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The data giveth and the data taketh away. In the case of a new study conducted by GTM Research for SEIA, the data giveth a surprising, seemingly counterintuitive view of the US solar industry: The United States was a net solar exporter by a far piece in 2010—including in trade with China—and nearly three-quarters of the direct value of solar systems installed here last year accrued to the US economy, to the tune of more than $4.4 billion. Titled “US Solar Energy Trade Assessment 2011: Trade Flows and Domestic Content for Solar Energy-Related Goods and Services in the United States,” the report factors in the entire value chain—from raw materials to finished products to balance of systems and installation to permitting and other soft costs—and demonstrates that there is a lot more to the total market picture than where solar modules are manufactured and how much they cost.
The research also provides a jumping-off point to check in on a pair of domestic companies—commercial project developer/builder Ra Power & Light and mounting system purveyor Renusol—each of which offers a snapshot of a slice of the US solar pie. In the first chapter of this two-part blog-feature, I drill down into some data in the report and then get a peek of RPT's recent module pricing experience.
The GTM study had two key research objectives: to ascertain the percentage of domestically created value in US solar installations last year as well as the value of solar products exported and imported into the country. On each front, the findings reveal a more layered complexity to the economics of the 887MW of projects deployed domestically in 2011.
The study encompasses all flavors of solar products, but found 82% of the value created came from photovoltaics, or about $3.6 billion of the aforementioned $4.4 billion. The majority of that value came not from the cost of modules or inverters, but from mostly nonsystem costs, such as site preparation, labor, permitting, legal, financial, engineering, distribution, and “value chain mark-ups.” About 31% of the total representative system cost was attributed to modules, and those modules featured US-sourced components to the tune of about 30% of their total value.
Although some modules installed last year were certainly made in the USA (and some of those red, white and blue tinged panels were exported as well), the vast majority were not. But that same mass of mainly imported Chinese panels feature a healthy dollop of good ol’ American polysilicon as well as the contribution to their production of US-made capital equipment.
Those two upstream categories comprise a big reason for the US solar trade export bulge, combining for nearly $4 billion of the more than $5.6 billion in goods sent overseas. On the imports side, modules accounted for a not-insignificant nearly $2.4 billion of the $3.75 billion, but were still no match for the wave of US products. In the end, solar exports topped imports in the US by almost $1.9 billion, according to the GTM study.
Given the falling price of modules, the numbers for 2011 could end up showing even more value on the export side of the ledger. I was recently contacted by Michael Campbell, managing director of Ra Power & Light, a Southern California-based commercial solar project developer, who shared current module pricing he has been offered for a 129.7KW rooftop system the company will build on top of a food compound production plant in Vista, a city located in northern San Diego County.
Campbell emphasized his business model is not about finding the absolute cheapest modules or BOS products on the market. “We only sell what we would put on our own roof,” he told me in one of our many email exchanges.
“We don't buy solely on price like the other guys, and we certainly don't sell on price,” he said. “We are consistently $0.20 or more per DCW (DC watt) than the competition and do not participate in RFQs (his italics). We are successful because we sweat the small stuff and sell solutions that deliver greater value over the life of the renewable asset, not because we are the cheapest.”
“We sell top-of-the-line (no junk), value-engineered commercial PV @ $4.85 per DCW all-in, and pack the roof to eliminate [any] daytime plant operations spend for light manufacturing operations,” he explained, adding that RPL backs the installer warranty with a 10-year minimum operations and maintenance contract.
For the Vista project, Campbell has chosen Canadian Solar 240W monocrystalline-silicon CS6Ps as well as Satcon inverters and Sunlink racking systems (noting that the company has “hitched our wagon” to the latter two product lines, to “reduce complexity and assure quality”). In a previous 100KW site built in nearby Carlsbad, Mitsubishi modules and PV Powered inverters create and transform the solar energy.
So what price has he been quoted directly from Canadian for the 528 modules he will rack on that roof in Vista? $1.17 per watt: that’s down 6 cents in less than two weeks, the time of our first communication when Campbell cited a $1.23 price point. He’s been offered even lower prices for some older, lower wattage models as the module companies seek to “bleed off inventory” and match the competition’s pricing—an increasingly common practice in a time when the industry consensus estimates 5-8GW of inventory may sit in the global warehouse.
Campbell also copied me on a direct bid he received from a second-tier Chinese supplier, replete with module performance comparison and bankability documentation, in which he was offered 230W panels for $1.15/W and 225W units for $1.10/W. Although he has never used those modules, he believes they are a “good product.”
He also sent me information received that showed pricing from a European wholesaler perspective, with bulk (MW-scale) prices well under a Euro per watt on several name-brand modules and no-name Chinese panels down to 70 Euro cents “shipped directly from the manufacturer.”
Over the past six months, Campbell said he has seen module costs come down from $1.60/W to $1.30/W three months ago, to the current $1.10/W or so on the low end—a trend representing about a 30% erosion of one customer’s de facto ABP (average buying price).
(The GTM study posited modules accounting for an average of $1.85 of every $6.25/W of c-Si-based total system installed cost during 2010, numbers that now seem almost quaint, given the market volatility this year.)
On the inverter side, prices have not dropped as fast, with some hitting about $0.26 per DCW, according to the RPL managing director. Over on the racking side of his BOS BOM, there is no volatility to speak of, although Sunlink has “added engineering services to offset the lack of price reductions.”
While Campbell may be pretty stoked about the drop in module prices from the perspective of his EPC business, he has also been trying to get a domestic module manufacturing company off the ground, where the view is distinctly murkier. For now, those plans are on hold, as the prospects of late for building a US factory have been “completely undermined. I'm certainly glad this happened now, before we had robots and the shop-floor gear arrived!”
He believes the “PV industry is cannibalizing itself, trading long-term viability for short-term gains,” and doesn’t “see a way back to $1.40/W anytime soon. Even after the coming shakeout in Q1 2012, it will be next to impossible to get back to those average unit prices without an (artificial) product shortage like last year.”
Given the combination of a possible doubling of the US solar market this year, seriously cheaper modules and other components, and some reduction of soft costs, the 2011 version of the GTM/SEIA study should see significant variations compared to last year’s research.
(The second installment of this two-part blog-feature—which can be found here—checks in with Renusol, long-time German BOS purveyor and new kid on the US racking/mounting block, and looks at some data points related to balance of systems in the GTM report.)
Latest Comments
Great article. Refreshing to see a developer like Campbell willing to share real world information that is so useful to Industry insiders.