ld-of-pv-manufacturing.html?cmpid=EnlEIQDailyOctober42011
By Paula Mints
principal analyst, PV Services Program
October 3, 2011 - Emily Dickinson wrote, "Fame is a fickle food upon a
shifting plate." Just a few short months ago solar was big news globally,
sometimes touted as the hope for a planet suffering from climate change,
offering an industry filled with shiny new factories, perhaps even the new
job creation engine for the US. From 2005-2010 the global PV industry grew
by a compound annual rate of 65%, and in 2010 shipments of technology to the
first point of sale grew by 120% over the previous year. What a wild ride it
was -- and then, three US bankruptcies (including a very loud one)
coinciding with an upcoming election year in the US ... well, what a
difference a few weeks make. Solar is *the* topic currently, and not in a
good way -- the present rush to demonize the PV industry is simplistic and
threatens to stall progress.
Warning: this is not an article about any company in particular -- it is
about the leadership in PV manufacturing shifting from the US to Japan to
Europe to China and Taiwan. All of the data used are primary (hard market
data) and the analysis is independent and original. This is also a reality
check on the nature of industry margins -- bluntly, for most of its ~40 year
history, technology manufacturing has operated on negative margins.
Traditionally, solar has been a buyer's market.
The PV industry still needs incentives and subsidies, and to keep these
incentives and subsidies it has promised to wean itself off of them while
remaining profitable. Frankly, these two topics are currently mutually
exclusive, and unfortunately, the industry has promised itself into a corner
from which it cannot emerge with higher prices lest it be seen as breaking
its promises.
The solar industry is filled with true believers, who can sometimes be blind
to market and technological realities. The daunting task ahead of all solar
technology manufacturers is to develop a technology that will operate
efficiently for at least 25 years in the sun (meaning, sometimes very hot
sun and very bad weather), and become ever cheaper to manufacture. (A
personal observation: I have seen many a technology roadmap promising that
solar will cost ~25 cents/Wp to manufacture, despite the industry's lack of
control over its raw materials over and above the cost of polysilicon and
rare earth metals and including the cost of aluminum, steel, glass,
consumables, silver, etc. Nothing is free and everyone is taking margin from
the raw material manufacturer to the system installer -- though these days
cell and module manufacturers are taking very little margin indeed.)
The promise of ever-lower prices ignores the cost of hiring and supporting a
highly trained staff, the cost of continuing R&D, and often ignores any
discussion of margins. This promise of ever-lower costs ignores the
subsidized cost of other energy technologies. Moreover, it keeps the
discussion focused on cost -- instead of focusing on the other attributes of
solar. These other attributes include (among others): long running,
relatively low maintenance (O&M), and the creation of direct and indirect
jobs. Currently there are myriad of articles all filled with facts and the
dissection of these facts about the solar industry, particularly PV. Maya
Angelou said, "There's a world of difference between the truth and facts.
Facts can obscure the truth."
Prices down, down, down...
Currently a number of factors are holding prices down: high capacity, high
levels of inventory, softer demand, a myriad of module assemblers (not the
same thing as technology manufacturers), and the continuation of a degree of
aggressive pricing. Third-tier manufacturers are pricing product at
<$1/wp,>Figure 1 presents prices to the first point of sale. In some cases,
these prices are not passed on to the consumer, nor, frankly, should these
prices be passed on to the end user, because all along the chain
participants need to take margin in order to stay in business.
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