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Atthe beginning of 2023, European countries gradually regarded the development ofrenewable energy as part of their regional security strategy, withphotovoltaics being the most prominent. However, in the first half of lastyear, the market was overly optimistic and expected full-year photovoltaicdemand, which led to a large number of purchases. This, coupled with pricecompetition among Chinese manufacturers, led to the accumulation of moduleinventory in the second half of last year. The price of PV modules also fellfrom 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.
Marketoverview and policy observations of major European countries
Europeis the second largest photovoltaic market in the world after China. The demandfor photovoltaic modules in 2023 is about 89GW, and this year it is expected toincrease to 97-115GW, with an overall growth rate of about 20%. Among them,Germany, Spain, Poland and Italy are the top four photovoltaic markets inEurope. Infolink estimates that the demand for photovoltaic modules in theabove-mentioned four countries this year is 17.5-19.5GW in Germany, 11.5-12.5GWin Spain, 7.5-8.5GW in Poland and 5GW-6.2GW in Italy. The total demand of thefour countries accounts for approximately 42% of the European market demand.Therefore, the following will be an observation on the installation situation, thisyear's photovoltaic module demand and policy development of the above fourcountries.
Germany
Accordingto statistics from the Bundesnetzagentur, 14.26GW of new photovoltaic installedcapacity has been added in 2023, exceeding the annual installation target. Theincrease 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 targetin 2030.On average, it must reach 19GW of new installedcapacity every year. Since Germany's installed capacity performance in recentyears has always been at the forefront of European countries, coupled withgovernment policies that strongly support photovoltaic development, theanalysis indicates that the possibility of achieving the goal is high. In termsof policy, Germany proposed a number of stimulus policies last year tostimulate the demand for photovoltaics in distributed projects. It alsoallocated a budget of 4.1 billion euros to subsidize the production of localphotovoltaic raw materials and components in an attempt to strengthen the localsupply chain production capabilities. However, the German Constitutional Courtruled in mid-November last year that the federal government violated the"debt brake" by investing unused anti-epidemic debt funds into greenenergy industry plans, causing the 60 billion euro budget frozened by thecourt. As a result, the government faces a budget gap. In order to resolve thefiscal impasse, the federal government has cut the "Climate andTransformation Fund (KTF)" and photovoltaic subsidy budget, which mayaffect photovoltaic subsidy expenditures and weaken the subsidy ability tostrengthen local photovoltaic production capacity. However, the federal cabinetalso passed the draft "Solarpaket" in August last year, which will besent to the German Bundestag and the European Parliament for voting in Februaryand March this year. It is currently estimated that Germany may simplify thePhotovoltaic grid connection procedures, increase photovoltaic bidding orprovide project sland as the mainstays of stimulus policies.
Spain
Accordingto statistics from Spanish power grid company Red Eléctrica, Spain has added atotal of approximately 4.7GW of photovoltaic installed capacity throughout2023. As of January this year, Spain’s cumulative installed capacity hasexceeded 25GW. Compared with the 2030 installation target of 76.4GW, it hascompleted nearly 33%. The average annual demand Only by adding at least 7.4GWof new installed capacity can the target be fulfilled on scheduled. Comparedwith Germany, Spain is less obvious in stimulating the demand for self-occupiedresidential photovoltaics. It mainly focuses on photovoltaic installations inpublic facilities. It increases the photovoltaic installations in publicfacilities through the "Revitalization, Transformation and Recovery Plan(RTRP)" and through the " Next Generation Funds" subsidizesself-occupied residential installations. According to statistics, publicfacilities currently account for 60% of the total photovoltaic installedcapacity; the industrial and commercial fields account for 27%; residentialself-use accounts for 13%. However, Spain is in a leading position in Europe inpower purchase agreements (PPAs),making it easier toattract developers to invest. At the same time, large-scale projects continueto increase. However, there are still some challenges that need to be overcome,such as long project permit application times, low government administrativeefficiency, and a shortage of professional photovoltaic technical manpower,coupled with local farmers’ protests that the installation of photovoltaics onfarmland may impact agricultural, which affect the development of centralized photovoltaicprojects. However, overall, Spain is still one of the markets with greatpotential in Europe, and its demand this year is expected to grow by 28-32%compared to last year.
Poland
Accordingto statistics from the Polish Institute for Renewable Energy (IRE), a total ofapproximately 4.2GW of newly installed photovoltaic capacity has been addedfrom January to November 2023. As of November last year, Poland’s cumulativeinstalled capacity was nearly 16.4GW, which was 61% completed compared with the2030 installation target of 27GW. It is the country with the highest compliancerate of photovoltaic installation targets in Europe. On average, it needs toadd at least 1.6GW of installed capacity every year to reach the target asscheduled. Based on Poland's current installation speed, it is expected toreach the target ahead of schedule.
Polishphotovoltaic demand is growing steadily, mainly driven by the "EnergyPolicy of Poland until 2040 (PEP2040)", which has made Poland the countrywith the highest photovoltaic installation compliance rate in Europe. One ofthe main reasons for Poland's bright photovoltaic demand in 2023 is the fifthround of the "My Power (Mój Prąd) Plan" launched in April last year,which successfully stimulated demand for rooftop photovoltaics. As of the endof September last year, the number of distributed installed capacity below 50KWin Poland has exceeded 1.3 million, and about a quarter of households acrossthe country have installed rooftop photovoltaics. The dedicated unit alsostated that it does not rule out the possibility of expanding the subsidybudget in the future. It is currently believed that Poland also has greatpotential in developing ground-based photovoltaic projects. In addition, DonaldTusk, 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 topropose a number of stimulus policies this year, it is expected to increase thedemand for photovoltaic in the Polish market. It is estimated that photovoltaicdemand in Poland this year is expected to grow by about 31% compared to last year.
Italy
Theincrease in distributed photovoltaic installed capacity in Italy in 2023 ismainly attributed to the "2023 Superbonus", which provides users withphotovoltaic installations with a 90% tax credit. Although it is significantlylower than the 110% tax credit of the Superbonus in 2022, it is also successfullystimulated demand for rooftop photovoltaics. According to statistics, about 47%of Italian installed capacity in the first half of last year came fromdistributed projects. However, the 2023 Superbonus tax credit will be reducedto 70% starting this year. Observing the data of Italian photovoltaic modulesimported from China,the purchase in the fourthquarter of last year has dropped significantly compared with the first threequarters, with an average quarter-on-quarter decrease of about 60%, indicating thereduction 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 toinstall solar panels and energy storage systems, and each household can enjoyup to 50% income tax reduction, but the demand stimulation brought by analysisis 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 gridconnection review procedures and improve grid transmission, it will bedifficult for demand to grow significantly. It may be possible to stimulatephotovoltaic demand by expanding rural power supply and other large-scaleprojects. It is currently estimated to be approximately 36% of Italy’s 2030installation target, and an average of at least 7.3GW of new installed capacitywill be needed every year. In the long term, there is still considerablephotovoltaic demand, but if the speed of photovoltaic installation is to beaccelerated, it still needs to be observed whether the above issues can beimproved.
Acomprehensive overview of the European market from the first quarter to thefirst half of 2024 shows that the first quarter is affected by winter and theshortage of installation manpower. It is the traditional off-season in Europe,and demand may be affected. However, recently, European distributors haveaccelerated the consumption of component inventory and the rapid inventorydepletion will enable Europe to replenish its inventory, which is expected tosupport European market demand in the first quarter of this year to a certainextent. However, in terms of long-term demand, the average European electricityprice has dropped from a high of 438 euros per MWh in September 2022 to 84euros per MWh in December 2023, a drop of more than 80%, which may affect theend-users demands for photovoltaics, making it difficult to reproduce thedemand 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 notbeen significantly improved, making it difficult for the installed capacity togrow rapidly. Also, the base period is increasing year by year, and the overallgrowth rate is slowing down.
Interms of full-year demand, as the second and third quarters enter thetraditional peak season of the European market, and market demand begins toshift from PERC to TOPCon, the European market is expected to maintain acertain level of demand, and with the arrival of the off-season in the fourthquarter, there may be a normal situation where the sales is revised downward.
Overall,Europe's rapid inventory consumption is expected to maintain a certain extentin the first quarter of this year, but it will not be able to reproduce the purchasinggoods in the same period last year. In the second half of the year, as batterytechnology changes from P to N, demand is expected to rebound, and it has theopportunity to grow by at least 15% this year compared to last year. Lookingforward to long-term demand, as most European countries want to achieve the2030 installation target, but the current compliance rate in most countries hasnot exceeded 40%, reflecting the urgency of accelerating the installationspeed. In addition, net-zero has become the energy development goal of mostEuropean countries and even the EU, and long-term demand is expected tocontinueto rise.
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