Market Analysis August 2016 - What counts ...

In an overall quiet market characterized by the onset everywhere of summer vacation, module prices generally declined in July. Prices for European and Chinese modules were in a neck-and-neck race to the bottom, and even reached a low for the year.

More and more products with Chinese certificates of origin are now being offered at less than the minimum import price, which has brought down the average price. Suppliers of modules from other regions have to follow suit or risk losing market share. Only the prices for Japanese and Korean modules have held onto their high levels or crept upward. The least expensive Southeast Asian solar panels have nearly reached the 40-cent mark, which is not yet reflected in the average price. This downward trend is expected to continue over the coming weeks.

To complete the unfinished sentence in the headline, I’ll allow my self a small digression. Every one of us makes purchasing decisions every day. These affect our future life - sometimes more, sometimes less. We apply a standard to the offers made to us, a standard derived from our experience and expectations. The more diverse the offers are, the more difficult and lengthy the selection process is. A lack of information can also make the decision difficult. Ultimately, the gut plays a decisive role in many of our decisions - as do the financial possibilities, of course. All of this combined can be distilled into a central indicator. What counts is the cost-benefit ratio!

Let’s apply this simple wisdom to the module market. Although the diversity of what is on offer (variety of brands/types) has indeed already become much smaller than it was even just a few years ago, it is still hard to get one’s head around. The information we get about the products on offer, however, is usually fairly paltry and highly influenced by the sales ambitions of the vendor. Often, even the origin of the modules and their composition (cell quality and origin) are scarcely identifiable. You can trust the manufacturers’ information, or not. The current situation of market restrictions and minimum import prices brought about by market participants and policy makers has provoked sellers to mask the origin of materials.

Yet another key point is product quality, which also depends a great deal on origin. If the origin is unknown, judging quality is reduced to a crapshoot. Buyers who do not check this themselves, but instead trust manufacturers’ guarantees are naive, gullible, or both. So many apparently solid producers have already crossed the Jordan, making their warranties worth little more than the paper they are printed on. Even random testing of every delivery has failed to protect buyers from surprises, as hidden production faults due to inferior materials are hard to detect with measurements. Nevertheless, meticulous visual inspections and performance testing at least provide a minimal measure of assurance.

Should a problem with a purchased and installed product crop up in the future despite these controls, the presence of a solid warranty is desirable. But this is only true in two instances: either the manufacturer still exists and has an European branch office, or the buyer has purchased warranty insurance. Unfortunately, false information about insurance leads to many mistakes, which can lead to disappointment when trouble strikes. The insured party must always be the owners of PV systems themselves. Insurance drawn on insolvent manufacturers is worthless. Larger systems should therefore be insured directly and comprehensively. One indicator of the solidity of a manufacturer is the bankability of its products. Caution is advised with non-bankable products.

Without binding information, it is impossible to make a decision. The variety of products on the market is a high-stakes gamble with potentially big losses. For instance, if presumably MIP-free modules actually come from China after all, buyers may even risk criminal charges. In any case, the punitive tariff would have to be paid retroactively, regardless of the channel used to acquire the panels. Customs authorities do not negotiate and go after whoever they can exact payment from. If there is no one else left in the supply chain, the system operator can be left holding the bag, and the bill.

So, how can we define the cost-benefit ratio of an offered module? Buyers have to decide for themselves regarding the aspect of expected or desired performance. How much security, quality and efficiency does the buyer want or need for the planned project? One cannot automatically assume that European products are better in these respects. Chinese firms now lead the list of tier-1 manufacturers, a collection of the most solid and financially strong PV producers in the world. Combing through the few surviving European producers reveals that most of them, even those that still produce have just a few years left at best, even with the continuation of MIP. Technologically, Asian manufacturers no longer have to hide behind their American or European competitors, thanks in no small part to the intentional or unintentional knowledge transfer over the past few years.

But how can buyers find out if the price is right? Simple: they follow the monthly price index, which in addition to information regarding origin also takes technological differences into account. An offer for modules with a price that falls below the average price in the index can be considered a bargain. If all of the other factors, such as module efficiency, quality, and security (warranty conditions, strength of the company), are simultaneously above average, a buyer can make a purchase in good conscience. The basis for this has to be a market survey that is as objective as possible and not based simply on the marketing pitch of a manufacturer or its representative.

Having thought this through and put it all down in writing, I now wonder how the results of the recent installer survey can be arrived at. Supposedly, more than half of all of the European installers are in favor of extending the minimum import price regulation if subsidies artificially hold down the price level of Asian products. That would mean that the majority of those surveyed are in favor of a worse cost-benefit ratio, take the risk of a greater chance of product failure, and are willing put their own existence on the line! Come again?

Here is an overview of the new price points – first time introduced in October 2015 - including changes:

(The prices shown reflect average asking prices for duty-paid goods in the European spot market in the month of July 2016.)