Today’s Solar Market:
Changes to Expect for Companies and Consumers
The solar market is continually changing, shifting to reflect consumer needs, trade agreements, and innovations in technology. As solar energy becomes a stronger option in the renewable energy field, the costs of manufacturing solar modules has changed as well. While this can mean good news for consumers, for large manufacturers it could lead to more industry consolidation or increased price squeezing.
Solar Module Manufacturing
Solar modules are primarily manufactured in East Asia. By far, this region leads the world in large-scale manufacturing companies, with 8 of the top 10 companies coming from China, South Korea, or Taiwan. However, even these companies are not immune to fluctuations in the marketplace.
Trina Solar, JA Solar, and Hanwha Q Cells all reported 3rd quarter losses in 2017. For Hanwha, this came off an already difficult end to the 2016 year in which they lost over $25 million in six months.
Several factors are involved in the decline of some of the international solar companies. First, innovations in technology have made the bottom fall out of prices for commodity modules. Because the technology is improving so rapidly, companies are struggling to keep up with the changes and instead must lower their prices on their existing products. As a result, they post losses.
Second, fears of a trade tariff have influenced the marketplace in 2017 and into early 2018. International manufacturers have been forced to lower their prices for modules, and now are facing potential tariffs on all products. These are estimated at 30-35% for solar modules. In January 2018, President Trump voted to enact a 30% tariff on all international solar modules, which could lead to more instability for even the large manufacturing companies.
Domestic Solar Companies
In the United States, we are seeing a similar downturn for many national solar companies. They are failing primarily because of decreased consumer demand and because they are charging higher prices than local installers. National companies, such as Spruce Finance (a company that finances residential solar projects) have been forced to make substantial payroll cuts and layoff hundreds of workers this year.
Although this seems like a challenging time for the solar industry, market experts believe that it will lead to greater stability for solar.
What to Expect in the Future
As large manufacturers close, they will most likely be absorbed into other manufacturers. This will create less competition within the marketplace. We may also see a greater tendency for residential solar consumers to work directly with more local installers – this route promises the most competitive pricing. Technological innovations will cause the production of commodity modules to fall even farther, which with the potential passage of trade tariffs, could shift more production to the United States.
What does this mean to residential solar consumers? Technological advances will cause the production costs to fall, which will likely lower solar costs for residential consumers. Solar installation costs dropped nearly nine-percent in the past year, with little indication that they will plateau at any point. This is great news for homeowners who are making the switch to solar.
The strongest manufacturing companies will be the ones that create essential components for solar panel systems. They will have the ability to charge a premium on their parts and command a stronghold in the marketplace. The companies that fail to produce essential parts – which represents many of the larger international manufacturers – will need to create more efficient modules or run the risk of bankruptcy.
Solar is still relatively new, but is continuing to grow (39% of new energy installations came from solar last year), which means both the job outlook and consumer outlook are good. For companies both domestic and abroad, they will need to stay on the forefront of technological advances in order to stay competitive.