Time to stanch the solar bleeding

SolarBusinessServices

I posted a story recently on some of the fascinating findings from our latest report “Australian PV – Technology and Brands 2013”. Although I’m running a little later than I would like on getting this out, the deeper I dig the more insights I find and this week we have yet another doozy which is forcing me to rethink some of my assumptions.

Over the last few weeks, I’ve seen evidence of no less than four price rises from PV manufacturers shipping into Australia. That’s right; PV prices are starting to increase.

To the uninitiated, this could seem startling, impossible perhaps. But to those who have witnessed the ups and downs and PV supply and demand or who have tracked the staggering losses made by many of the world’s major (and minor) PV companies, it is no great surprise.

Many of the world major PV companies have been losing money for many months if not years and to make matters worse, the price of polysilicon rose towards the end of last year, after hitting prices below cost, according to some manufacturers we spoke to. In 2011 for example, 9 major PV companies reported total combined net losses of $US3.97 billion dollars, with individual company losses ranging between $US40 million and $US1.1 billion.

At some point the bleeding had to be quelled and it seems that point has arrived.

One good source of data is Photon magazine’s regularly published price index of Asian modules available on the German spot market. Using this data we have tracked International average prices for a year now. Importantly for the local market, we have extrapolated this information and overlaid monthly exchange rates to provide a real life Australian and US dollar comparison, taking into account currency fluctuations. The delta between the price points does vary; between the Euro and the Australian dollar we have seen the gap vary by between 15 and 23% for example.

Of course, for those buying and selling in the Australian market the signals and local prices are somewhat distorted. On the one hand, we have some major PV suppliers increasing prices as costs rise but on the other, we are continuing to flush inventory out was purchased at the lowest point of the PV cost cycle and one of the highest points of the foreign exchange cycle. Throw in a dash of low end product and low and behold you can still buy product here at less than A$0.50c/Watt – if you are game.

We have also seen some very big name brands inexplicably and dramatically drop their price and some end user prices for systems that are so low that a rash of collapses appears inevitable (how does $999 for 5kW grab you?).

The price rises are part of a bigger story however, which is about PV industry consolidation. Excess capacity exists almost everywhere in the PV supply chain, although it has improved somewhat on 2012 and China has actually halted the construction of new polysilicon production facilities. This is part of what drove prices down but there is almost universal agreement that 2013 will be – has to be – a corrective year internationally.

It is looking increasingly likely that the same correction and consolidation will need to take place down under too. Although we remain bullish on the year, clearly PV sales are no longer falling from the sky and all the while costs are rising and operational efficiencies diminishing.

Get the first aid kits ready folks.