacement panels, it’s the cost of replacING panels.
Inventory is inventory, whether it’s a distributor or a manufacturer.
It’s just a stockpile of goods. If prices go down, whoever holds it loses money. A perfectly normal business risk.
What is actually happening here is an echo of what has been happening all over in the massive switch of manufacturing from the West to the East. Cars, phones, ships, computers, appliances, tools, machinery. China sells more cheaply; the Western businesses struggle, often building up inventories of unsold goods. But customers want the cheaper product, and they prevail.
The solar problem is that there are now few customers for whom solar makes sense. Energy costs are down from the peak, interest rates for financing are up, the value of export surpluses has cratered. Payback periods are lengthy to never, unless you can make use of most of the power you generate.
Thanks for reading, Nick
Inventory is a dirty word for corporate accountants.
JIT, Just In Time, was a wave of the early 90s that helped manufacturers look fantastic by minimizing inventory – hey don’t make it if you don’t need it! Unfortunately, it only works if sales volume is very smooth. Lots of corporations that looked heroic for carrying no inventory going into the covid crash looked like fools when they couldn’t ship product at any price coming out of the covid crash. Some manufacturers were stealing pieces off low margin models to make high margin models.
The wider picture is this:
Demand for solar installations went through the roof on the back of sharply rising energy prices in 2021 and 2022. Manufacturers everywhere geared up production, and even costly EU made panels could be sold. Energy prices have since fallen back, and solar installations have become much less economic. Indeed, in parts of Europe solar surpluses have led to curtailment costs at the EU ceiling of €500/MWh.
The order backlog on new installations has dropped, and new orders are few again. Meanwhile Chinese companies are dumping panels again before they go bankrupt again (this happened before). Installers had bought panels on the assumption of a strong market and rising prices. They too are being caught out. The change in market conditions hits manufacturers first because installers simply stop buying more stock. They still have some business, but that will dry up one their order backlog is cleared.
Well, here is the graph of global installation. It’s hard to see any kind of slowdown. Maybe some companies got too optimistic, but th demand didn’t go away:
Your chart shows annual data ending in 2022. It does not capture the slowdown in Europe in 2023.
I’d call it
Hide the decline
LOL
“Buyers don’t get paid.”
Buyers get paid by the government when they purchase an EV, among other things.
We are talking about solar panels.
“We are talking about solar panels.”
Which have large subsidies applied.
Except people aren’t buying, dopey !
The economic illiteracy can be solved by removing “high demand” from the argument. The story only makes sense if you assume people are hesitant to buy.
In this case, “demand” is entirely manufactured (pardon the pun) by idiotic government policies – “renewable energy” mandates, subsidies, price supports, and tax credits that make the worse-than-useless ‘energy’ they erratically, unpredictably, and inconsistently produce (on occasion) APPEAR to be worth “investing” in (actually read “throwing away money on” in this case).
Without the Godzilla-sized idiotic government policy “boot” on the scale, “demand” would ne NONEXISTENT.
Thanks for reading, Nick. Even though you remain in total denial about the manufactured “demand” for wind and solar.
They’re not installing them for free. If I decide to buy a warehouse-full of panels to install at £1000 a unit in January, and in February the price drops to £500 a unit, I now either have to mark down the price of those units to £500 to remain competitive, or forgo those orders altogether. Potential customers will want the cheapest price all other things being equal. After all, why should they pay double what others are offering, in this hypothetical?
“ If I decide to buy a warehouse-full of panels to install at £1000 a unit in January, and in February the price drops to £500 a unit”
You made a bad investment. But prices aren’t dropping that fast.
“But prices aren’t dropping that fast.”
They are obviously dropping fast enough so that stockpiles are becoming unsellable…
Or they didn’t sell in the first place.
Panel prices are probably dropping very dramatically. Installation prices not so much. Scaffolding is always expensive to hire for instance.
Thanks for reading, Nick
Wind and solar are never a good “investment.” The entire chain of their manufacture, installation and use is grounded in government trough feeding.
The solution is obvious. Rebrand the solar panels Gucci, Tiffany, Prada, Armani or some such fashionable nonsense and then market them to women.
From the very first line of the above article.
Either Nick never actually read the article, or he hopes nobody else did.
Agreeed. Price doesn’t drop on dearly wanted items.
Whats the barrier to new entrants with a lower price point?
Nick actually agreed that it’s not good for European manufacturers. The people he said it is good for are people installing PVs. I suppose it’s a bit like all the textile mills in the north of England complaining about cheap foreign competition. Most of them went out of business but the public were able to buy cheaper clothes. (But Fred Dibnah did well out of the closure of the mills. There’s always a silver lining.)
In the long run its not even good for people installing PV’s. Sooner or later the foreign competitors control the market – and there is no guarantee they will have the UK’s best interest at heart. Price hikes and supply chain shortages are ahead for the buyers. It *will* happen sooner or later.
I don’t think it’s likely, but we could have a war with China- and if that happens, forget getting any solar panels from there, instead you can buy much more expensive panels elsewhere.
It’s going to be interesting to see what happens within China itself. I just heard something about Xi proposing 20% cuts in wages for all government workers.
I wonder if Xi can succeed in cutting wages. Probably. No reason to pay them more than necessary- supply and demand. If they don’t like it, too bad. Here in Wokeachusetts, state workers (most not all of course) are vastly overpaid. But we have a woke governor who thinks it’s progressive to give them big pay raises.
“government workers”
Now there’s an oxymoron, like “military intelligence”.
“Forget getting any solar panels”
Best answer to the whole problem.
Without subsidies, tax breaks, forcing your neighbors to buy your excess “energy” AND pay for the dispatchable generation capacity you use when the sun is not shining, no one would install solar.
If the TRUE costs of solar were known, and even reading this blog I am sure they are not, the whole Ponzi scheme would have collapsed by now.
Yes, solar is a Ponzi scheme. Manufacturing and installing a product that doesn’t replace anything and only makes electricity more expensive should fail and become insolvent. The sooner the better, an excellent time to give it up.
Same is true for home appliances, TVs, phones, computers, tools, a huge range of industrial equipment.
Elaborate
I was replying to Zorzin saying we shouldn’t buy PV panels from China because there might be a war.
Those with principles wouldn’t buy them because they are made by slave labour.
Thanks for reading, Nick.
I see you are in favour of slavery.
Makes sense. I read it differently first.
Nuclear weapons and population growth ruined (for the rich) that solution.
Yes – but only if some level of demand continues. With any luck, the tide is turning against al these Green endeavours, and the demand will disappear. Hope those Chinese pv-panel manifacurers have backed the wrong horse!
Manhattan and London fund managers will control the markets. If sock and sneaker manufacturing comes back to the West then robots will do the stitching instead of Malaysian children. It would already be so if robots and real estate weren’t too expensive.
As a Ross once said “those jobs aren’t coming back.”
He is wrong about the prognosis for installers. They are working off an order backlog, some of which is falling through. They’ve stopped buying panels because new orders are only trickling in after the surge during the peak of the energy crisis. They are trying to run down stocks.
That’s what the Chinese want to happen
That’s great except that chinese manufacturers are not selling direct to the public but to the solar industry who are resistant to the idea of low prices providing cheap competition. Those savings on cheap chinese components will get filtered through EU protectionism and not be passed on to the customers.
“Those savings on cheap chinese components will get filtered through EU protectionism and not be passed on to the customers.” Huh? Need more words.
The Chinese are dumping because they know there is a collapse in demand. It’s likely that once again several of their manufacturers will also end up bankrupt.
If people were installing lots of solar panels… there wouldn’t be overstocking.
Basic economics eludes little nicky, once again. !
“Strong demand” they said. They just aren’t buying the pricier European product.
That’s actually correct.
story tip
Ørsted enters its first UK solar project (orsted.com)
Given that their wind business isn’t doing so well at the moment, and their observation that the UK government has a quite silly target for solar that they are subsidising you can hardly blame them for farming a different subsidy.
Nick, you really should have spent some of your career in the real world. How could prices drop with “strong demand”? Supply and demand is a fairly simple concept that seems to elude you. They obviously are exaggerating the demand to make themselves appear useful or they are cherry-picking price points like you do with temperatures.
Production costs drop. There is lots of competition among sellers, whose profit margins have increased. They drop their prices. Buyers buy enthusiastically, ie more demand. That is all supply and demand.
Except the sellers all have LOTS of old stock that they haven’t sold, because there was not a market for it.
So their margins have actually become negative.
You really are a clueless little Nick-picker… as you try desperately to maintain your cult belief system, and your irrational worship of erratic, unreliable junk energy supplies.
Which production costs have dropped? Have slaves become cheaper?
Thanks for confirming you have no evidence, Nick.
Strong demand for cheap crap…. (lol)
If you give it away, someone might take it !
The strong demand is so last year. There is an installation backlog, but demand has collapsed. That’s why we’re getting bombarded with ads for solar, supposedly cheap.
Thanks for reading, Nick.
Nick,
Governments want to control dumping, although in the short run it is good for the consumers because they could avail of cheap products but in the long run it will be detrimental to their economy or in this case the EU. It becomes worst when the economy dumping its products is a centralized planned economy with geopolitical ambitions other than simply profits. The various mechanism through which an industry is able to destroy competition through dumping is too long to discuss here. I hope some of our bloggers will discuss it as Nick’s point is something the misanthropic crowd could always cite as beneficial to the environment and to democratic society. Dumping could range from industry being allowed to charge the fixed cost to local markets and only the variable cost in the competitors market and also to direct and indirect government intervention to promote the dumping and destruction of competing economies.
Dumping means selling below cost to manufacture. There is no evidence that is happening here. The Chinese just have lower costs. That is sustainable.
As campsie says above, history is full of examples of industries going out of business because a cheaper product comes along. It isn’t just a blip, and can’t really be overcome by protection.
“The Chinese just have lower costs. That is sustainable.”
Please explain how they have “lower costs” – which particular part(s) of the manufacturing process for PV panels made in China benefit from lower costs vs European manufacturer costs for the same “part(s)”?
The answer to this is pretty obvious. Their direct labor costs are lower. Real estate is cheaper. Regulation is a lot lighter if it exists at all. Quite a lot of the product components are sourced locally.
There is another effect. You are putting together a product like a panel, you get lots of subassemblies in from contractors. They too have lower direct labor and regulatory and real estate costs.
Lower costs for them are not just a matter of the direct materials costs. Its the whole cost of doing business in a very different social and regulatory environment.
Regulation is a lot lighter if it exists at all.
Aren’t the godless commies supposed to be the experts at regulating their citizens to the nth degree? And isn’t competition from whatever source supposed to be the great creator of innovation and lower prices? This is getting confusing.
He means the kind of regulations that benefit workers – e.g. 40-hr week and minimum wage.
Direct labor costs in so many products today is a minor portion of the total cost. Pharma, semiconductors, steel, and on and on. So much of it is mechanized and automated that direct labor is not a major part of production. AI and more advanced robots will make it an even smaller part of total costs.
Yes, I realize that. Should have said total salary costs. Not just wages, but also the total costs of employing the entire workforce. Both for the manufacturer and the subcontractors. And minimal regulatory costs too. And lower real estate costs.
What do you mean by “total salary costs” and “entire workforce”? Salary costs are usually direct wages plus overhead. As fewer workers are employed the overhead costs go down as well.
I think they genuinely have lower costs because of different social circumstances. I think it costs less to employ someone in China in the industry than it would in Europe. There is less regulation and less staff needed to comply with it. Real estate costs less. And these things go all the way through their supply chain, everyone they deal with and buy from has lower costs. There is probably in lots of cases a subsidy element too. Taxes?
Do you disagree? Do you think they in fact have similar costs but are selling at a loss, perhaps disguised by subsidies of various sorts?
People go overseas _instead_ of automating.
Maybe you forgot to mention the vital role of low-cost electricity in such an automated world.
That is precisely what I was driving at; it may be invidious to compare “social costs” between China and Europe, as much as “real estate”.
No mention of coal fired cheap chinese energy by an avid proponent of unreliable energy of which chinese manufactured PVs are a very major part….funny that.
“direct labor is not a major part of production”
Does not sound like the words of someone with a manufacturing work history?
Tim is correct. Used to be that direct labor was the most important thing, and in manufacturing accounting you used to load overhead, material handling and so on, onto direct labor when calculating cost of goods sold. But direct labor became such a small factor that this no longer made much sense.
Direct labor costs, you know, for slave labor, is just food and housing, with a little for clothing.
So yes, Chinese labor costs are a little less than European labor costs.
And the Chinese can build them so cheaply that the added CO2 emissions and the associated cost of shipping is inconsequential to the end price as compared to product manufactured “in your back yard”.
Factory workers South of Texas work for a few dollars a week. A small robot to replace that worker costs >$50k plus requires someone to program it. Think.
That’s especially low labor cost behind the very high fences and guard towers in western China. No one is there to photograph that these days nor do they tie this large-scale production of sixty percent of the world’s polysilicon by a large set of coal power plants and coal mines. I’ll give you the benefit of the doubt that have all that but forgot to list it here.
I know people who have toured the very automated panel assembly plants in other parts of China, but I rather doubt they even contemplated what the whole supply chain looked like much less asked to go to western China to see “re-education facilities”. Ignorance is bliss and so are state secrets.
“Potemkin Factory”
Exactly.
There is no like-for-like comparison between manufacturing conditions in China and manufacturing conditions in developed Western economies.
yes thanks.
China’s costs are no lower than 2 years ago. Probably a bit higher. They have dropped prices because they misjudged the market and overproduced. They are dumping.
Thanks for reading, Nick.
Cheap (slave) labor costs.are significantly lower than paid worker costs.
You got there before me.
Doesn’t “significance” depend on the proportion of total costs represented by the slave labour cost? Surely with automation that is becoming progressively LESS significant?
Automation is not free.
Bingo!
And what better combo than slave labor and coal power with state subsidy for fenced compounds making components and automation in final assembly plants
2 words: Slave labor.
The Chinese cut labour costs by using slaves.
They fenced in more than a million people to make components and the EU was happy to get the final panel products. I’m sure NPR, NYT and 60 Minutes will get a fully report on this with photographs any day now. At any rate we’re getting a replay of history on the unreported camps of Germany and occupied Poland during WW2.
I know. The parallels are chilling. And just as before, the Western elites are happy to pretend they are virtuous instead of complicit in evil.
labor. occupational health and safety. real estate.
Dumping does *NOT* require selling below cost. It only requires cost allocation to push part of the costs onto a different pile.
If you charge local customers more then you can charge foreign customers less. That does not mean you are selling below costs.
Just ask the pharma companies how that works!
What has to happen is that the competitors need to move to the lowest cost production possibility just like the one selling for less is using. With energy costs controlled by the governments it makes that impossible for so many things.
That is what happens with a central control by government economy. It’s why in the Soviet Union you could only buy the one standard car. One size fits all – until foreign competition is let in.
Nick says:”The Chinese just have lower costs. That is sustainable.”
Slave labor is always lower in cost, but it is only sustainable as you have slaves.
I wonder what the result of the 1 child policy will be in 50 years.
The Chinese use slave labour to produce their solar panels but that’s ok by you 🙁
Slave labour often leads to lower costs. Ask any Chinese Uighur.
Yep, that is why fossil fuel usage is dropping like a rock, because cheaper “renewable energy” is pricing it out of the market, all on its own, without ANY government intervention!!!
BTW, Nick, why do you hate the poor so?
So you have the cost components laid out but not shared, like polysilicon from forced labor camps, and powered by coal plants, and the amount per watt of Chinese producer/exporter subsidies?
Chinese panel prices have dropped because they are trying to flog off excess supply. Their coal and slave labour are no cheaper than before. They are dumping.
Thanks for reading, Nick.
I hadn’t gotten to your reply when I made mine. The same point! The US is now suffering from the loss of its manufacturing base over the past 50 years due to dumping from all sorts of foreign competitors, including China and the EU. It’s the main purpose for the BRICS coalition – bring down the competition. The Democrats have eroded the US’s energy independence and see where it has put us – at the mercy of OPEC. It’s no different with steel, semiconductors, medicine and so much more.
Marxists like Nick truly have no understanding of economics at all let alone national security interests.
The real problem will hit home down the road. Cheap now to buy, but quality is probably not good meaning short lives for the product. Wait until replacements must be purchased from the remaining supplier.
Especially wait until there is no other supplier?
Is that what the Chinese are doing – maybe not exactly = ‘dumping’ but they’re driving the competition out of existence.
They have ‘form’ in that matter..
It was when a large wind turbine maker (Enercon) informed the world that permanent magnets were the way to go in turbine manufacture and from then on, they at least, would use only Neodymium magnets to make their turbines
(Doing so gets rid of the gearbox – the weakest part of conventional turbine design/build)
Lo and behold, within months that announcement, the price of Neodymium magnets (as used in disc-drives, headphones and by arts/crafts people) – the price of Neo magnets went up by a factor of 20 (twenty)
Because China was the only supplier of Neodymium metal itself.
It is also that when it comes to installing solar systems, The West has hobbled itself with safety safety safety regulations – and devices intended to prevent fraud.
Result is that in a solar install, the price of the panels (modules) is a small part of the total. The Regulators have made all western economies = very high cost in that regard.
To to cover the cost of complying with those regulations, the installers themselves have got greedy
(Only following Government’s lead so why not, everybody’s doing it.)
Thus, when the price of panels falls, the cost of the installation doesn’t and the installers pocket the difference.
Lovely example: Price of wheat vs price of loaves of bread
UK current wheat price = £200 per tonne
UK price for an 800gram branded loaf = £1.55
Of that 800grams, half will be water so there is 400grams of wheat in a typical (lets say = Kingsmill) loaf
Thus 1 tonne of wheat will make 2,500 loaves – for which UK consumers will pay £3,875
While the wheat cost £200.
So where did the £3,675 go?
Solar panels are little different
If they get their way, the government will force the prices back up to the point where local manufacturers can make a profit again.
Oh dear,, So Funny
Seem nick-pick doesn’t understand basic economics, either.
I guess he’s on Universal Basic everything
Marxist fools like Stokes are clueless about everything but their dogma.
“stockpiling for the future when prices go up again”
On behalf of everyone who bought tech stock in the late 1990s or houses in the mid 2000s I say NnnOOOoooOOOOoooooOOOooooooOOOooOOOoOOOooo!!
I think the argument he’s making, rather elliptically, is something like this. The real costs of solar power are not falling as promised. The European manufacturers are not seeing their costs fall.
There is a wave of Chinese imports at prices the European suppliers cannot meet, because the Euiropeans’ costs have not fallen. But the reason the Chinese can sell at these prices is only because they have a much easier regulator environment, including lower labor costs. Its not because the Chinese costs have fallen either, they have not.
So the promise that solar would become cheaper is not being met. All that is happening is that if you have lower regulatory costs you can undercut those with higher regulatory costs. But the real cost position of either supplier is not changing. For that to happen, holding regulatory and social environment constant, costs of production should be falling everywhere.
I think this is pretty much a dead horse. Wind and solar are both very high cost technologies which deliver a product not fit for purpose, and which is not cost effective in deployment.
The interesting social question is why believers in the supposed climate emergency should also invariably be believers in wind and solar. When the two are logically unrelated. It could be there is a crisis, but even if there is, wind and solar are not part of the solution. So why is it that people who believe in the imaginary climate emergency seem also to believe, just as irrationally, that wind and solar are viable, and that they are solutions?
Just what *are* the direct labor costs in producing solar panels? It’s not like you have hundreds of slaves gluing tiny semiconductor junctions onto glass substrates. Or gluing glass substrates onto some kind of backing plate to make a panel. That’s mostly mechanized and automated.
The *real* cost is in energy costs of production. The neo-Marxist, centrally controlled economies of the west have raised energy costs so high that there is no way to compete with the energy costs in China. Even after having to pay shipping costs to points all over the world from China, it doesn’t erode the energy cost advantage enough to make local production competitive in the west.
OK, now understand what you are saying. They have a lower cost position primarily because they have lower energy costs. Interesting argument, don’t know what the numbers are, or where you would find them. But yes, could be a significant element.
Cost of electricity in a usa plant was tens of thousands per month… equal to one usa vp or four total floor workers.
Try starting here
https://euanmearns.com/the-energy-return-of-solar-pv/
“It’s not like you have hundreds of slaves gluing tiny semiconductor junctions onto glass substrates.”
How sure are you that someone doesn’t?
“So the promise that solar would become cheaper is not being met.”
It is. Buyers can buy panels more cheaply than they could before.
The situation is really no different to many other manufactured products. Washing machines, phones, cutlery. The Chinese, for whatever reason, can make them more cheaply, and so set the price. Manufacturers who can’t make money at that price are squeezed out. If prices come down, as is happening with solar panels, it is because of competition among Chinese manufacturers, responding to a reduction in their costs.
The question is, whether the Chinese cost to manufacture has fallen and is falling. Or is it just that their costs are and have been lower, but haven’t fallen over recent years.
I suspect that you have lower costs in China. And certainly lower selling prices from Chinese suppliers. But that the cost of production of panels in China is not falling.
The promise of wind and solar both was that manufacturing costs would fall. I don’t think this is happening. Or not any more. In fact, all the evidence on wind is that the cost of manufacture and installation is rising.
“In fact, all the evidence on wind is that the cost of manufacture and installation is rising.”
Well, please share it. The fact is that prices have dropped by orders of magnitude. Here is OurWorlInData’s log scale:
You aren’t getting those reductions from regulatory changes or energy cost reduction.
Sorry, that was solar. I didn’t notice that you had suddenly switched to wind. The link is here
https://ourworldindata.org/grapher/solar-pv-prices
No, you are right, it must be due, or a lot of it must be due, especially in the early years, to falling costs of production.
Looking at the chart however, the rate of reduction of prices has fallen in recent years. It goes, in inflation adjusted $/watt:
2017 0.49
2018 0.43
2019 0.40
2020 0.32
2021 0.27
It is still a decline in real terms. But I would still like to know how much of this later decline is due to falling costs of production with location held constant. And how much is due to production having moved to an overall lower cost manufacturing environment, which is lower cost for social difference reasons, not because of anything in either the cost of materials or the processes.
IRENA data are notoriously unreliable.
Thanks for reading, Nick.
No reply needed, you provide no facts.
https://www.ref.org.uk/ref-blog/374-the-economics-of-utility-scale-solar-generation-summary
This is Gordon Hughes. A sample quote:
2. It is well-known that the cost of solar panels fell sharply during the 2010s. Many have assumed that the overall cost of building solar plants has fallen similarly and, even more important, will continue to fall in future. The data show that there was a 15% decline in the average capex cost per MW of capacity from 2011-13 to 2014-16 and a 10% decline from 2014-16 to 2017-20. The average capex cost per MW was £0.95 million at 2018 prices. The trend in capex costs is consistent with the fall in the costs of solar panels and inverters, but other costs have increased over the period and appear to be affected by a scarcity of equipment and skilled labour. Further falls in the cost of solar panels will only have a limited impact on total capex costs.
3. The average annual level of opex costs per MW of capacity for solar plants is 3 to 4 times the official assumptions at about £36,500 for a plant in the size category of 10-20 MW. Opex costs are highly variable over time and across plants because of equipment failures and other factors, but the pooled data suggests that they tend to increase with the age of the plant. The estimated rate of increase over time was about 5% per year in real terms. That rate of increase may fall as the industry matures but it would be prudent to assume that opex costs will increase by 2.5% to 3% per year in real terms.
I don’t see any reason to think the technology is going to get lower in cost, either to make, to install or to maintain.
Prices may fluctuate. But the basic cost picture doesn’t seem to be improving.
in usa, the utility industry,, especially electricity, is unionized. It is a collection government regulated monopolies with guaranteed profits that depend on experts negotiating with complicit elected officials
This is not the first time that China has ended up dumping surplus solar panels. Doubtless Lazard will tell us that solar has an even lower LCOE while they construe to ignore all the other costs that solar imposes, not least in curtailment.
Here’s one they did earlier
https://www.gsb.stanford.edu/insights/jeffrey-ball-chinas-solar-panel-boom-bust
There’s been another since which you can research.
Thanks for reading, Nick.
You might also try reading the link.
I did read that 2013 article on a burst of overproduction they had back then, no doubt corrected. That can happen. Levels of production in China were then very small.
But there is no doubt that demand has been growing steadily in recent years:
There is a good reason why it doesn’t seem to follow
Surely, if Chinese solar is so cheap, an economist would advise stockpiling Chinese made panels for future use. Although whatever they do is a waste of money.
Peak renewables was in 2017 and about a year ago, I forecast that this peak will survive. There is now a backlog of of replacement of ‘spent’ solar/windmill farms with no appetite for investment in replacing it. Meanwhile, world’s largest installers of wind farms (European) are backing out of huge contracts in the US.
Sorry, the silliest part of renewables in Europe are just simply going to go bankrupt and they know it! Ditto the wind. Think about it. Politicians are being handed an excuse for getting out of this horrible debacle without having to declare it as their failure.
“Surely, if Chinese solar is so cheap, an economist would advise stockpiling Chinese made panels for future use.”
Prices have just gone down and down throughtout this century. And at any stage, that would have been very bad advice.
According to my count there’s about three (3) of us here at WUWT who understand that wind and solar never should have happened and the sooner it ends the better off everyone will be.
Count me in from away back.
Say rather, should never have been subsidized in all the various ways they are. Then they never would have got started.
Repeatedly missed in this thread:
Cost of panels is not the dominant cost cost driver for solar electricity.
Quite. Installation cost and integration costs are far more important.
Yeah, panels have got cheaper all right.
Just finally installed some myself, due to the constant escalation of power prices, which are driven by poorly planned attempts to integrate all these renewables into what was a functional system.
Mine have to last 4 years to pay their way, and less if the floundering grid pushes prices to sillier levels.
But it’s an ill wind which blows no good, I have a friend who makes a fortune installing high voltage lines to get power from these wind and solar farms to the consumer. And the consumer is footing the bill via escalating power prices.
“Strong demand, combined with large investments and fierce competition among Chinese suppliers”
as a response to
“Europe’s solar industry warns of bankruptcy risk as prices drop“
Prices dont drop when demand is high.
They do if production costs drop. PCs? Laptops? Memory?
If a new chip foundry comes online radically increasingly the supply of RAM demand will likely be inadequate. Cost may not increase at all, but the loss of a major foundry can result in a severe supply shortage and rapidly escalating prices. These kinds of features are regularly seen in semiconductor markets.
Thanks for reading, Nick.
“China solar module prices have fallen to their lowest values ever, as buyers and sellers alike reiterate that the module market continues to see intense competition and weakening demand, according to OPIS data.
The Chinese Module Marker (CMM), the OPIS benchmark assessment for Mono PERC modules from China, and TOPCon module prices plummeted for the first time in five weeks to $0.151/W and $0.157/W respectively this week.”
If deploying solar panels provided cheaper power it would result in growing demand. Instead, lack of demand is creating a glut of solar panels resulting in Chinese panels plunging in price. That increased the demand of Chinese panels but at the loss of sales at profitable prices elsewhere, and may bankrupt manufacturers in other countries.
This begs the question: can solar cells be manufactured profitably at a cost that is competitive with other forms of power production? Lack of demand so far indicates that has not yet happened, so there is no such thing as cheap solar power. Not yet, anyway.
I see Nick read your post, but was obviously uncomfortable with the evidence you provided of dumping level prices.
No evidence of dumping was provided, just price reducitions.
“Strong demand, combined with large investments and fierce competition among Chinese suppliers led to overcapacities in the market and a price fall.”
If prices are dropping, demand is lower than supply. Pretty much by definition. Blaming China seems like a cop-out to me.
GOOD. We need to rid ourselves of this evil monster. Cheap, reliable energy is the very bedrock of a strong economy, and renewables are the antithesis of that.
“The industry calls on the European Commission to buy up European companies’ solar module stockpiles, to set up a Solar Manufacturing Bank at EU level and to boost demand for solar PV in Europe among others.”
It doesn’t get any more blatant than that, does it?
The USSR never had any trouble adopting the EU’s preferred attitude to competition. look how successful they turned out to be.
You have to smile. The industry can’t compete so are asking the tax payers to stump up money and buy their overprice product i.e. solar panels.
Before you know it, the wind turbine manufacturers and installers will be demanding the state provides tax payers money to give them as grants to enable them to continue bidding….oh they already have that.
Makes you wonder what the problem is with intermittent energy supply and unreliable failing generation systems that can not be scheduled to meet variable demand, oh and the price continues to increase in sync with the increasing failure to supply reliable energy.
Maybe the customers are getting too choosey?……
I suspect, but don’t know, that the Chinese competition may be manufactured to different standards to the more expensive EU ones. It could be the other way round of course.
But should a manufacturing fault appear 10 years down the line who pays, I can imagine a Chinese manufacturuer getting involved in that.
Chinese solar modules are cheaper because… cheap fossil energy is plentifully available in China, whereas here everything has been wagered on renewable energy so we can’t afford it. Good thinking, Batman.
Google “heap fossil energy is plentifully available in China”. They might not be building all those power plants because they have too many of power plants.
In alarmist-world there is much deliberate confusion as to what a subsidy is.
Subsidy: noun, money given as part of the cost of something, to help or encourage it to happen.
Tax Break: a change in the law that results in the opportunity to pay less in taxes.
In a subsidised venture nothing happens before the money is handed over. In contrast, fossil fuel companies have to first obtain licences etc at great cost. They then develop the oilfield and… get a tax break. And hey presto, the government has a new revenue stream it would not have otherwise had.
“Fossil fuel subsidies growing despite concerns”
Government subsidies for renewable energy cause great consternation to those who believe in the sanctity of free markets. “If they can’t stand on their own feet, then why support them?” the argument goes.
But in actual fact, most energy sources are subsidised, and none more so than fossil fuels. “
https://www.bbc.co.uk/news/business-27142377
Looks like the markets are making their choice. Clever word play won’t change that in a hurry.
Linking to an 11 YO article makes no sense for comparing TODAY”S subsidy rates. Moreover, has anyone seen a subsidy versus taxes received comparison?
In alarmist-world there is much deliberate confusion as to what a subsidy is.
There has been for quite some time.
The definitions of subsidy and tax break remain the same. That was the point you missed.
A tax break is a portion of your earnings you don’t have to pay to the government after the work is completed.
A Subsidy is money paid to you from the government for doing no work at all.
A subsidy is when the government robs someone else at gunpoint and gives the money to you.
A tax break is when the government robs you at gunpoint but does not take all of your money.
Nicely put!
You do realise you are suggesting a link to the BBC don’t you? No one with an ounce of desire for the truth goes anywhere near the BBC hype.
But great briish baking show is worth it.
More BBC fiction about fossil fuel subsidies. It’s all based on the idea that just because there are some very high marginal tax rates on some production, they assume it should apply to all production with no recognition of costs. The equivalent would be saying you should pay 50% tax on every penny you earn because that’s the top tax rate. Anything less is a “subsidy”.
Well it’s starting to look like demand for solar pavel is goin g to go UP:
https://wattsupwiththat.com/2023/09/11/a-10-gw-time-bomb/
Let’s try this again, but proof read first;
Well, it’s starting to look like demand for solar panels is going to go UP:
From the article: “Strong demand, combined with large investments and fierce competition among Chinese suppliers led to overcapacities in the market and a price fall.”
So the Chicoms are underselling the competition to the point that the competition goes bankrupt. Then the Chicoms have a monopoly on the product and raise their prices.
This is a familiar theme. The Chicoms tried bankrupting U.S. steel manufacturers in the same way, until Trump slapped tariffs on them.
Maybe the EU should slap tariffs on the Chicoms.
A better idea is to quit buying solar panels period. We don’t need them and the power they generate makes the grid unstable.
Yes, that is a better idea.
“Strong demand, combined with large investments and fierce competition among Chinese suppliers led to overcapacities in the market and a price fall.”
If true, that means the Chinese suppliers are in trouble as well. The entire PV world-wide market is failing. Aw, gee.
Oh dear, how sad.
Never mind…
As note below, the Chinese subsidized are target with government support, bankrupt other countries manufacturers and then control the market price. Simple, it’s not like their using slave labor or Uighurs.
Just put a “windfall profits tax” on everything ‘green’ and just watch this scam disappear.
If they balk .. tell them “it’s an existential crisis worth of a ‘fair’ solution for all” while smiling.
“The industry calls on the European Commission to buy up European companies’ solar module stockpiles…”
Intervention – is the name by which it is known in the Fourth Reich.
Europe’s Leviathan in past times had a policy of intervention in agriculture. In the good years of bumper output by farmers, Common Agricultural Policy (CAP) would ‘intervene’ and buy up surpluses (with taxpayers’ money) to maintain market prices. Consumers got hit twice, first from taxation, second from higher prices.
The notion being that stockpiled product from good years, could be released onto the market in leaner years to prevent shortages and keep prices down.
But. Whilst the stockpiling was successful, the stuff never did get released, because in the leaner years, the farmers wanted to keep market prices up, and release of the intervention stores would defeat that.
So we ended up with perpetual butter, cheese and meat mountains, milk and wine lakes and hundreds of tonnes of perishable produce being dumped in the sea, and a huge cost for cold storage.
’The industry’ wants the EU to do the same sort of thing with all the PV panels nobody wants. This is right up the EU’s street, the incestuous relationship between State and Big Business (Benito would be proud), so likely the EU taxpayer will be stuck with the bill for another failure.
“Strong demand”????
In your dreams. Falling prices tell us just the opposite is happening – an outbreak of common sense.
Why hasn’t this led to lower electricity prices?
“European Commission to buy up European companies’ solar module stockpiles” Once again it proves green energy is not ready for prime time since it cannot survive without government bailouts.
The reason China can undercut on prices is due to three things:
Please show me a single PV manufacturer using PV energy to make PV panels.
I’m waiting.
Never happened, never will.
There’s a very interesting history of the boom and bust and subsidies and mysteries of the Chinese solar industry here
https://chinafocus.ucsd.edu/2021/02/16/solar-energy-in-china-the-past-present-and-future/
So, inexpensive solar power is something strive toward, but inexpensive solar panels are not?
Go figure.
I’m not sure that I can take so much good news early in the morning!
I don’t care what solar and wind businesses do but governments need to get out of the business of propping up these useless businesses. They are going to fail but I see no reason why I should pay to extend the charade.
Installing solar panels in Europe is a fool’s errand, the capacity factor is too low to justify the capital expenditure. The answer to the problem is abandoning the effort that never should have started and wouldn’t have without nonsense green manipulation of the energy market. Bankruptcy is the correct path forward along with ending all subsidies that have created the false market. Ending the ban on horizontal drilling and hydraulic fracking is long past due.
Solar in Europe is going bankrupt, meanwhile,
Could it be that “cheaper than fossil fuels” wind and solar has peaked? Germany has awarded 4,400 MW of onshore wind thus far this year. At a capacity factor of about 25%,1,000 MW. Ignoring that wind isn’t dispatchable about the same as 3 each 330 MW CCGT’s
.
Year of issue
2023
Date of issue
2023.09.08
The Bundesnetzagentur has today published the results of the auction for onshore wind farms that closed for bids on 1 August 2023.
Auction again undersubscribed, although the Bundesnetzagentur had reduced the auction volume from 3,192 megawatts (MW) to 1,667 MW.
141 bids totaling 1,433 MW were awarded. The total volume awarded following three of this year’s four onshore wind auctions now stands at about 4,400 MW. The average volume-weighted bid price was 7.32 ct/kWh, just below the price ceiling.:
labor cost, energy cost, regulatory cost, and all the cost does not matter in a centrally planned economy. China was going towards a market economy or the socialist market economy but the last few years have seen drastic reversal back to the rigid centrally planned economy. Cost, price, production output, quota and currency exchanged rates are dictated. This greatly facilitated dumping or as the old economic dicta “beggar thy neighbor” strategy. Dumping was identified as one the major cause of European wars as economies were destroyed by state manipulation of its export prices through various economic instruments.
This greatly facilitated dumping or as the old economic dicta “beggar thy neighbor” strategy.
Yes but perish the thought that State sponsored solar and wind are dumping on power grids to the long term detriment of power consumers which leaves Chinese commies to hoist the climate changers on their own petard. Shock horror!
The climate changers meant well-
New figures provide clarity on solar module glut, ‘dumping’ prices – pv magazine International (pv-magazine.com)
I hope you’re right about “rigid centrally planned economy“. I need my job a while longer.
Copious taxeater and regular weather worrier Ursula is shocked and upset that Chinese commies are engaging in unfair slushfunding to fix the weather-
“Global markets are now flooded with cheaper electric cars. And their price is kept artificially low by huge state subsidies,” European Commission President Ursula von der Leyen said in her annual address to the bloc’s parliament.
Clearly this sort of deplorable behaviour has to be assessed and tariffs introduced to up planet saving EV prices for the masses-
EU to assess whether to hit Chinese electric cars with tariffs (msn.com)
Nick will explain the finer nuances of it all to you if you’re struggling with watermelon logic here.
According to the law of supply and demand, price only approaches zero when…
When you are living under Communism?
Also: if the panels cost “nothing” but the electricity costs “something” then the costs must come from something _other_than_ the panels. Duh.
I often wonder what world the greenies live in. Their ability to understand future economics is sadly lacking. For instance, as more residential solar panels are installed the average demand on the power company infrastructure will fade downward – meaning that infrastructure will also physically fade down. Smaller sub-stations, smaller feeder routes, etc.
When something like a hurricane hits in Florida, thousands of line crews converge from all over the country with equipment and parts to repair the existing power company infrastructure – which will have faded down over time from lower average demand. Who is going to repair all the residential infrastructure? The power companies won’t do it. They won’t have the inventory of solar panels. The solar panel installation companies won’t do it because they couldn’t afford to maintain disaster-level inventories of spare parts. The residential population can’t afford to store away replacement for damaged infrastructure. Is the local, state, or federal governments going to do it? Doubtful.
That means that in a widespread natural disaster with lots of power interruptions, those interruptions are going to last a *lot* longer than they do today – along with all the corresponding human impact.
Where is this even being discussed? Certainly not by the politicians or by those pushing for “renewable” power. It’s the blind leading the blind for the most part. That’s not a good thing for those alive in the future.
Fortress Europe will prevail….all the way down.