Real Reversal or Short-term Recovery? Market is Witnessing A Surge in Distributed PV Installations, Dealers Report "Order Cancellations"

Recently, module dealer Cao Yu (pseudonym) complained on social media about module manufacturers "canceling orders." Amid the rush installation wave of PV, demand surged in a pulse-like manner, but supply was insufficient, leading to a supply-demand imbalance. Cao's experience is not an isolated case. Cailian Press reporters recently learned from several dealers that they had paid the full amount in advance to module factories, but the manufacturers failed to deliver according to the agreed time and price, and even requested an increase in the contract unit price. The involved module factories include multiple top-tier brands.

For the specific reasons behind the "order cancellations," Cailian Press sought confirmation from several top-tier enterprises but did not receive a clear response. A representative from one module company only stated that the company would adhere to delivering orders as contracted. Order fulfillment varies based on each company's sales strategy, generally prioritizing long-term stable relationships with customers.

An analyst believes that behind the "order cancellations" is the surge in demand, leading to full-capacity production at module factories and continuous price increases. Cailian Press interviews revealed that brands like Tongwei, Trinasolar, and GCL have already seen their module prices rise above 0.7 yuan/W, a significant increase from the beginning of the year.

Module Prices Continue to Rise, Some Manufacturers "Cancel Orders"

Cailian Press noticed that multiple social media accounts recently reported that dealers and EPC construction firms encountered "order cancellations" from module factories.

Cao told Cailian Press that modules priced at 0.72 yuan/W were already sold out. Another dealer said, "To avoid further disputes, we no longer accept orders below 0.7 yuan/W. Even for existing low-price orders, if fully paid, there might be a request for a price increase."

A professional engaged in module sales and recycling also told Cailian Press that there have indeed been cases of module factory sales breaches. Another dealer also reported experiencing "order cancellations," stating that after signing a dual-stamped contract and paying the full amount, he was informed that the low-price order would be delayed due to improved market conditions.

Why are orders not being fulfilled in what was initially a promising market? One dealer believes that previously, the industry faced a significant oversupply, and some companies competed for market share by offering low prices. However, with the rush installation wave, module prices surged, and some manufacturers preferred to sell to higher-bidding dealers, forcing those with lower-priced contracts to adjust their procurement plans.

May 31, 2023, will be the deadline for new PV projects to be classified as existing projects. To meet this deadline, the distributed PV market has seen a rush installation wave, significantly boosting module demand.

Since the beginning of the year, the rush installation in the distributed market has clearly boosted module production. According to a business leader at LONGi, all of LONGi's production lines are operating at full capacity, with BC lines in Jiaxing and Xixian running at full production. The first batch of orders is now in the production and shipping phase. Trinasolar stated that its cell operating rate has continuously increased, reaching over 80%, while the module operating rate is slightly lower. Tongwei also told Cailian Press that the recent market recovery has led to a continuous increase in the entire industry's operating rates.

Meanwhile, module prices have been rising, with new prices every two to three days. Since late February, Cao has updated his WeChat Moments more than three times daily, frequently posting the price increases of the brand modules he represents. In early March, Niu Yanyan, President of LONGi's distributed business, told Cailian Press and other media that PV modules have seen a comprehensive price increase, with TOPCon products at 0.75 yuan/W and BC products at over 0.8 yuan/W, even experiencing a "hard-to-find" situation.

According to the latest SMM quotes, last week, the average prices for distributed TOPCon modules in 182, 210, and 210R models reached 0.757 yuan/W, 0.767 yuan/W, and 0.767 yuan/W, up 0.009 yuan/W, 0.004 yuan/W, and 0.004 yuan/W MoM, respectively.

Dealers Face Dilemma

In the short term, there is a clear expectation of price increases for the main PV industry chain and key auxiliary materials. TrendForce believes that due to robust demand for solar cells, major manufacturers are expected to increase production next month. Additionally, analysis suggests that March module production schedules will exceed 50 GW, and PV glass inventory is expected to further decrease, with new orders likely to see price increases.

Given this, can the recent "order cancellation" phenomenon caused by rising module prices change in the short term? How will dealers respond?

A dealer explained that even when facing untrustworthy commercial behavior from manufacturers, dealers often have limited options: either pay an additional 0.05 to 0.1 yuan/W to pick up the goods immediately or get a refund. Few dealers pursue legal action. This is partly because both parties need to maintain future cooperation, and dealers do not want to completely sever ties. Additionally, all efforts are currently focused on the rush installations by April 30 and May 31, leaving no time for legal battles.

However, whether it's paying extra or getting a refund, dealers face irrecoverable losses. Multiple dealers told Cailian Press that they have experienced secondary price hikes. Once trust is broken, neither party dares to take the next step.

One dealer mentioned that he paid a top-tier module factory on February 22, with an agreement to deliver within a week, but he still hasn't received the goods. Under the shadow of a trust crisis, even if he pays more, there is no guarantee of receiving the goods. If he chooses a refund, it could take nearly two months, significantly impacting the company's cash flow.

"Our clients also face a dilemma," a dealer told Cailian Press. Some projects planned to start construction after the New Year, but with continuously rising module prices, costs have increased. For signed contracts, the EPC construction firm bears the increased cost; however, for projects still under consideration, they are waiting, but with the May 31 deadline, there isn't much time left. For construction firms, besides the rising module prices, there is also significant uncertainty about whether they can obtain the modules and complete grid connection on schedule.

For the earlier low-price orders, module companies also face significant pressure to fulfill them. The rush installation wave has driven up the prices of upstream solar cells and auxiliary materials like PV glass. A module factory representative told Cailian Press that M10/G12/G12R monocrystalline TOPCon cells have been rising for several weeks, increasing production costs. The earlier low-price orders are now almost unprofitable.

This Round of Price Increases May Be Nearing Its End

The recent rise in module prices is generally attributed to a temporary supply-demand imbalance caused by policy-driven rush installations. Opinions on the H2 module market outlook vary. A business leader at LONGi predicted that module prices may see a correction in H2, especially with new policies that may pause or reduce related investments, affecting this year's distributed installations.

However, module prices are unlikely to experience a "cliff-like" drop. She believes that by 2025, manufacturers' business strategies will become more rational. Even if supply-demand imbalances persist, PV companies will have better strategies and adjustment methods. Additionally, with the introduction of power market trading and grid connection restrictions, the development of ESS and virtual power plants will be promoted, requiring more diversified development from industry partners, which will enhance corporate capabilities.

Some more optimistic analyses suggest that the current unprecedented focus on capacity control in the PV industry will effectively alleviate product surpluses.

An analyst told Cailian Press that domestic centralized ground-mounted power stations are less affected by new policies. Meanwhile, overseas markets in Europe, the Middle East, Africa, and Southeast Asia are expected to see increased demand in H2, maintaining prices above 0.7 yuan/W.

Infolink's latest market forecast indicates that, influenced by the rush installation, supply chain price increases are expected to continue until mid-to-late April, aligning with dealers' expectations. "This fluctuation is expected to last for about a month, and by April, prices should return to a reasonable level. Since current module prices are too high, it's difficult for EPCs and project owners to renegotiate prices, so some EPC projects are being delayed as much as possible," a dealer revealed.

"It's just entering the market, not impossible to do," an EPC power station developer told Cailian Press. In recent years, with increased competition in the distributed PV market, development costs have risen, becoming a significant part of total project investment. "If the market is poor in H2, development costs will be lower, having little impact on projects with over 70% consumption. There's no need to rush this wave."

He further noted that current electricity prices are very low, while development costs are too high, making such a situation unsustainable. After a few months of adjustment, things might improve.

Notably, policies guiding the steady development of the PV market are being refined. On March 20, the National Energy Administration issued a notice on further implementing the "Thousand Households Basking in Sunshine" initiative. It mentioned that 56 counties (cities, districts) have entered the list of fully achieving pilot work goals.

Industry insiders say this initiative, following the "whole county promotion," is another favorable policy for the development of distributed PV. By standardizing local access, local consumption, upgrading supporting grid infrastructure, and enhancing consumption capacity, it aims to ensure the healthy and sustainable development of rural distributed PV.

Note: This news is sourced from Cailian Press and translated by SMM.