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Summary:

Solar panels have been described as commodities, but are they? A solar project investor says that is not quite true given the uneven quality of solar panels he has seen. And that begs the question: is solar really a low-risk investment?

solar panel

Solar factories around the world are rolling out over a billion solar panels each year and the price of solar panels is at one of the lowest points in history. So naturally the term “commodity” is being used to describe them, meaning they’re now a product that can be mass-produced and are mostly undifferentiated. But is that description correct at this point in the solar life cycle and, if not, what does that mean for services that have been built on top of solar becoming a commodity (like banks investing in low-risk solar projects)?

“(Solar) modules are not a commodity. We have seen a lot of problems — but we have a lot of modules that perform great, too,” said Brian Matthay, vice president in Well Fargo’s environmental finance group, during a panel discussion at Greentech Media’s solar conference just south of San Francisco this week. “You need to negotiate tough warranties with module suppliers … especially in this environment where people are cutting corners.”

Matthay wasn’t alone at the conference in expressing concerns about solar panel quality and therefore the risk of investing in solar projects, especially since the term “commodity” can imply a standardization of quality. Many solar power plants are now under construction to help utilities meet their state mandates to sell more renewable energy, and those power plants are supposed to perform well for 20-25 years. However, since the solar market is so new, there are very few solar energy projects that have been around for decades.

There has also been an emergence of new companies that finance solar panel projects — selling or leasing panels to consumers, or through crowd-sourcing — and these companies have been assuring their customers and investors that the panels will generate a certain return on the investment over time.

“Even within the same brand, there is a significant differentiation in quality, depending on whether they are from Malaysia, Thailand or China. There are differences in where the modules are built,” said Yuri Horwitz, CEO of Sol Systems, which brokers the sales of renewable energy credits for financing solar energy projects, at the Greentech Media event.

An oversupply of solar panels in the past two years is partly to blame for this worry about quality. Prices have plummeted as a result of a glut that began in early 2011. Dozens of solar manufacturers have shuttered factories of filed for bankruptcies. Maintaining good quality control can be challenging during these hard times.

Many solar panel makers have stepped up their publicity and sales efforts to try to set themselves apart. But with the falling prices -– and they are still dropping -– manufacturers might find their customers more interested in getting a good deal than hearing about technological advancements.

Meanwhile, many startups that have spent billions developing novel technologies have gone out of business or been sold for little money because they had a tough time raising enough money to build large-scale factories and compete on price.

“The number of discussions I’ve had with buyers in the last six months is it’s all about price. Price is the No. 1 thing for us,” said Jonathan Pickering, president of JA Solar’s business in Americas, at the Greentech Media conference. JA Solar makes cells and assemble them into panels.

“I’m worried about all the decisions that are made based on price. Surely when you are at a supermarket, you want to check the label, especially if you are going to eat this for the next 25 years. Is it organic? Does it have high quality?” Pickering said.

So what are some ways to cut the risk of using faulty solar equipment? The solar industry hasn’t yet come up with a good way to test the reliability of solar panels, Matthay said. So developing those tests would be helpful. Doing spot checks of a large shipment of panels for a project also will help, said Jenya Meydbray, CEO of PV Evolution Labs, which does safety and performance testing of solar panels.

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  1. selfhelpexperts Wednesday, October 31, 2012

    I’d love some solar panels in our office – it would save so much money in heating bills (even though we are in the UK)

    1. Generating enough electricity in an office environment to offset electric heating isn’t typically plausible.

  2. When the market is controlled by a few companies then maybe we will see solar panels become commodities. Just like the auto industry over 100 years ago; too many companies with few industry standards make them less attractive for investors.

  3. I agree with the author of this article that solar panels can’t be considered yet as commodity. Maybe additional research for quality is still necessary. But I guess, because these panels cost high, many consumers are not yet into having these for home use. I just hope, these solar panels will get better in time-quality and cost wise. Thanks so much for sharing!

    -SoCalEnergySystems.com

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