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How to Survive Solar's Unhealthy Consolidation

The solar sector is once again entering a period of increased activity, but not the good kind, as several firms have announced losses and cutbacks, temporary shutdowns, and closing down entirely. As the solar photovoltaic (PV) industry plows through the current consolidation — and eventually out of it — here are six things to consider and remember:

Stop invoking grid parity.  The promise of grid parity, which was supported by many price/cost and technology roadmaps while lacking a definition that included healthy margins, should be replaced with the goal of energy independence. After the expense of installing the technology, running costs are minimal, resulting in independence from utility-rate volatility for system owners of all system sizes; if the utility is the system owner, it also has control over its costs. Prices for natural gas and oil vacillate up and down. Once a PV system is installed there is stasis, stability and freedom from the anxiety felt when utility bills are opened, and from increases in the price of raw materials.

Carpe Diem for existing and new markets.  Realize that PV will not necessarily be an easy sale in areas where energy rates are already low. Eventually, though, even these areas will experience volatility, so seize the day, and the opportunities, when they present themselves. And beware: in the US, underbidding on PPAs will lead to systems that are either unprofitable or un-installable.

Steer clear of bandwagon jumping.  Resist the siren songs of unreasonable goals (system prices of $1.00/Watt-peak), announcements that grid parity has been achieved (as manufacturers fail weekly), or announcements of the next big market (which almost never prove true or supportable). Stick to developing reliable technology including balance-of-system (BoS) that generates electricity for around 30 years, perfecting installation practices, and developing innovative business models that will stand the test of time.

Find and trim costs away from the module.  There is ample proof that today's low prices for module technology are unsupportable in over the long term. We should not be proud of an achievement that drives manufacturers globally out of business. And system prices and costs today are based on module prices that are not supportable; there is nothing to brag about here either. There is much learning still to come in BoS innovation, along with installation design and installation efficiency — and there are out-of-control costs for these entities as well, such as labor, raw materials and consumables, let alone for equipment.

Accept that we're still learning.  The multi-megawatt "utility-scale" installation category is relatively new, and was driven by the feed-in tariff (FiT) model in Europe. The industry is still learning how to manage these large systems, from installation design to technology choice to financing to project stewardship; much more field data is necessary to continue this learning. Along the way, underperforming systems will be discovered, and this will lead to system design learning. There is no clear trend here; learning takes time.

Quit infighting.  The current PV industry infighting is painful to watch. As an industry we are in this together and we all need each other.

It is true that all industries experience consolidation. However, for solar PV the overbuilding of manufacturing capacity was based on the belief that either the FiT incentive model would never end, or that grid parity would be achieved by the time it did. Today, the FiT model is unstable with erratic changes to rules and tariffs, largely unprofitable, and coming to an end. Grid parity has been achieved, but at the cost of solvency. A healthy consolidation would see more mergers, and not achieved on the back of the almost blanket failure of an entire industry. This is not it.


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Volume 18, Issue 3


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