At the beginning of 2023, European countries gradually regarded the development of renewable energy as part of their regional security strategy, with photovoltaics being the most prominent. However, in the first half of last year, the market was overly optimistic and expected full-year photovoltaic demand, which led to a large number of purchases. This, coupled with price competition among Chinese manufacturers, led to the accumulation of module inventory in the second half of last year. The price of PV modules also fell from US$0.238 per watt in January to US$0.13 in December, a drop of nearly 45%, reflecting the oversupply situation in the overall photovoltaic market.
Market overview and policy observations of major European countries
Europe is the second largest photovoltaic market in the world after China. The demand for photovoltaic modules in 2023 is about 89GW, and this year it is expected to increase to 97-115GW, with an overall growth rate of about 20%. Among them, Germany, Spain, Poland and Italy are the top four photovoltaic markets in Europe. Infolink estimates that the demand for photovoltaic modules in the above-mentioned four countries this year is 17.5-19.5GW in Germany, 11.5-12.5GW in Spain, 7.5-8.5GW in Poland and 5GW-6.2GW in Italy. The total demand of the four countries accounts for approximately 42% of the European market demand. Therefore, the following will be an observation on the installation situation, this year's photovoltaic module demand and policy development of the above four countries.
Germany
According to statistics from the Bundesnetzagentur, 14.26GW of new photovoltaic installed capacity has been added in 2023, exceeding the annual installation target. The increase mainly comes from household rooftop and balcony photovoltaics, reflecting the effectiveness of Germany's stimulus policies in boosting demand. By the end of 2023, Germany's cumulative installed capacity has reached 81.8GW, which is about 38% completed compared with the 215GW installed capacity target in 2030. On average, it must reach 19GW of new installed capacity every year. Since Germany's installed capacity performance in recent years has always been at the forefront of European countries, coupled with government policies that strongly support photovoltaic development, the analysis indicates that the possibility of achieving the goal is high. In terms of policy, Germany proposed a number of stimulus policies last year to stimulate the demand for photovoltaics in distributed projects. It also allocated a budget of 4.1 billion euros to subsidize the production of local photovoltaic raw materials and components in an attempt to strengthen the local supply chain production capabilities. However, the German Constitutional Court ruled in mid-November last year that the federal government violated the "debt brake" by investing unused anti-epidemic debt funds into green energy industry plans, causing the 60 billion euro budget frozened by the court. As a result, the government faces a budget gap. In order to resolve the fiscal impasse, the federal government has cut the "Climate and Transformation Fund (KTF)" and photovoltaic subsidy budget, which may affect photovoltaic subsidy expenditures and weaken the subsidy ability to strengthen local photovoltaic production capacity. However, the federal cabinet also passed the draft "Solarpaket" in August last year, which will be sent to the German Bundestag and the European Parliament for voting in February and March this year. It is currently estimated that Germany may simplify the Photovoltaic grid connection procedures, increase photovoltaic bidding or provide project sland as the mainstays of stimulus policies.
Spain
According to statistics from Spanish power grid company Red Eléctrica, Spain has added a total of approximately 4.7GW of photovoltaic installed capacity throughout 2023. As of January this year, Spain’s cumulative installed capacity has exceeded 25GW. Compared with the 2030 installation target of 76.4GW, it has completed nearly 33%. The average annual demand Only by adding at least 7.4GW of new installed capacity can the target be fulfilled on scheduled. Compared with Germany, Spain is less obvious in stimulating the demand for self-occupied residential photovoltaics. It mainly focuses on photovoltaic installations in public facilities. It increases the photovoltaic installations in public facilities through the "Revitalization, Transformation and Recovery Plan (RTRP)" and through the " Next Generation Funds" subsidizes self-occupied residential installations. According to statistics, public facilities currently account for 60% of the total photovoltaic installed capacity; the industrial and commercial fields account for 27%; residential self-use accounts for 13%. However, Spain is in a leading position in Europe in power purchase agreements (PPAs), making it easier to attract developers to invest. At the same time, large-scale projects continue to increase. However, there are still some challenges that need to be overcome, such as long project permit application times, low government administrative efficiency, and a shortage of professional photovoltaic technical manpower, coupled with local farmers’ protests that the installation of photovoltaics on farmland may impact agricultural, which affect the development of centralized photovoltaic projects. However, overall, Spain is still one of the markets with great potential in Europe, and its demand this year is expected to grow by 28-32% compared to last year.
Poland
According to statistics from the Polish Institute for Renewable Energy (IRE), a total of approximately 4.2GW of newly installed photovoltaic capacity has been added from January to November 2023. As of November last year, Poland’s cumulative installed capacity was nearly 16.4GW, which was 61% completed compared with the 2030 installation target of 27GW. It is the country with the highest compliance rate of photovoltaic installation targets in Europe. On average, it needs to add at least 1.6GW of installed capacity every year to reach the target as scheduled. Based on Poland's current installation speed, it is expected to reach the target ahead of schedule.
Polish photovoltaic demand is growing steadily, mainly driven by the "Energy Policy of Poland until 2040 (PEP2040)", which has made Poland the country with the highest photovoltaic installation compliance rate in Europe. One of the main reasons for Poland's bright photovoltaic demand in 2023 is the fifth round of the "My Power (Mój Prąd) Plan" launched in April last year, which successfully stimulated demand for rooftop photovoltaics. As of the end of September last year, the number of distributed installed capacity below 50KW in Poland has exceeded 1.3 million, and about a quarter of households across the country have installed rooftop photovoltaics. The dedicated unit also stated that it does not rule out the possibility of expanding the subsidy budget in the future. It is currently believed that Poland also has great potential in developing ground-based photovoltaic projects. In addition, Donald Tusk, who is committed to increasing the proportion of green energy in Poland, took office as Prime Minister at the end of last year. If he continues to propose a number of stimulus policies this year, it is expected to increase the demand for photovoltaic in the Polish market. It is estimated that photovoltaic demand in Poland this year is expected to grow by about 31% compared to last year.
Italy
The increase in distributed photovoltaic installed capacity in Italy in 2023 is mainly attributed to the "2023 Superbonus", which provides users with photovoltaic installations with a 90% tax credit. Although it is significantly lower than the 110% tax credit of the Superbonus in 2022, it is also successfully stimulated demand for rooftop photovoltaics. According to statistics, about 47% of Italian installed capacity in the first half of last year came from distributed projects. However, the 2023 Superbonus tax credit will be reduced to 70% starting this year. Observing the data of Italian photovoltaic modules imported from China, the purchase in the fourth quarter of last year has dropped significantly compared with the first three quarters, with an average quarter-on-quarter decrease of about 60%, indicating the reduction in tax rates has indeed impacted the demand for distributed projects. Although the Italian government announced in 2023 that it will extend the "Detrazione 50%" until the end of 2024, encouraging households to install solar panels and energy storage systems, and each household can enjoy up to 50% income tax reduction, but the demand stimulation brought by analysis is not as significant as Superbonus.
Overall, Italy is expected to be able to maintain a certain amount of demand this year. However, if it is unable to propose other stimulus policies, simplify grid connection review procedures and improve grid transmission, it will be difficult for demand to grow significantly. It may be possible to stimulate photovoltaic demand by expanding rural power supply and other large-scale projects. It is currently estimated to be approximately 36% of Italy’s 2030 installation target, and an average of at least 7.3GW of new installed capacity will be needed every year. In the long term, there is still considerable photovoltaic demand, but if the speed of photovoltaic installation is to be accelerated, it still needs to be observed whether the above issues can be improved.
A comprehensive overview of the European market from the first quarter to the first half of 2024 shows that the first quarter is affected by winter and the shortage of installation manpower. It is the traditional off-season in Europe, and demand may be affected. However, recently, European distributors have accelerated the consumption of component inventory and the rapid inventory depletion will enable Europe to replenish its inventory, which is expected to support European market demand in the first quarter of this year to a certain extent. However, in terms of long-term demand, the average European electricity price has dropped from a high of 438 euros per MWh in September 2022 to 84 euros per MWh in December 2023, a drop of more than 80%, which may affect the end-users demands for photovoltaics, making it difficult to reproduce the demand in the same period last year in the first half of this year. In addition, the grid connection review process and bureaucracy in some countries have not been significantly improved, making it difficult for the installed capacity to grow rapidly. Also, the base period is increasing year by year, and the overall growth rate is slowing down.
In terms of full-year demand, as the second and third quarters enter the traditional peak season of the European market, and market demand begins to shift from PERC to TOPCon, the European market is expected to maintain a certain level of demand, and with the arrival of the off-season in the fourth quarter, there may be a normal situation where the sales is revised downward.
Overall, Europe's rapid inventory consumption is expected to maintain a certain extent in the first quarter of this year, but it will not be able to reproduce the purchasing goods in the same period last year. In the second half of the year, as battery technology changes from P to N, demand is expected to rebound, and it has the opportunity to grow by at least 15% this year compared to last year. Looking forward to long-term demand, as most European countries want to achieve the 2030 installation target, but the current compliance rate in most countries has not exceeded 40%, reflecting the urgency of accelerating the installation speed. In addition, net-zero has become the energy development goal of most European countries and even the EU, and long-term demand is expected to continue to rise.
Post time: Feb-21-2024