Industry analysts continually project lower and lower prices for solar photovoltaic modules for the end of 2010, which means integrators will get offers of inventory-clearing prices. But to ensure quality product, integrators should make sure their suppliers not only offer competitive prices but also meet other key characteristics, explains Mark Chen from Abound Solar.
by Mark Chen, Abound Solar
March 17, 2010 – Industry analysts continually project lower and lower prices for solar photovoltaic modules for the end of 2010. Most figures range between $1.70-$1.50 per watt. Some analysts have even ventured to guess that prices could drop as low as $1.30/W if demand outside Germany fails to be realized. Counterintuitive as it may seem, such price declines place even greater responsibility on system integrators and project developers to carefully select their module suppliers.
End-users hear comments about rock-bottom pricing, typically from third-tier suppliers. Integrators will get offers of inventory-clearing prices. But to ensure a quality product, integrators will have to make sure their suppliers not only offer competitive prices but also meet other characteristics.
Long-term cost advantage
The price of crystalline silicon modules has fallen dramatically since 2008 (Figure 1), primarily driven by the 90% fall in polysilicon costs. As the cost of polysilicon stabilizes around the long-term economic production cost, manufacturers will face greater difficulty in cutting crystalline silicon module costs. Some manufacturers have been able to vertically integrate, thereby ensuring slightly more margin that can be compressed as prices contract further. Other products, such as cadmium telluride thin-film modules, do not use any polysilicon and have been shown to be able to maintain costs substantially below the industry norm. Regardless of the specific technology or vendor selected, module purchasers should look to make sure their suppliers can economically produce at low price levels.
|Figure 1. Cost of tier-1 crystalline silicon modules.|
Focus on quality
As manufacturers hunt for costs to eliminate, some have cut back on product testing, quality control, and certification. Cells and modules bought on the spot market to capture the lowest bill-of-material costs have varying operating characteristics, and certainly cannot be expected to have consistent quality and reliability. Stories of counterfeit UL and TUV certificates abound. Buyers must be wary to ensure that the manufacturers of photovoltaic modules have rigorous quality standards in place and are not simply rebranding products from lower quality OEMs.
Plan for the long-term
The worldwide market for solar PV is expected to grow 30%-50% in 2010 by volume. Successful system integrators and project developers are not planning for just 1Q and 2Q, but are also developing their pipeline for 2011 and 2012. They should expect the same from their suppliers. Integrators should work to develop long-term relationships with strategic module manufacturers that can meet their supply needs not only for a specific project but for the future as well. If manufacturing capacity begins to tighten, those relationships will payoff huge dividends as the project developers will have access to high-quality, reliable supply, at prices that remain competitive.
Module costs will represent a decreasing share of total system costs as pricing continues to decline. System integrators that simply look at system components on an individual basis will sub-optimize their systems. Some module manufacturers have made significant efforts to reduce labor costs by removing frames, integrating mounting solutions, and simplifying cabling. Others have worked directly with integrator manufacturers to optimize joint performance and thereby extend reliability and minimize maintenance.
|Figure 2. Total system costs, broken down by modules and balance-of-system (BOS) integration.|
The landscape of PV module manufacturers is becoming ever more crowded as second generation PV startups begin production and large conglomerates like GE and Samsung increase their investments. Each manufacturer will attempt to offer competitive prices in 2010’s deflationary environment. Solar project developers must increasingly look to non-price differentiators to help guide their purchasing decisions.