Real men have fabs, a semiconductor executive once said, but companies such as Apple and Qualcomm show you can build great electronics companies without manufacturing plants. This reality is playing out now also in the solar photovoltaic industry where installers such as Solar City USA are making good money while panel makers such as First Solar struggle.
The solar industry appears on track to follow in the footsteps of the semiconductor industry’s history. It is also reinforcing the general rule that those companies which are closest to the customer often make most of the profit in the value chain, while support companies hidden behind often struggle.
Most of the earnings in the solar industry at the moment are not in manufacturing hardware. It’s in the “software” of designing, financing, installing and maintaining rooftop systems.
As in the electronics industry, I think this distribution of profit along the food chain will continue. Solar photovoltaic components will become ever more commoditized, while each rooftop will always be unique with ever more complex and larger installations ahead.
Steep drops in panel prices are the main reason big commercial building rooftops are starting to be covered with solar panels. Three years ago, pricing was more than US$3/W. Just nine months ago people were saying panels could come down to US$1/W in two or three years—a price they actually hit at the end of 2011.
With these lower prices, solar generated electricity has now reached parity with traditional energy sources in a number of regions worldwide, especially in remote areas compelled to use expensive diesel.
As a result, the market for rooftop solar panels has expanded to include not just green-aware companies, but now anyone simply looking to save money on electricity bills. The clean energy aspects of solar panels have become a bonus.
Some compare solar panels to traditional energy’s average per KWh pricing and say it’s not at parity. However, this argument ignores some key points.
Traditional sources such as coal and oil have hidden costs to human health and the environment. They also cost taxpayers billions of dollars in grants, tax breaks and other subsidies.
In addition, solar power’s output is mostly during peak energy consumption periods such as summer days. That’s when utilities charge peak rates to cover the costs of expensive top-up turbines they have to turn on during peak periods. Thus, solar reduces a company’s bills the most, and those comparing solar to average or off-peak rates are not being fair.
If solar wasn’t at or near parity already in a number of places, Solar City in the U.S., Solar Cities Asia and The Solar Project in Australia couldn’t promise cheaper electricity. None of these companies are charities subsidizing their customers.
In some regions like Australia with retail peak electricity prices at A$0.44/KWh, solar is below parity already. Some large-scale projects forecast costs at below A$0.10/KWh.
Current forecasts predict solar will be cost competitive in a majority of countries in a few years. Projections made before the latest panel price declines said it would take decades. -- Valdis Dunis is Chief Executive of Solar Cities Asia based in Macau.
A nice briefing on the solar panels present cost,energy efficiency,cost of solar power,life time reports of various panels installed at hot and chill places, and finally on the micro inverter approach.
What happens if I install solar panels on my roof top today and after a couple years a more advanced technology comes in with panels with panels having much higher efficiency? Not sure if it is practical or not, but I think it would be better if the companies provides some kind of scheme to upgrade the panels at subsidized price if something better comes up.