Most of the earnings in the solar industry now and in the future are not in manufacturing hardware but in designing, financing and installing rooftop systems.
Some panel makers are experimenting with putting micro-inverters on each panel. They believe do-it-yourselfers may be a large market for these panels to create their own plug-and-play installations on home roofs.
I think this DIY market will be relatively small. The costs of today’s inverters on a per Watt basis will be hard to beat by a batch of integrated micro-inverters.
The sweet spot for inverter pricing now is about 10KW and up, or about one inverter per 40 panels. I think for the next one to three years while everyone is still seeking the Holy Grail of cost parity most people won’t choose the costlier micro-inverter approach.
The commercial systems my company installs vary from about 30 to 200KW per rooftop. We use sets of 10KW inverters from SMA Solar Technology AG, along with power optimizing electronics from Tigo Energy which eek out extra power when there are differences in performance between installed panels, all at a net cost lower than installations using micro-inverters.
Looking more broadly, The Economist recently said it sees manufacturing returning to the U.S. and Europe as customization rises, labor costs become less significant and the speed of response to new trends becomes more important. It suggested solar panel manufacturing may shift away from China eventually as production lines become more automated and the cost of shipping heavy sheets of glass half way across the globe becomes a dominant expense.
I’m not convinced that today’s already commoditized solar panels will be affected by these trends. For example, I can’t see what customization in panel design may be needed for different solar installations. A brick is a brick even when building different houses.
It’s still early days for the solar industry. I expect we will see changes in who makes panels and who makes money in this industry. For example, Foxconn is now rumored to be looking at the photovoltaic panel market.
There’s another old saying I think is useful: Follow the money.
The U.S. is leading most nations in innovative financing for solar installations so end users can save money on their energy bills each month without upfront costs. Banks, power utilities and Google are providing funds and making profits creatively financing systems being built by a Solar City or SunEdison which are also making a fair profit. Solar City recently announced plans to go public thanks to its fast growth and earnings.
I believe these financial value chains will expand rapidly across the world. They have just started to catch on here in Asia and Australia in a big way, so things look increasingly sunny for photovoltaic solar worldwide despite the pain being felt by some in the industry.