Trade issues with China have sent the panel industry into flux, and only the strong will survive.
The last issue of Solar Power World featured a piece on The State of the Solar Inverter Industry, in which installers shared their likes and gripes with the electric component. Solar companies had lots to say on panels as well, but, in light of recent events, selecting the right solar module goes beyond technology and price. The Trade War with China adds another element to choosing the right component. It’s a decision that not only affects solar projects, but also potentially businesses, which impacts the fate of the U.S. Solar Industry as a whole.
May 17th was a big day for solar. The Department of Commerce’s decision to place antidumping tariffs ranging from 30 to more than 200% on Chinese solar manufacturers was a shock to most. After the Department’s initial move to place mild 2 to 4% tariffs on the Chinese in March, many didn’t expect anything different this time around. This was Ron Van Dell’s thinking, President and CEO of SolarBridge Technologies.
“I didn’t think it would be so high, neither did a lot of people,” he says. “But I guess it’s not over ‘till it’s over.”
What Will China Do?
Though it’s possible to say the high tariffs were a shock to most, opinions of what Chinese companies will do aren’t as in line. Some are curious to see how quickly Chinese solar manufacturers can adjust their supply chains—most have already been working on sourcing cells from other countries for months. Others acknowledge that some companies are in a better position to deal with the tariffs than others—not all will be able to adapt. Still, others wonder what Europe will do. Europe has notoriously reacted first in many matters throughout history, but the U.S. took the lead on this one. The greater question is how this decision will affect the U.S solar market here at home.
Effects on the U.S. Solar Market
Just as views of how this decision will affect China vary, so do opinions as to what will happen to the U.S. solar market. Mark Durrenberger, President of New England Clean Energy, suggests panel prices will increase in the short term, but will level off in the long run as manufacturers adjust. He also has an opinion as to whether this will encourage people to buy American.
“People may buy fewer Chinese modules,” Durrenberger says, “but that doesn’t mean they’ll necessarily buy from the U.S. There are panels from Mexico, Germany and all sorts of other options.”
Van Dell says that in some ways this decision may seem like a victory — it may make things tactically troublesome for some Chinese companies — but he doesn’t see it as a way to further American renewable energy.
“We have to realize, there’re a lot more jobs in solar than just in panel manufacturing,” Van Dell says. “There’re probably ten times more jobs in design, installation, service and maintenance etc.— and these are local jobs. If we are trying to drive more PV deployment here at home, and more green jobs, then we shouldn’t focus only on modules and manufacturing.”
Standard Solar President Scott Wiater says he hasn’t sided on the fight, but expresses disappointment in it. He sees it as just another distraction to the industry.
“We don’t need distractions when we’re trying to reach grid parity,” Wiater says. “It’s not a benefit to anyone.”
Van Dell says his company hasn’t been much affected by this decision because SolarBridge Technologies works with a matrix of solar module partners from all over the world. The company also focuses on residential and light-commercial projects that have smaller panel orders so nothing has been placed on hold, as with some of the larger utility-scale projects. Mark Begert, Executive Vice President and Director of Meridian Solar, says most of the recent projects completed by the company are government-owned and emphasize using American-made products. If not using U.S. products, Meridian uses components from countries with existing U.S. treaties, so the company hasn’t experienced effects of the decision either. Durrenberger, however, has.
“One of our suppliers stopped taking imports of at least one product line because of the tariffs,” Durrenberger says. “They literally had the ship turn around. This was a pain for us because we had projects sold using those panels. Fortunately, we were able to find a drop-in replacement.”
Selecting a Solar Supplier
As if the current political atmosphere hasn’t made selecting a solar module manufacturer tough enough, solar panels are beginning to show little differentiation from company to company.
“The best-in-class guy isn’t much different from the other guys, as he used to be,” Van Dell says. “We look to partner with companies who want to differentiate.”
Van Dell says manufacturers can create value for their products by being open minded and different. For example, SolarBridge has teamed-up with a manufacturer of DC modules to integrate their microinverter and so create a true AC Module. Van Dell says AC modules are simpler to install than DC options and have an integrated 25-year warranty, so no inverter replacement is needed half way through the service life of the PV system. He sees AC modules as a better option for installers because these enable completing more projects with the same number of workers.
“We’re interested in stepping up to differentiated products,” Van Dell says, “rather than companies that say this is trench warfare and are all about winning on absolute lowest cost. Modules are actually less than half the cost of installing a solar system. Labor and other costs are what get expensive. Innovations such as AC modules address these system cost issues directly.”
But each company has its own ideology when it comes to selecting a panel manufacturer. For Durrenberger, it’s all about manufacturer credibility.
“Proven technology of three to five years doesn’t excite me,” Durrenberger says. “I have to also warranty these things. Companies who have been around for 35 or 40 years are likely to be around for the duration of the warranty.”
Begert says Meridian also looks to partner with strong, stable businesses. Meridian checks out potential partners through financial and quarterly reports, as well as analyst reports.
“Our approach to procuring these key components to a solar system is to work with stable companies with sound balance sheets,” Begert says. “We ask around, do our research and take time to understand the word on the street.”
Begert says it’s important to partner with quality manufacturers because customers want to know their products are going to be supported for the life of their systems.
“The types of products we specify reflect our expertise, credibility and integrity,” Begert says. “Going with the lowest cost product to make a sale is not a way to create a long-term credible brand.”
Performance, installation cost, seamless integration, design resilience and degradation rate are also important factors for Meridian, according to Begert.
Thoughts for the Future
U.S. solar companies have many thoughts and expectations for innovation and the future of the industry. For instance, Durrenberger predicts increased power density will solve space issues.
“The Holy Grail for installers is being able to put more watts up per lift or labor unit,” Durrenberger says. “Fewer parts to connect also eases installation, which is better for businesses.”
Begert also says higher performance for lower cost will define success for solar module manufacturers. He stresses the need to lower solar costs down to the prevailing cost of electricity, but an incentive structure comparable to other types of energy generation will also be necessary.
Other predictions for panels in the future include:
-More consistent size and shape
-More AC modules or microinverter compatible DC modules
-Increased wattage, perhaps up to 300W
-Improvements in manufacturing that will drive down costs
-Possibly mixed technology (thin film on PV, perhaps)
One common prediction is that solar companies will consolidate. But there are different opinions on what it will take to make it. Begert says solar module manufacturers that can’t introduce added value, such as financing options, will ultimately struggle. In his opinion, business models also matter.
“Manufacturers are best off gearing their services toward the developer and the dealer community, instead of competing with these parties, moving downstream and attempting to capture these project margins themselves,” Begert says. “This ultimately alienates the module manufacturers from the dealer community.”
Van Dell agrees, going back to the idea of differentiation.
“It’ll be the ‘tweeners who have no strong differentiation and can’t offer the lowest over-all price that won’t make it.” SPW