Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)


Page added on March 29, 2014

Bookmark and Share

Solar for $1/W – Really?

Alternative Energy

Solar Energy Costs

Can you get a solar system at under the magical $1/W? You betcha. But I am increasingly of the view that systems priced at these levels are either built with smoke and mirrors or there is a magic formula that a very select number of companies have managed to find.

If you shop around you can find a surprising number of offers from a wide variety of companies at $1w or even less. A consumer wrote to me yesterday about one such offer and my advice was blunt; don’t do it.

I listed a bunch of reasons, but in the simplest of terms my view is that any solar company selling at this level is extraordinarily unlikely to survive in the medium term (if not short term), making it a bad long term investment.

Now to be clear, low cost solar at this price (or better) is clearly a wonderful thing for the growth of our industry; its been talked about as the “tipping point” for PV parity for decades. So I want to see it as much as anyone else and we need to get there. However, pricing systems at this level before we are truly able to do so in a financially sustainable way has only two possible outcomes in my humble opinion; bankruptcy or customers getting junk products and services.

If there are any solar magicians out there who would like to share their secret formula with me for how to do it well at this price, I’m all ears. I looked (again) at a bunch of data points to see where things are up to and see if I could unlock secret formula myself and this is what we found.

Up until late last year, the Clean Energy Regulator used to publish data on “out of pocket expense” (OOPE); the net PV price after STC’s and fully installed. It was an awesomely powerful data set because it was’t a hypothetical price, but a sold and installed price; real money.

Typically, the CER’s OOPE had hovered around $2/W, which was just a little higher than average pricing that was seen in the market, highlighting teh difference between what we see advertised versus what people actually end up paying. Since their last publication, foreign exchange rates have gone the wrong way and PV prices have increased.

Solar Choice also regularly publish sample data from offers that they receive from their network of installers. Their latest data was published in March and historically correlates with CER data very well so its a powerful data sample too, although the difference is it is quoted rather than installed price. Their data shows a clear increase since late last year; evidence that the majority of system offers have risen since the final OOPE release and confirming the trend we believe has happened.

So what on earth is going on?

I re-ran some numbers (as I tend to do) based on a survey of installation companies on system price that we collected late last year. No matter how hard I tried, I couldn’t arrive at a net price under $1/W net, even using the very lowest component prices that we got as samples. So I reduced them by all by 10%, despite the fact that prices have actually increased and I still couldn’t get there. This assumes that the lowest quality (and cheapest) products are used, installers are paid a pittance and gross margins are less than 10%. Still couldn’t get there.

Then I thought, maybe I’m out of touch, maybe my data is wrong, so I called the largest wholesaler in the country and asked them if it was possible. “Not a friggen chance, Nige” was the reply. “We are increasingly contacted by customers saying you have to do something; we are getting beaten by price and you are the biggest buyer, so c’mon, do something”. Their response was that it makes no sense because their margins are so low already.

To add to the research mix, totally by chance, I was lucky enough to meet with a researcher from the Rocky Mountains Institute this week. The RMI was founded in 1982 by Amory Lovins who is a legend in sustainability and established the RMI as a dedicated research, publication, consulting, and lecturing institute in the general field of sustainability, with a special focus on profitable innovations for energy and resource efficiency. It was Lovin’s who first inspired me to consider energy when he was a guest speaker at an event I attended 24 years ago.

In recent times, RMI have been looking at the “soft costs” of solar; the non equipment related costs, with the aim of helping reduce solar system costs in the US where they are a much more significant component of system price. We had a great chat about how different the cost build up is in Australia and they are presently touring the country trying to learn how Australian solar companies can do solar so much cheaper then US companies. Interestingly, my take away was that US solar companies are much more focused on profit than many Australian solar companies!

So, costs are up. Sales are down. The data we have says it’s not possible. Why is it happening?

There are three possible reasons.

The first is that companies selling under $1/w have a magic formula, which the remaining 99% of the market hasn’t figured out yet.

Perhaps they can buy everything cheaper than everyone else by buying on the spot market for clearance stock, trade STCs at a higher price and their overheads are incredibly low. Maybe their cost of customer acquisition, administration and compliance costs are staggeringly well refined. It’s possible but highly unlikely and at a minimum, as precarious as a house of cards.

The second possibility is that they are happy to run at a loss to get volume. Businesses do that from time to time and it’s a legitimate strategy if it has an end game or can be subsidised by other revenues and margins through diversity.

It’s the big worm approach; low prices attract customers, then you up-sell like mad, praying you won’t actually have to deliver at that low price. The problem is, low prices establish a customer expectation which can drag the whole market down into a price war.

But frankly, I don’t buy this strategy . We are in a market with declining volumes and declining prices. In a year, you’ll sell the same volume for 5% less revenue if things keep heading the same way. If you sell with no profit today, in 12 months, assuming the same effort to sell, you margin dollars will be less per sale. It’s not rocket science.

The third possibility, and one I fear, is that too many solar businesses don’t understand their real costs and think they will make a small profit at ultra-low prices, because they don’t understand what it takes to really do the business properly. Proof? The survey we conducted late last year sought to break out costs in detail and a common response was “Wow, I have no idea what (for example) my customer acquisition cost is, I should look at that!”

The most prevalent example of this is in commercial systems where I see prices just get lower and lower and lower under the false assumption that scale equals lower cost. All things being equal, its true, but anyone who has spent months courting company directors, producing endless iterations of CAD drawings, presenting option after option, paying engineers and realising that grid connection approvals will cost tens of thousands of dollars knows it blows out quickly.

Complexity sucks up scale benefits faster than an angry death-eater.

So, here’s my thinking.

1) Companies who promote at $1W or less need to up-sell like hungry dogs or they will go bust. Competitive pressure is making up-selling harder

2) Companies who sell at $1W and don’t up-sell will dig a hole that they can’t get out of and go bust and or, the house of cards will tumble one day (remember Unleash and Clear?) and then they’ll go bust or, the warranty and quality issues will send them bust.

3) Companies, who recognise that margin dollars need to increase as revenues and volumes decline will struggle, sell less but make more margin dollars and probably survive. If you are clever and have a new angle, you might even prosper and take market share.

Whilst things are clearly not easy, the opportunity today is for our market to innovate, to add value, to increase revenue and more importantly, to increase margin dollars. There are many ways to do it with products, services, and value.

One thing is for sure, any-one can buy a bucket of fat worms, but it’s a short term and simple approach that without exception, has failed miserably in this industry to date. I am boggled that companies continue to line up at the worm store along with other desperate souls then throw their lines in the water together.

My grandfather taught me decades ago that fishing somewhere else, with a different bit of bait makes a whole lot more sense.

Solar Business



28 Comments on "Solar for $1/W – Really?"

  1. Arthur on Sat, 29th Mar 2014 4:22 pm 

    http://www.solarnrg.nl/prijzen-zonnepanelen/prijzen-canadian-solar-s6p-255/prijzen-canadian-solar-s6p-255-schuin-dak

    Offers in Holland, starting from 1 euro per Watt, excl. VAT.

  2. Davy, Hermann, MO on Sat, 29th Mar 2014 4:50 pm 

    Basic laws of supply and demand. We are witnessing a debt unwind death spiral in China. Part of this was cheap money and lots of liquidity mixed in with shenanigans to produce very bad investments by Chinese society, businesses, and individuals. On the business front it created huge over capacity. Consequently we see solar prices dropping to very low and bellow production costs with a ‘HUGE” solar industry that grew up in China. Just a few years ago there were threats of a trade war over it. At that time there was concern over dumping. Dumping or not we needed altE sources and these low prices were making it competitive and initiated a huge build out. Chinese over capacity, dumping, and poor investments are costing someone allot of money. It is just the “who” is hard to define. One could say the Chinese economy or the businesses allowed to go belly up. This is finally a new trend in china and it may reform their poor investment strategies and funny money market practices. Finally in a sense the world economy is paying for it because anytime market distortions happen the overall economy has to deal with dysfunction. It hurt solar firms in Germany, US, and elsewhere. We know here the true cost of solar. It is a fossil fuel supported cost and it ain’t cheap. It is being touted by the tooth fairy believing folks that believe in a transition to a shiny AltE economy with jobs and prosperity with the side benefit of low carbon, ecosystem protection, jobs, and growth. Come on….you believe that then you believe in the tooth fairy and white bearded reindeer riding jolly old fella.

  3. Arthur on Sat, 29th Mar 2014 5:24 pm 

    http://www.greentechmedia.com/articles/read/top-chinese-manufacturers-will-produce-solar-panels-for-42-cents-a-wat

    1$/Watt?

    “Top Chinese Manufacturers Will Produce Solar Panels for 42 Cents per Watt in 2015

  4. Dave Thompson on Sat, 29th Mar 2014 6:16 pm 

    Without fossil fuel energy inputs, solar power does not exist, except growing plants and passive usage at point.

  5. bobinget on Sat, 29th Mar 2014 6:22 pm 

    Another of the world’s leading solar PV manufacturing giants has underlined the potential for yet more substantial falls in the manufacturing cost of solar modules, even as the cost of fossil fuels – and gas in particular – surges in the opposite direction.

    Beyond the near-term revenue forecasts that obsess market analysts, one of the big take-outs of First Solar’s annual market day in New York this week was its predictions about the cost of solar modules over the next five years.

    In short, First Solar expects its average manufacturing cost to nearly halve – from an average $US0.63/watt in 2013, to $US0.35/W in 2018. That will bring the total installed cost of a module (including racking and inverters) from around $1.59/W to below $1/W by 2017 – so meeting the US Department of Energy’s ambitious Sunshot Initiative goals at least three years ahead of time.

    This is significant because as solar prices are coming down, fossil fuel prices are headed quickly in the opposite direction. The US has been hailed as the nation of cheap gas, but that is proving to be an illusion betrayed by rapid depletion rates of wells and the growing challenge of deeper and more complicated reserves. Not to mention the water and other environmental considerations.

    Read more at http://cleantechnica.com/2014/03/26/average-manufacturing-costs-solar-halve-gas-prices/#XdTTzdr14Lofwwz4.99

    First Solar(FSLR)

    “First Solar Inc., a Tempe-based solar panel manufacturer, announced March 19 it set a thin-film module efficiency record of 17 percent.
    The cadmium-telluride photovoltaic module efficiency was achieved in tests performed by the U.S. Department of Energy’s National Renewable Energy Laboratory.
    The efficiency rating measures the amount of sunlight that is collected by a module and turned into electricity. In recent years, First Solar’s panels have lagged behind traditional silicon-based modules, but it has been increasing its efficiency. It could mean the company could target residential and commercial installations.
    Raffi Garabedian, First Solar’s chief technology officer, said the company’s research and development efforts are “delivering technology that will quickly be scaled to real-world application as part of our integrated power plant systems.”
    The new mark is an increase from the previous 16.1 percent efficiency record set by First Solar in April 2013.
    These technology enhancements are being implemented on the company’s commercial production lines. This comes on top of First Solar’s announcement last month of cadmium-telluride research cell efficiency of 20.4 percent.

  6. bobinget on Sat, 29th Mar 2014 6:32 pm 

    As an aside, my Installer is prepared to replace my existing solar array, generating around 7,500 KWH,
    with newer more efficient panels generating 33%
    percent more but taking up exactly the same space
    as PV’s installed six, seven years ago at half cost.

    IMO markets will open for used solar panels well under
    a buck a watt.

  7. ghung on Sat, 29th Mar 2014 6:41 pm 

    Authur: “Top Chinese Manufacturers Will Produce Solar Panels for 42 Cents per Watt in 2015“

    I have four 240W grade A listed panels sitting in my living room (for sale) that I paid $0.64/watt last year. I had to buy an entire crate/pallet to get that price (these are extras I’ll sell for $1.00/watt). Shipping added about 8 cents/watt. Installing them, including properly sized wiring, mounting racks and hardware, combiner boxes, fuses or breakers, conduit, and labor will bring their installed costs to above a dollar per watt. That doesn’t include balance of system stuff: inverter, more breakers, etc., inspection and fees (for a simple grid-tied system). An off grid system would be more even if one did the labor themselves and skipped the permitting and inspections.

    I’ve been getting panels from sunelec dot com in Miami. They are currently showing grade A 280w panels for $0.58/watt, minimum purchase is a pallet (21 modules). They have good prices on other stuff. I may get a 12/24 volt PV direct freezer currently at $575.

  8. Davey on Sat, 29th Mar 2014 7:13 pm 

    Look guys this cost improvement on solar is great but it will not last in my estimation. We will have a very short golden age of solar before the cost of money goes up, subsidies go away, and Chinese overcapacity dries up. The economy may crash any day. Let us give it 5 years. During that time it should be balls to the wall. Let’s install as much as possible especially dispersed residential power. One person in a neighborhood could support the needs of several in a crash situation with lights and hot water access

  9. ghung on Sat, 29th Mar 2014 7:45 pm 

    Yeah, Davy, at least stock up on panels, a good inverter and charge controllers while these prices hold. Of course,if the economy crashes, prices may drop even farther.

    From the vendor I referenced above, $6610 (plus shipping) gets you 5880 watts of PV, 3 Outback FM80 charge controllers, and a 3kW Outback inverter/charger; the core for a very nice off grid system. Balance of system, mounting, and batteries can be sourced locally. Add another inverter for $1608 to get 6kW at 240 volt, continuous. You can do a lot with that. This system will have redundancy as well.

  10. Kenz300 on Sat, 29th Mar 2014 7:51 pm 

    The price of oil, coal and nuclear keeps rising…..

    The price of wind and solar keeps dropping…………

    Add in the environmental costs of fossil fuels and alternative energy sources are a safer, cleaner and cheaper way to go.

  11. Kenz300 on Sun, 30th Mar 2014 12:01 am 

    What will the cost of CLIMATE CHANGE be ?

    Alternative energy sources are cheaper than the cost of the environmental damage from fossil fuels.

  12. peakyeast on Sun, 30th Mar 2014 1:04 am 

    http://www.sunelec.com

    They had solar cells for 0.29$ at times. Now approx. 0.6$

    I purchased 9½ KW from them @ 0.98$ – they were nice quality japanese panels.

    Inverter cost 2000$ Cabling: approx. 200$. Mounting approx. 200$.

    So approx. 12.000$ for 9½ KWp. That was in 2010.

    Price is about the same today.

  13. Makati1 on Sun, 30th Mar 2014 1:58 am 

    The old adage: “You get what you pay for” is always appropriate.

    In my book, something as important to your life as a solar system should NOT be bought totally on price, but also on quality. I try to buy those types of items from companies that have been in business for at least 10 years or more. Their products have proven themselves and there is likely to be some support in the future. If I were to spend $1,000, I think it is better to buy a 500 watt system that is more likely to last, than a 1,000 watt system that is not.

  14. PapaSmurf on Sun, 30th Mar 2014 2:12 am 

    Without fossil fuel energy inputs, solar power does not exist, except growing plants and passive usage at point.
    ———————

    Even if that were true, why would it be even remotely relevant? We have plenty of fossil fuels. In fact, many would say that we have way too much.

  15. PapaSmurf on Sun, 30th Mar 2014 2:20 am 

    What will the cost of CLIMATE CHANGE be ?
    ———————

    According to the latest IPCC report about to be released, the cost of climate change is not much at all.

    They are retracting the bulk of their previous alarmist estimates from the 2006 report that was discredited in recent years.

  16. Kenz300 on Sun, 30th Mar 2014 2:37 am 

    NRDC: The Cost of Climate Change

    http://www.nrdc.org/globalWarming/cost/contents.asp

  17. PapaSmurf on Sun, 30th Mar 2014 3:27 am 

    The IPCC report from 2006 estimated the world GDP impact at 15% to 20%. The Stern report has widely criticized in the years after that as been poorly sourced and widely discredited.

    In the updated 2014 IPCC report, they have dramatically cut their estimates from 0.2 percent to 2 percent of economic output, if temperatures rise 2.5 degrees Celsius (4.5 degrees Fahrenheit) from pre-industrial levels.

  18. PapaSmurf on Sun, 30th Mar 2014 3:29 am 

    Here is an article on it.

    http://www.bloomberg.com/news/2014-03-28/the-two-numbers-climate-economists-can-t-stand-to-see-together.html

    The cost of mitigation is estimated at 4% of global GDP.

    The cost of doing nothing is estimated at 0.2% to 2% of global GDP.

    Based on how China and India are planning their energy future based on coal, my guess is that we are going with the do nothing course of action.

  19. PapaSmurf on Sun, 30th Mar 2014 3:34 am 

    Notice that none of those Global Warming predictions really take into any consideration the concept of Peak Oil or a complete collapse in society from massive energy shortages.

    They are all assuming that we keep burning fossil fuels and have a growing GDP for decades into the future.

    Strange that so many smart experts really don’t believe jack shit from the Cassandra obsessed crowd at PeakOil.com.

  20. rollin on Sun, 30th Mar 2014 4:22 am 

    GE probably had he best approach to lowering price of installation. Lower the voltage.
    By lowering the voltage regular electricians could do the install versus highly trained and certified high voltage techs.

    I do not know the outcome of their endeavor but it seemed a reasonable cost lowering device.

    One thing that the western world is noted for is the middle-man markup. Although the PV panels may be manufactured at 50 cents per watt, by the time they are installed it can be $4 a watt.

  21. GregT on Sun, 30th Mar 2014 9:06 am 

    “They are all assuming that we keep burning fossil fuels and have a growing GDP for decades into the future.”

    They are assuming nothing of the sort. They are assuming that temperature increases lag CO2 accumulations by several decades. Something that has been very well understood for over a century by those in the scientific community. Of course, there are still those that are incapable of rational thought, and refuse to listen to anyone that has an IQ of at least double of their own. Yup, the ‘smart experts’ know nothing at all, while the cartoon character ‘smurf’ remains to be the all knowing expert on everything.

    What a complete f#cking idiot.

  22. Davy, Hermann, MO on Sun, 30th Mar 2014 11:32 am 

    POOPSmurf, Bloomberg is a good source of MSM news but you have to read between the lines and naturally look who they are speaking to. Bloomberg is more balanced then other MSM because they are dealing with investors who are generally more intelligent than your CNN crowd. They are still biased towards the “lobby of plenty and technological exuberance”. I imagine a guy good with words like Kunstler went to Bloomberg had an interview and worded the PO message without referencing PO it would be accepted as a possibility. I have already seen non-peak oil guys on their talk about the energy predicament. By reading much of your crap I see you do not follow finance much. On global warming and your cow tow on the predictions and costs. Tell me POOP how accurate is any one going to get with such a forecast. First of all if the economy corrects (which it will) how are you going to base a cost of mitigation with pre-correction dollars are post correction dollars? We know here that climate change will be ignored or not economically managed except around the edges. You know why POOPs, because it is a predicament like PO. If you want to be successful with AGW mitigation you drop the population by ½ and you go to a postindustrial society with nothing but animal power, Human power, and direct solar energy sources. Basically we would be a postindustrial agrarian society. In the transition we could use AltE until entropic decay renders it useless with no manufacturing base to produce new product and spare parts. Batteries wear out quickly. So POOPER, why do you like wiping your butt and getting it dirty all the time? Your responses and points stink!

  23. meld on Sun, 30th Mar 2014 9:36 pm 

    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels
    Renewables are subsidised by fossil fuels

    get it yet? 😉

  24. Bandits on Sun, 30th Mar 2014 9:44 pm 

    Renewables are subsidising fossil fuels is more accurate.

  25. Name on Mon, 31st Mar 2014 7:57 am 

    Well, you can get panels for under $1/W or whatever… that’s not even half the system’s cost if grid-connected, less than one third if off-grid, not to mention that most “solar” batteries last 5 years top.

  26. ghung on Mon, 31st Mar 2014 3:06 pm 

    Name: “…most “solar” batteries last 5 years top.”

    Citations? This simply hasn’t been my experience. Of 11 off grid systems I’ve helped install, even the cheapest batteries have lasted longer than 5 years. It comes down to the system being sized right, proper operation and proper maintenance. I’m currently working with a friend to replace his 9 year old cheapo golf cart batteries which are still functioning quite well. He’s had one cell failure out of 48 cells, in just under a decade.

    The biggest failure of off-grid systems is failure of expectations and operator error. It’s sort of silly, considering the number of folks living off the grid successfully for decades, like me, when grid weenies continually make these blanket statements with zero first-hand knowledge of what they are claiming.

  27. Kenz300 on Mon, 31st Mar 2014 9:13 pm 

    Fossil fuels — old fossils hanging on to an old business model …………..

    Alternative energy sources like wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste are the future.

    The old fossils running the oil, coal and nuclear power companies see the world as it was ………. Younger business people see the world of the future.

  28. Name on Tue, 1st Apr 2014 7:16 am 

    Ghung,

    Surely the battery life depends on the daily DoD. The AGM batteries from Trojan have about 1000 cycles at 50% DoD, which gives us 3 years of service, and these are the good ones, the cheaper versions have only 500 cycles @50% DoD. Of course, if you oversize the bank you get more cycles, but then you have to buy more batteries to begin with. Very roughly, you get twice as many cycles for half the discharge rate, giving an (again, very roughly) constant number of kWh that you can drain from the battery, so buying twice as many batteries and then be glad that they lasted 6 years instead of 3 it’s just fooling yourself. Here’s the data for the Trojans:
    https://www.google.ro/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CDIQFjAA&url=http%3A%2F%2Fwww.trojanbatteryre.com%2Fpdf%2Fagm_trojan_productlinesheet.pdf&ei=QWY6U8zrI8niywPOoYCABg&usg=AFQjCNEhqk1LVbx9yuU0oYg2Wt0M8iDkOw&bvm=bv.63934634,d.bGQ

Leave a Reply

Your email address will not be published. Required fields are marked *