Navigating the Solar Module Surplus: EUPD Research’s Comprehensive Analysis of the Current European Warehouse Woes
As solar module prices continue to drop to new record levels in an extreme global oversupply cycle, one key question being discussed in Europe is about the high inventories in warehouses – and when these will reach normal levels again. As there are several different numbers and assumptions in the public debate, EUPD Research has looked closely at the numbers in an attempt to provide a transparent view on this controversial topic.
Rystad Energy analysts have recently expressed apprehensions regarding a substantial surplus of unsold solar PV modules stockpiled within European warehouses. They noted that, in the first eight months of 2023, Europe imported approximately 78 GW of solar modules, a figure already surpassing the anticipated installations for the entire year. Furthermore, although import data by the end of September reached 85.9 GW  and the import data beyond September is presently unavailable, unless there is a substantial deceleration in deliveries to Europe, it is envisaged that this surplus may exceed 100 GW by year-end. Marius Mordal Bakke, a senior supply chain analyst at Rystad Energy, emphasized his concerns about the declining prices of solar PV modules in the market and the challenges associated with destocking older modules, which were procured at higher costs. He underscored the necessity for the industry to adapt to shifting market dynamics.
Nonetheless, this development has provoked varying responses from other experts, including Karl-Heinz Remmers, the founder of PV Magazine. He has criticized Rystad Energy analysts, particularly drawing attention to their inconsistency in estimating the stock of PV modules in European warehouses, with figures fluctuating between 40 and 80 GW. Remmers’ primary contention appears to be that Rystad’s statements may be generating undue alarm, as he maintains that a surplus of PV modules in the European Union is a common occurrence. He emphasizes that EU analysts should embrace the notion that a warehouse stock ranging from 10 GW to 19 GW represents a “normal” inventory and should not be associated with the notion of “dumping.” Subsequently, he presented three scenarios, and the one which we, at EUPD Research, find most plausible is outlined below:
With a 60 GW market in the EU in 2023:
- “Normal” inventory: 10 GW
- Module consumption in 2023, up to and including October: 50 GW
- “Excess” inventory till the end of 2023, including excess from 2022: 59 GW
1. EUPD Research’s Perspective:
EUPD Research adopts a firm stance that robust analysis must be contingent upon precise PV installation data. Our comprehensive assessments, rooted in years of meticulous data collection and monitoring of PV installations in our databases, necessitate certain adjustments to the figures put forth by various analysts. Here are our key observations:
- First and foremost, the 78 GW of China PV export to the EU-27 by the end of August  must be considered with caution. The calculations are made by Ember, a London based independent energy think tank. The General Administration of Customs People’s Republic of China does NOT release the solar export capacity (in MW or GW). Ember’s estimations are done by dividing the export value in US dollar and the average monthly PV module prices . When we at EUPD calculated the export capacity according to a methodology based on several data points including module export weights, China’s PV export figures reduced to ~66.6 GW, which obviously reduces the concern for oversupply.
- Additionally, there appears to be a miscalculation in the assertion that the EU installed 46 GW of PV capacity in 2022. Our data  indicates that the actual installation figure was approximately 40.4 GW. Consequently, when considering that China exported 7 GW to the EU in the previous year, the surplus of Chinese exports from 2022 stands at approximately 47 GW: 87.74 GW – 40.48 GW = 47.26 GW
- As an effective part of inventory management entails demand forecasting, looking ahead to 2023, our realistic projections suggest that the EU is poised to deploy ~60 GW of PV capacity, which represents a substantial increase of nearly 20 GW compared to the previous year. This renders the other two scenarios outlined by Remmers inconsequential unless European energy authorities undertake significant retroactive revisions of their PV installation data during the first half of 2024. While the ultimate outcome remains to be seen, based on our monitoring of the EU-27 updates for Q3 2023, and solid methodology of EUPD Research’s Global Energy Transition Matrix (GET Matrix) data base, it is estimated that the EU-27 will install approximately 60 GW of PV capacity by year-end .
EUPD Research’s forecast for the installed PV capacity in 2024 ranges from 65-75 GW (depending on the scenarios). Now assuming  that towards the end of 2023 China’s PV export to the EU will reach 100 GW by the end of 2023 and taking the normal warehouse flow into account, the solar PV module excess inventory for 2023 will be considerable . This is quite similar to the first scenario Remmers is offering (59 GW excess inventory), given the fact that EU installed ~40 GW and NOT 46 GW in 2022.
Whether the Chinese module export and PV installation numbers put forward by think tanks and experts such as Marius Mordal Bakke and Karl-Heinz Remmers will materialize or not, we all need to wait. However, these numbers and analyses were combined with the EUPD PV installation figures along with our Chinese EU module export estimations to respond to a key question, “is there an oversupply”?
1.1 Is There an Oversupply?
Yes, there is. Zhang Sen, Secretary-General of the Photovoltaic Branch of the China Chamber of Commerce for Import and Export, wrote in an article published on China’s Ministry of Commerce website that “Due to the optimistic atmosphere in the European market last year  and the recent decline in European electricity prices, distributors have excess inventory.” Sen continues that as the EU is poised to install approximately 70 GW of PV capacity in 2024 it becomes evident that a chunk of next year’s PV installations will already exist within European warehouses at the onset of the new year. Furthermore, in conjunction with the data derived from the EUPD Research price and stock monitoring databases in Germany and Europe, as well as the disconcerting feedback received from various stakeholders, it could be concluded that the concern is real.
In accordance with the studies conducted by EUPD Research, we meticulously monitor the net purchase price of PV modules crafted from monocrystalline PERC cells from the perspective of PV installers. It is noteworthy that these prices have reached historic lows. In the fourth quarter of 2023, prices for monocrystalline PERC modules from Chinese manufacturers have gone down by 30% compared to the first quarter of 2022. While the lower prices generally reflect market developments over the last eight quarters, the reductions for Chinese manufacturers are particularly striking. For modules of the same technology produced by German manufacturers, the price decline over the same period was around 15%, only half the decline of Chinese manufacturers. The persistent price fluctuations pose a particularly formidable challenge for installers who had made substantial prepayments to accumulate significant module stockpiles, anticipating extended delivery times. A testimony from one such installer underscores the predicament:
“The market has completely collapsed. Even the suppliers have cut their selling prices by almost 50% from 2022 to 2023. We are the ones left behind because we ordered in 2021 for delivery at the end of 2022 so that we can work in 2023 and we will make huge losses this year. We are expecting a 75% drop in volume and a 50% drop in purchasing because prices have dropped so much. We are curious to see if we can survive that. And that’s after 20 years of stability in the market and having weathered every solar crisis so far.”
This testimony poignantly illustrates the issue of price erosion. In previous years, the primary challenge for installers was extended delivery times, prompting many to diversify their product portfolios and accumulate larger quantities in stock. However, these forward-thinking installers are now confronting the brunt of the challenge. Availability is no longer a major concern, and the market oversupply has driven prices down significantly compared to the previous year, when some installers made significant stock purchases.
2. Macro causes of the current issue and what comes next?
We think there are some main reasons for the current issue:
- Solar PV learning curve
- The solar industry to undergo some reshuffling
- Chinese manufacturers upscaling was faster than market development
- Chinese manufacturers could reduce their market share as local support surges
2.1 PV learning curve
Like any other technology, solar PV has to go through a learning curve. The solar PV learning curve refers to the process of continually reducing the cost as more experience and expertise are gained in its development and deployment. The Swanson’s and Wright’s laws clearly describe how the cost or time required to perform a task in the industry decreases as the task is repeated and experience is gained. In other words, the costs decrease and performance improves as the industry gains knowledge and experience in manufacturing, installing, and maintaining solar PV systems. The price drops we are experiencing in the solar PV market today is therefore primarily a phase in the solar PV evolution that needs to be understood and managed.
2.2 A reshuffling of the industry
According to Zhang Sen, the industry is poised for a transformation due to the recurrent issue of oversupply. In 2023, prominent photovoltaic companies, including LONGi Solar, JA Solar, Jinko Solar, Trina Solar, and Tongwei, have unveiled their plans for expanding production. The expanded capacity predominantly focuses on N-type production, known for its enhanced photovoltaic conversion efficiency. Notably, the N-type TOPCon technology route is the primary choice, although N-type HJT (heterojunction) technology is also in use. The expansion of these companies serves a dual purpose argues Zhang Sen – facilitating the rapid advancement of new technologies and reducing production costs. However, it also accelerates the depreciation of photovoltaic equipment due to the excess production capacity, compelling enterprises to increase their investments in backend research and development (R&D) and continually expand their high-efficiency production capabilities to meet market demand. Sen’s conclusion is that this in turn forces the relatively lethargic small and medium-sized photovoltaic companies to exit the market.
Moreover, the newer, more efficient modules mean faster installation, with less required workforce and subsequently higher margins. Put this in the context of acute shortage of skilled workers in Europe and it would not be difficult to understand why this tectonic reshuffling with focus on new technologies is transpiring.
2.3 Chinese manufacturers upscaled a lot faster than the market
Chinese manufacturing capacities increased at a pace much faster than the markets. As the Chinese companies competed to have a bigger share of the market, the European market had to deal with basic issues such as the supply issues (critical material delays), and installation bottlenecks (grid issues, and labor shortages). As an example, according to EUPD’s PV InstallerMonitor 2022/2023©, 63% of the surveyed installers in Germany stated that customers had to wait at least four months for the installation after the initial contact. Although not as acute as in Germany, the situation was more or less the same for other major European markets.
2.4 Local support surges
COVID-led supply chain disruptions, Russian invasion of Ukraine and increasingly ambitious climate change actions has mobilized the main importer of the Chinese modules to kick off initiatives favoring local manufacturing. The most important export destinations of the Chinese module exports have traditionally been the US and the EU. Both these markets (US and the EU) have/are now planning to further support their local manufactures via certain local manufacturing support policies. The Inflation Reduction Act (IRA) in the USA  and the Solar Energy Strategy (within the REPowerEU plan) – the Green Deal Industrial Plan (published in February 2023), the Net-Zero Industry Act (NZIA) and the Critical Raw Materials Act (both published in March 2023) are such policies . These latter EU policies are aiming for 40% of installed solar PV (~30 GW) being made in Europe by 2030.
Furthermore, it should be emphasized that, as a consequence of the Russian invasion of Ukraine, the European Union is adopting a more cautious approach to avoid placing exclusive reliance on Beijing for its solar energy initiatives. To put it differently, if China takes on the primary role in advancing green energy within the EU, it would grant Beijing greater influence in key political decisions, thereby displacing Brussels. European policymakers are thus striving to reduce their critical infrastructure dependence on China.
3. What are and will be the reactions to it?
From 2013 to 2018, the EU Commission introduced minimum import tariffs on Chinese solar products in order to protect the domestic solar industry. This, however, did not deliver a renaissance of European solar manufacturing, with persistent insolvencies. In this period, we also witnessed the bust of solar demand – it took several years for Europe’s solar installation rates to return to 2011 levels. Thus, one would think that the EU will not sleep walk again into such a blunder especially as Brussels does not have the support of the majority of the solar sector which is responsible for almost all European solar jobs and revenues today.
Against such a background, and as Europe’s solar sector association, Solar Power Europe recommends:
- The European Commission should amend the EU State Aid rules (the Temporary Crisis and Transition Framework) to allow EU Member States to support European solar manufacturers opex costs
- Allow for specific resilience auctions within Member States under a swiftly-adopted EU Net-Zero Industry Act to meet is solar manufacturing targets
- Set up an EU-level financing instrument dedicated to European produced solar PV, like a “Solar Manufacturing Bank” 
Moreover, as each EU member state has a different PV ecosystem, it is highly likely that each state will create special mechanisms to further support their local PV production. The reaction on member states level is a matter to be determined in the coming months.
4. Conclusion: data and market intelligence as canary in the coal mine
In the realm of the PV industry, effective inventory management in the face of fluctuating demand and prolonged lead times presents a formidable challenge. This challenge necessitates a meticulous and collaborative approach, recognizing that no singular entity operates in isolation within this dynamic industry. Instead, it is prudent for all stakeholders to adopt a holistic perspective, encompassing the broader business ecosystem. This comprehensive approach mandates decisions that not only bolster individual profit margins but also foster the collective well-being of interconnected companies.
Inherent uncertainty persists in demand due to the perpetual evolution of technology. Consequently, it is imperative for manufacturers to engage in proactive collaboration with their clientele, gaining profound insights into the actual, attainable demand for their manufactured products. Additionally, an opportunity exists for suppliers, manufacturers, and distributors to participate in innovative and cooperative endeavors focused on the efficient recycling of unused components, ensuring their sustainable integration into the hands of end-users or entities.
EUPD Research maintains a steadfast belief that the market will naturally self-regulate as the industry undergoes a transformative ‘reshuffling.’ This self-regulation will occur in tandem with the stabilization of regulatory mechanisms, rendering them less susceptible to fluctuations. Simultaneously, different stakeholders will acquire a refined understanding of the rules governing their activities. It is evident that component manufacturers boasting exemplary back-end R&D will strategically prioritize shipments to regions where reasonable profit margins can be maintained, meticulously factoring in logistics and distribution costs. Conversely, markets characterized by a high risk of revenue loss will be approached with caution.
Within this intricate landscape, pivotal factors for achieving success encompass access to comprehensive market intelligence, the harnessing of invaluable insights from industry installers, the adoption of a strategically astute regional positioning, and the judicious entry into the market with a meticulously calibrated level of investment. It is imperative to recognize that Europe constitutes a mosaic of distinct states, each delineated by unique political, economic, and environmentally sustainable strategies and prerequisites. The linchpin for survival and subsequent prosperity in the European PV market lies in the nuanced understanding of ‘what,’ ‘how much,’ and ‘when.’ This is achievable exclusively through rigorous market research and data analysis.
Against this backdrop, EUPD Research extends its resolute recommendation to principal stakeholders (both in the realm of politics and industry) for the forthcoming months:
Punitive tariffs would severely impact the EU climate goals, job market, slow down the PV industry as the European end-customers and consumers costs will increase. With the EU goal of achieving 42.5% renewable energy by 2030, which entails an acceleration of the PV deployment (600 GWac by 2030), solar PV is expected to create over 1 million jobs in the EU by 2025. Therefore, the re-shoring of the European manufacturing must happen with great caution and the right tools so that the painful, fruitless experience of the 2010s is not repeated.
In the ever-evolving landscape of the European Union’s renewable energy industry, navigating the complexities and embracing innovation are paramount. The art of communication tailored specifically to the target audiences would be key. Messages that resonate deeply, addressing the concerns and aspirations of diverse stakeholders within the renewable energy sector need to be created. The expertise in understanding the nuanced needs of installers, distributors, and other market intermediaries. By identifying and engaging with these key players, synergistic partnerships should be created that drive meaningful progress.
Macro market intelligence would be vital in understanding global and regional trends, installed capacity, module prices and the amount of PV components manufactured and exported. This would lead to a clear understanding of the top and emerging markets in each region in short and mid-term and help align supply and demand on a macro level. In other words, and strategically speaking, it optimized supply chains and ensures products reach the right places at the right times. Coupled with nuanced understanding of local markets as micro market intelligence, it enables the stakeholders to establish a localized company presence that resonates with regional sensibilities.
At the heart of any successful approach in Europe lies a finely tuned brand management strategy. Compelling narratives that capture the essence of each renewable energy initiative must be created along with adaptive strategies, acknowledging the unique challenges posed by each European state. By employing country-specific language, cultural gaps should be bridged and a sense of connection that transcends borders should be fostered.
Finally, in a world where sustainability is not just a goal but a necessity, implementation of the right communication strategies combined with comprehensive market knowledge emerge as the catalysts for transformative change. The mission is to accompany business partners to thrive in the EU’s renewable energy industry. By aligning the right strategies with the pulse of local communities, impactful change is created, which ushers in a future where renewable energy isn’t just a choice but the cornerstone of progress.
 Please note that this figure is taken from the energy think tank Ember. According to EUPD methodology, which is later briefly referred to, the Chinese module import by the end of September is around 73.3 GW.
Please note that by the end of September 2023 the Chinese PV export to the EU-27 reached around 85.9 GW according to Ember calculations.
 Obviously, this does not mean that Ember’s calculations are wrong, but to draw attention to the fact that there will be room for different results depending on more precise data and methodology.
 Please note that in 2022, the EU-27 installed around 40.4 GW and Europe (including other big European markets such as UK, Turkey, Switzerland etc.) installed approximately 44 GW.
 Please note that depending on the upcoming Q4-2023 data release the more precise estimation would be 57-60 GW for 2023. To find out more about how we collect and update our global PV data, please check EUPD Research’s Global Energy Transition Matrix on our website.
 Please note that this is just an assumption made based on the Ember data export. As mentioned before based on EUPD methodology, the Chinese module export to the EU by the end of 2023 is estimated to be ~87 GW
 It should be noted that if the EUPD methodology for the 2022 Chinese modules export to the EU is taken, just like 2023, this export figures reduces
 Please refer to EUPD Research US Market Leadership Study released in September 2023
 Please refer to EUPD Research European Market Leadership Study released in 2023
 For more details please refer to Solar Power Europe website
About the authors:
Markus A.W. Hoehner (hoehner [at] hrcg [dot] eu) is the founder, President and CEO of Hoehner Research & Consulting Group as well as EUPD Research. Markus has been active in the top-level research and consulting focusing on clean tech, renewable energies and sustainable management for more than three decades.
Ali Arfa (a [dot] arfa [at] eupd-research [dot] com) is the senior data manager at EUPD Research. With a background of politics and IR, Ali is leading several projects at EUPD Research. Amongst the most important projects he is managing is the online platform Global Energy Transition Matrix which constantly monitors the renewable energy and especially PV data of around 60 global markets.