WoodMac: COVID-19 Driving Down Solar and Storage Prices Faster Than Expected

The fallout from the coronavirus pandemic and coming recession
is expected to drive down pricing for both front-of-the-meter solar
and storage systems evenfaster than expected.

Project construction delays and tightening consumer spending
will drive down storage and electric vehicle demand,
according to
Wood Mackenzie. This in turn will drive down U.S.
front-of-the-meter (FTM) storage system costs more rapidly than
previously forecast.

At the same time, WoodMac finds that solar PV system costs in
the U.S. are
falling
faster than anticipated across all market segments.

Falling FTM solar system costs are being primarily driven by
module price reduction, partly due to price pressure on
manufacturers from demand destruction caused by coronavirus.
Similarly, battery prices are what’s driving the price reductions
WoodMac is expecting for FTM energy storage systems.

Storage pricing impacts from coronavirus

Stakeholders anticipate delays in FTM energy storage and solar
projects for the U.S. in 2020. Global EV sales are also expected to
drop by 43 percent year-over-year. 

Driven by the downside in battery demand from both storage and
EV markets, system cost declines for FTM storage are going to be 10
percent year on year in 2020, which is significantly more than the
7 percent YoY anticipated in Wood Mackenzie’s pre-coronavirus
scenario.

Front of meter storage system cost declines

In the near-term there is a risk of battery oversupply,
especially from Chinese vendors. Post-2022, the market will begin
to rebound and is expected to return to normalcy.

Beyond batteries, storage balance-of-systems costs will see
minimal impact due to COVID-19. Once the coronavirus pandemic is
contained and the global economy begins to recover, system costs
will resume their previously forecasted pace of steady
year-over-year decline.

COVID-19 and front-of-the-meter solar pricing

In solar, mono PERC utility system costs are now expected to
decline 20 percent from 2020 to 2025, compared to the pre-pandemic
forecast of a 16 percent price decline during that period.

Module cost reduction will be the most significant factor
impacting commercial & industrial and utility system costs as a
result of the pandemic.

Not only are module manufacturers facing reduced demand and
subsequently lowering margins to stay competitive, but they also
experienced a reduction in their supply chain component costs,
leading to module price declines at the end of Q1.

The Investment Tax Credit (ITC) reduction to 26 percent in 2020
will create further downward price pressure across all market
segments, for both EPCs and developers. However, we don’t expect
significant changes to system costs, as EPCs and developers have
been preparing for this stepdown for a while now.

As the solar industry faces demand destruction in 2020 from
coronavirus, the impact across market segments will vary. For the
residential segment in particular, we expect demand to pick back up
again by the end of the year and before the ITC steps down again in
2021.

As a result, companies may be able to maintain healthier project
margins towards the end of 2020 as a result of the heightened
demand, just like we saw at the end of 2019.

**

Molly Cox is a solar analyst and the author of the new Wood
Mackenzie report
‘US solar PV system pricing: H1 2020.’
Mitalee Gupta is a
storage analyst and author
of ‘U.S. front-of-the-meter storage system price trends H1
2020.’

Source: FS – GreenTech Media
WoodMac: COVID-19 Driving Down Solar and Storage Prices
Faster Than Expected