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<p>After falling by approximately <a href="https://mercomindia.com/product/q2-2017-india-solar-quarterly-market-update/" target="_blank" rel="noopener">5 percent</a> in the second quarter of 2017, for the first time in years, the average selling price (ASP) for Chinese modules is increasing quarter-over-quarter in India. Chinese module ASPs have risen by almost 12 percent as of August 2017 compared to Q2 2017. By comparison, module ASPs dropped by 12 percent from Q2 2016 to Q3 2016.</p>
<p><strong>Worst-Case Scenario</strong></p>
<p>This is the worst-case scenario that Mercom has been warning the market about. For the past two years, we have <a href="https://mercomindia.com/mercom-capital-group-forecasts-3-6-gw-solar-installations-india-2016/" target="_blank" rel="noopener">stressed</a> that “aggressive bidding in an effort to capture market share with the assumption that component costs will continue to fall no matter what is a risky strategy.” Developers not just in India, but across the world have been modelling their auction bidding strategies based on the assumed perpetual decline of Chinese module prices. It has worked for the majority of the time, and developers have become too ‘comfortable’ with this strategy resulting in aggressive bidding in India, which has reached new heights with government agencies cheering the low bids as an incredible achievement.</p>
<p><a href="https://mercomindia.com/wp-content/uploads/2017/08/Chinese_Module_ASPs_in_India.png"><img decoding="async" loading="lazy" class="aligncenter size-full wp-image-7607" src="https://mercomindia.com/wp-content/uploads/2017/08/Chinese_Module_ASPs_in_India.png" alt="Chinese Module Average Selling Prices in India" width="419" height="292" srcset="https://cms.mercomindia.com/wp-content/uploads/2017/08/Chinese_Module_ASPs_in_India.png 419w, https://cms.mercomindia.com/wp-content/uploads/2017/08/Chinese_Module_ASPs_in_India-300x209.png 300w" sizes="(max-width: 419px) 100vw, 419px" /></a></p>
<p>Short-term fluctuations do not usually make a huge difference but, if module prices continue to rise or even stay flat for a couple of quarters, it will start hurting the developers who cannot wait indefinitely to procure the lowest priced panel.</p>
<p>The price drop was steeper than expected in Q2 2017, even though high Chinese demand generally firmed up module prices in June before feed-in tariff deadline at the end of the month.</p>
<p><strong>Driving Factors</strong><strong> </strong></p>
<p>Polysilicon and wafer prices have increased significantly since June. Polysilicon prices are up by 19 percent since June, though it has started to flatten out over the last couple of weeks. A major polysilicon producer reduced its polysilicon and wafer production significantly due to technical and maintenance issues resulting in some wafer shortages, pushing wafer prices higher.</p>
<p><a href="https://mercomindia.com/wp-content/uploads/2017/08/Polysilicon_and_Multi-Wafer_Spot_Price.png"><img decoding="async" loading="lazy" class="aligncenter size-full wp-image-7610" src="https://mercomindia.com/wp-content/uploads/2017/08/Polysilicon_and_Multi-Wafer_Spot_Price.png" alt="Polysilicon and Multi-Wafer Spot Price" width="643" height="279" srcset="https://cms.mercomindia.com/wp-content/uploads/2017/08/Polysilicon_and_Multi-Wafer_Spot_Price.png 643w, https://cms.mercomindia.com/wp-content/uploads/2017/08/Polysilicon_and_Multi-Wafer_Spot_Price-600x260.png 600w, https://cms.mercomindia.com/wp-content/uploads/2017/08/Polysilicon_and_Multi-Wafer_Spot_Price-300x130.png 300w, https://cms.mercomindia.com/wp-content/uploads/2017/08/Polysilicon_and_Multi-Wafer_Spot_Price-624x271.png 624w" sizes="(max-width: 643px) 100vw, 643px" /></a></p>
<p>According to Mercom India’s channel checks, module prices quoted by Chinese companies ranged from $0.32 to $0.37 (~₹20.5 to 23.6)/W in Q3 2017. So far, installations in China have this year crossed <a href="https://mercomindia.com/solar-installations-china-totalled-35-gw-end-july-2016/" target="_blank" rel="noopener">35 GW</a>, which is already more than entire 2016 installations combined. For 2017, solar installations in China could rise to nearly 45 GW aided by the 5.5 GW Top Runner Program, which carries a deadline of September 30, 2017, and the Poverty Alleviation Program, which is a year-round, capital subsidy driven program strongly supported by both the local government and central government. Module demand for 2018 installations in China generally begins in December 2017.</p>
<p>The wild card right now is the question of how the <a href="https://mercomindia.com/lessons-india-suniva-solar-anti-dumping-hearing/" target="_blank" rel="noopener">Suniva anti-dumping case</a> underway in the U.S. against China and other countries turns out. The first hearing in the case occurred on September 15, 2017, and it will be followed on September 22, 2017, by an International Trade Commission (ITC) decision on whether harm was caused to domestic solar manufacturers.</p>
<p>If the ITC finds that domestic manufacturers were harmed by exports there will be a follow-up hearing on October 3, 2017, followed by ITC recommendations to President Donald Trump on November 13, 2017. The president will then decide on January 12, 2018, whether he accepts the ITC recommendations. If the president agrees with the ITC recommendations the effective date of remedy will be January 27, 2018. If the president does not agree with the ITC recommendations, he will have until April 12, 2018, to propose his own remedy. This timeline gives a roadmap for how long the uncertainty could last and a general framework for when the case could start affecting demand.</p>
<p>That said, regardless of which way the Suniva decision goes, U.S. module demand is bound to decrease after the ruling. If an antidumping duty is imposed, then demand from the U.S. is likely to crash immediately afterward. If no antidumping duty is imposed, then demand will fall as there will no longer be a rush to procure panels. The less drawn out the case the better for the Indian solar industry.</p>
<p>Regardless, the uncertainty is challenging for the Indian solar industry and comes at a bad time. The industry is also facing an <a href="https://mercomindia.com/indias-anti-dumping-investigation-solar-imports-china-taiwan-malaysia-underway/" target="_blank" rel="noopener">antidumping case</a> filed by Indian manufacturers for which Directorate General of Anti-dumping &amp; Allied Duties (DGAD) is expected to recommend a decision around September 22, 2017.</p>
<p><strong><a href="https://mercomindia.com/wp-content/uploads/2017/08/India_Rising_Solar_Module_ASPs.png"><img decoding="async" loading="lazy" class="aligncenter size-full wp-image-7606" src="https://mercomindia.com/wp-content/uploads/2017/08/India_Rising_Solar_Module_ASPs.png" alt="India Rising Solar Module ASPs" width="313" height="281" srcset="https://cms.mercomindia.com/wp-content/uploads/2017/08/India_Rising_Solar_Module_ASPs.png 313w, https://cms.mercomindia.com/wp-content/uploads/2017/08/India_Rising_Solar_Module_ASPs-300x269.png 300w" sizes="(max-width: 313px) 100vw, 313px" /></a></strong></p>
<p><strong>Implications</strong></p>
<p>According to <a href="https://mercomindia.com/product/q2-2017-india-solar-quarterly-market-update/" target="_blank" rel="noopener">Q2 2017 Mercom India Solar Quarterly Update</a>, developers were expecting module prices to be in the $0.285 (~₹18.35)/W range in Q3 2017 (almost 20 percent less than current Q3 prices) and to fall further to the $0.27 (~₹17.39)/W range in Q4 2017. Developers have been modelling their auction strategies around these projections.</p>
<p>Considering the uncertainty, it does not make sense for developers to participate in future auctions until there is more clarity on module prices.</p>
<p>Either way, the industry can expect some turbulence ahead and the lingering situation caused by these cases is likely to further slowdown auction activity in the short term and pose procurement challenges for Indian developers if the prices don’t reverse in a few months.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/raj/" class="vcard author" rel="author"><span class="fn">Raj Prabhu</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><div class="designboxt">
<p><img class="alignleft" style="border-radius: 50%;height: 50px;margin-top: -4px;border: 1px solid #00b451" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/04/Raj-New-200X200-1.jpg" width="50" /></p>
<p><strong style="text-decoration: underline">Raj Prabhu,</strong> Staff reporter at Mercom India<br />
<a href="https://mercomindia.com/author/raj/" target="_blank" rel="noopener">More articles from Raj Prabhu.</a></p>
</div>
<div class="authorboxn">
<img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/04/Raj-New-200X200-1.jpg" alt="Raj" /><a href="https://mercomindia.com/author/raj/" target="_blank" rel="noopener"><strong style="color: #00b451">Raj Prabhu</strong></a> is a recognized thought leader in clean energy markets where his work has influenced policies worldwide. He has a deep understanding of regulatory policy and clean energy markets and his market and opinion pieces are regularly published on both MercomIndia.com and other leading publications globally. Raj is also a regular speaker and presenter on clean energy policy and finance topics at conferences worldwide. Raj attended the KLE College of Science in Bangalore, India for physics and chemistry, and holds a Bachelor of Science Degree in Hotel and Institutional Management from Johnson and Wales University, Rhode Island. <a href="https://mercomindia.com/author/raj/">More articles from Raj Prabhu.</a></div>
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Rising Chinese Module Prices Pose Significant Short-Term Challenge for India’s Solar Industry

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