- Global solar panel prices have fallen by 50% as China floods the market with modules.
- But prices in the United States have seen a smaller decline, given trade barriers with China.
- Instead, rising domestic demand has helped push prices down, although that could change in 2024.
Last year, mass assembly of solar panels halved the average price of modules, while manufacturing in China led to a surge in supply.
According to the International Energy Agency, the country will supply 85% of the world's solar module production by 2028. Its production has been so great that it recently forced the shutdown of one of Europe's largest solar installations. surplus panels that have not yet been disposed of.
David Feldman of the National Renewable Energy Laboratory told Business Insider, "Prices in Europe have fallen sharply due to oversupply and inventory build-up." "In the United States, it's a different story."
Instead, the US solar market has been insulated from supply growth, with less than 0.1% of module imports coming from China. US modules lost just 10% to 15% between the first and third quarters of last year, Wood Mackenzie reported in December.
In fact, US laws prohibit trade in solar panels with China. The restrictions include tariffs and the U.S. Uyghur Forced Labor Prevention Act of 2022 (UFLPA), which bans imports from China's Xinjiang region.
However, part of the domestic depreciation is the result of spillover effects from China's manufacturing sector, Feldman said. Some Chinese companies have set up production elsewhere in Southeast Asia, giving them access to US markets.
But in most cases, the decline in US prices and the build-up of inventories are driven by domestic changes.
In fact, there has been oversupply, as the UFLPA and other trade barriers with China have raised concerns about supply shortages.
"There was just a concern about whether the installers would accept the panels," Feldman said. "So developers and installers were working to get a good supply chain going, and there may have been a little bit of a decline."
At the same time, demand has generally increased, driven by the Anti-Inflation Act and the greater efficiency and profitability of technology.
But the pipeline of new projects has slowed significantly, Feldman said. Demand for solar power has weakened nationwide as interest rates have risen and debt financing has become more expensive.
Wood Mackenzie estimates that residential solar installations could drop 12% this year as projects in California and the Northeast come up for sale.
But the research firm predicts that this will be temporary and that the market will recover at an annual rate of 10% between 2025 and 2028.
"[Analysts] expect significant growth, but that said, production is likely to grow further, so it may take a few years for demand to catch up to current production," Feldman said.
