Solar Panel Manufacturing
Date May 2016
Approximate net recovery on cost
- Recovery values for PV modules and inverters improving
- Extension of key federal subsidy maintains industry’s favorable economics
- Industry revenues: $22.6 billion in installations in 2015 (U.S. only)
- Major product categories: PV modules, inverters, mounting hardware, cable
- Significant companies: Trina Solar, Yingli Green, Canadian Solar, Jinko Solar (PV module manufacturers); ABB, Advanced Energy, Enphase Energy, SMA (inverter manufacturers)
- Market share of top: The top six PV module manufacturers are expected to account for nearly 50% of 2016 revenue.
- Industry trends: 2016 is on track to be a milestone year for U.S. solar, with more than 10 GW added on annual basis for the first time ever and the number of homeowners with solar installed eclipsing the 1 million mark.
Photovoltaic (“PV”) Modules and inverters carry majority of inventory cost and value: Most PV modules are constructed using specially processed silicon, which, when exposed to sunlight, results in the generation of direct current (“DC”). Inverters are used in solar installations to convert electricity from DC into AC and tie into the public utility grid. PV modules and inverters are utilized in both residential and commercial/utility applications. These two product categories typically carry the majority of cost as well as value since the same type of PV modules and inverters are used by, and are salable to, a wide variety of residential and commercial/utility installation companies.
Pricing has stabilized and ITC extension will fuel demand: In 2011 and 2012, due primarily to the influx of Chinese imports, the wholesale price for PV modules fell from approximately $2 per watt in early 2011 to under $0.75 per watt in early 2013. Beginning in 2014, market pricing (as well as values) for PV modules stabilized. Average PV module prices are expected to fall less than 5% in 2016, which is the industry’s smallest year-over-year decline. Market pricing for inverters is much more stable than PV modules. Legislation extending the Solar Investment Tax Credit (“ITC”) was signed into law in December 2015. The bill extends the 30% Solar Investment Tax Credits for both residential and commercial projects through the end of 2019. The extension of the Solar ITC will lead to sustained growth in the U.S. solar industry. By 2020, the industry will deploy more than 20 gigawatts (“GW”) of solar electric capacity annually.
Tariffs may lower Asian inventory values: PV modules from top tier manufacturers are largely of a generic nature, with the specific manufacturer being irrelevant for the most part. PV module cost and pricing is typically referred to in terms of panel wattage. In Q4 2015, the global blended average price for a tier-1, Chinese-produced multicrystalline PV module fell 10 percent year-over-year and reached 57 cents per watt. Due to their generic nature, a difference of a few pennies per watt can often alter purchasing decisions. Manufacturers of PV modules typically introduce new models every six to nine months with average wattage increase increments of five to ten watts. Current PV modules range from about 260 to 320 watts. Older PV modules with lower wattages are salable at liquidation, but at a lower value.
Recent pricing plunge has stabilized but headwinds remain: In 2012, the Commerce Department began imposing a tariff, also referred to as AD/CVD (antidumping duty/countervailing duty), on solar equipment imported from China. In December 2014, the department expanded the scope of the ruling to include imports from Taiwan. The tariff is typically paid when PV modules are received at port or shortly thereafter and can range from approximately 19% to 35% of cost. When lending against PV modules from China and Taiwan, potential tariffs need to be considered.