The real price of solar

What is the real price of a solar panel these days, really?

If you believe the specials being offered around the big wide land, you’d have to assume it’s around 40c/watt, assuming those offering the specials are covering their costs and making a little profit.

However, digging a little deeper into the issue through publicly available information reveals a different story. Although costs are not fixed (foreign exchange, utilisation, silicon, silver and energy costs all vary over time) most companies are reporting costs around the US$0.55-0.60c/W mark.

On top of that you need to add freight, factory overhead recovery and of they have local representation, local overhead recovery too; perhaps another US$0.08-$0.10c/W depending on how well trimmed they are.

Additionally, in the complex global economy we have a huge number of industry participants all in different stages of growth and scale. This means that profits – or losses – can be staggeringly different, have a lag, and whilst certainly an indicator of overall health, are not always an indicator of whether product is being sold at a loss today.

So how is it that we can see prices below this? Does it equate to dumping?

Perhaps, but I suspect not in Australia’s highly unique case.

Firstly there is the issue of parallel importing.

A number of high profile PV manufacturers have released statements on parallel importing in Australia recently highlighting (just like other industries) that unofficial imports typically don’t always carry the same warranty, won’t get local support and in some cases are obsolete models.

It’s not illegal, but passing the product off as something which it isn’t is illegal and actions are underway to make good on false representations.

Secondly, there is the issue of clearances.

No corporation likes sitting on stock for too long and if a market slows down, the cost of carrying stock goes up and so clearing it at a special price makes financial sense; and that can mean lower than normal prices. That’s normal behaviour in a volatile market and a rational business practice, although not without some pain.

Thirdly there is the issue of product type and brand strength.

In Australia, as I have reported many times before, we have been awash with unknown brands from very small operations elsewhere in the world, many of whom have already exited the industry.  According to media reports quite literally, factories that previously made items such as cigarette lighters or shoes converted to making solar panels in the rush to join the solar snowball.

Using old ‘recipes’, obsolete equipment and lots of manual labour enabled them to make products at 10-15c/W cheaper again and if they had excess stock or were closing (as many have) then you could get it even cheaper.

With little scrutiny from some buyers in Australia, no bankability issues to worry about and a historical preference for 72 cell footprints (now rare elsewhere in the world), the opportunity to send it Down Under was understandably tantalising.

Now I’m not suggesting business people shouldn’t be allowed to make a buck, take advantage of fortuitous situations or leverage a relationship. That’s reasonable.

However, if it’s done in a misleading way it can be enormously damaging to the rest of the industry and consumer confidence. If it results in massive price distortion, it can confuse the hell out of customers (especially commercial clients) who simply don’t know who to believe, and can slow a market down. At worst, if it gets out of hand it could significantly disrupt a market by panicking consumers or policymakers.

Nigel Morris is the director of Solar Business Services.

This article was originally published by SolarBusinessServices. Republished with permission.