The solar panel manufacturing industry is fine. Healthy year on year growth at a rather spectacular rate with absolutely no sign of that changing any time soon (the opposite rather). Demand world wide is strong; and growing. Both for grid solar and roof top solar. Hundreds of gigawatts added every year and that's trending towards terawatts.
The bit of the industry that is at risk collapsing is the VC funded companies that "help" their customers get solar roofs by talking them into dodgy loans or leases they can't afford. If people can't pay off their loans or cancel their lease, these companies end up with a lot of solar panels that are stuck on roofs not generating any monthly recurring revenue. Removing them means spending more money and the second hand value is probably not amazing.
Add a lot of dodgy sales practices to the mix and the same kind of sleazy practices that banks used to talk people into mortgages they couldn't afford before the housing bubble burst in 2008 and you have a nice recipe for a company sitting on a lot of debt that is at a high risk of defaulting and not bringing in the revenue that they thought they were going to get. They'll create a big mess by twisting lots of arms to get some of their money back and bankrupting some families in the process and they'll get bogged down in expensive court cases for years to come. So, what's collapsing is the notion that these companies that took billions in investment to fund all this are going to turn into nice little rainbow pooping unicorns.
This kind of economical Darwinism is fine. Bad businesses not making it and taking some investors with them is not going to be the end of the world. But it's not going to slow down solar panel production and deployment. The US has plenty of underused roof real estate, and most of it us at a great latitude for getting some decent energy out of solar. With US grid infrastructure being as bad and expensive as it is, there are going to be plenty of people looking at getting some panels on their roofs. Just like every else in the world.
"Electric installation / Solar power installation you name it, the demand will skyrocket."
They go bankrupt left and right, just like solar manufacturers, because it's a race to the bottom. Race to bankruptcy it almost seems. I think it's a horrible market to be in right now.
Solar power installation you name it, the demand will skyrocket.
I work tangentially to that field and the problem is that the competition is fierce. Every old roofing company is now a solar installation company and a new solar panel company (reselling the same Chinese panels with thinner and thinner margins) is popping up every week. The only place I can see any margins is specializing in designing and setting up large industrial scale setups.
Totally agree. The entire solar space is over leveraged - there is already an oversupply issue on the solar module space, and nobody has figured out a consistent business model(s) that make sense over the long haul. One hiccup in the overall economy will send many of these companies into bankruptcy. There will be a ton of assets available for investors to scoop up, ala Sun Edison.
BS. Solar industry is already commoditized, most solar panels are produced in China, incoming trade wars, unclear expenses about panel disposal, incoming taxation on solar energy producers..
Bigger companies aren't going to buy up smaller production that is not efficient. The smaller production just goes offline and gets scrapped. Solar panel production is at the point where you need to be doing economies of scale to really churn a profit at it.
You guys need to read up on what happens when a government subsidies something. The subsidies allows inefficient producers to stay in business and it also results in over production....which is what pushes the price artificially low. Once the subsidies end. The weakest go out of business and only the most efficient producers stay in business.
I came here to post this. The solar "gold rush" of 2006-08 was precipitated by companies like HelioVolt claiming they could achieve panel production for under $1/watt.
Cheaper solar panels won't kill the industry, it will make it economically viable on the large scale. If this article's predictions are correct, it's probably time to invest--if you know the right company, that is.
And thus, we could also expect a boom and bust cycle for the solar tech industry.
Boom: Let's see how fast we can make money selling solar panels.
Bust: We sold so many solar panels that we have more energy than we need.
Re: investing in solar producers and a coming shakeout
This makes me think of some interesting structural economic issues I hadn't considered before.
Compared to the global distribution networks of hydrocarbons, distributing PV panels is uncomplicated and a lot less bulky. On the other hand consolidation in the industry and eventual economies in scale of production could point to less diversification at the lowest levels of supply compared to a system where individual wildcatters, new tech like fracking, and even cartel members (and outlaws/terrorists) undermining their quotas have a not insignificant effect on the cycles of energy pricing and supply.
Even technology with a well-defined trend toward decreasing prices like RAM or hard drives have this complication if you need to make your purchases right after floods in Thailand, or at the wrong time when a standards for RAM are coming into effect or stopping production.
With a small number of huge suppliers, and decades long replacement cycles leading to boom and bust cycles for the industry, it could be as difficult for users to plan energy supply needs as it has been when it comes from mismanaged areas of the world.
It could go either way, honestly. Solar has shown that as production is vastly overbuilt, prices plummet and a lot of people go out of business because they were assuming higher prices than they were able to charge.
It seems likely that lithium ion battery production is going to face a similar fate. Tons of people interested in the space, enticed by a market that's set to explode in size.
rooftop mounted PV solar panels plus battery storage are costly today, but their cost are declining very fast, %8-%14 by some researches.
Which companies would be killed in the short term over this?
And look at what happened to SolarCity, and similar firms. That space is unable to operate profitably, despite large federal subsidies. It also has no shortage of scammy ownership/loans-for-your-solar-install model, is a bad investment for most homeowners, and doesn't even answer the hundred-thousand-dollar-per-home question of peak energy storage. (Or how it can operate in a world where you are on an even playing field for selling power to the grid as the utility.)
The home solar industry makes most power utilities look both efficient and competent.
Does this make solar a great industry to invest in because of the growth potential, or a terrible industry to invest in because the prices are racing to the bottom?
Nice, optimistic outlook. People have a hard time dealing with exponentials. Yet they are easy to observe when they are happening. This one in particular is fun.
There are a few things worth noting.
- Like this article does, rather than talking about installed solar, we need to look at production rates for panels. It's much simpler to estimate and from there to installed capacity is just a matter of the market figuring out the right price levels and the panels being sold and installed.
- Why is the growth exponential? The demand for cheap energy far outstrips the supply. Our economies are bottle necked on energy cost and they've always been historically. And energy prices have come down by a lot recently. Every time somebody starts producing solar panels, they pretty much have no trouble selling them. That's not going to be true infinitely but we're nowhere close to having saturated demand for cheap energy.
- As production volumes go up, the learning effect drives prices down. People keep on finding new efficiencies and improvements as volumes go up. Everything from production, distribution, installation, operation, etc. is affected by this. New entrepreneurs in this space don't just do what others are doing but they try to do it a little faster. And looking at big markets like the EU and the US, there are plenty of easily observed inefficiencies still resulting from regulations, bureaucracy, and other hurdles. Most of the cost at this point is installation. And most of that is because it requires specialist skills and because there are lots of rules mandating the use of people with those skills. It could be plug and play but isn't just yet. Buy some panels, plug them in, job done. Works like that for your boat. But not your house somehow. Can that be solved? (rhetorical question).
- Lower prices grow the market because there are plenty of consumers of expensive energy that would love to pay less. We've long crossed the line where there is any doubt about solar panels earning themselves back under most circumstances. The lower the price, the faster they earn themselves back. The subsidies have helped but they aren't strictly needed for this anymore. And there are plenty of people and companies still paying way too much for their energy.
Based on the above, the market is much simpler to predict. Just follow the money: where are countries investing in new production capacity? Express it in GW/year. Add it up. That's the market growth. China is obviously leading and expanding enthusiastically but it's making other countries nervous that are now also investing in their own production capacity. So, we can expect some surge in growth to result from that.
And yes, solar panels don't work 24/7 and are affected by weather and seasonal changes. All well known and mostly easy to predict and model. Luckily, we're seeing the same exponential effects in battery and energy storage production. For grid storage, domestic usage, cars, planes, toothbrushes, etc. That number is soon going to be expressed in twh/year produced. 1 twh of battery can translate into hundreds of twh stored and released per year if utilized to the max. But most batteries actually aren't. Most batteries just sit there holding most of their charge for most of the time. It's potential capacity we're barely utilizing. We'll have lots of that soon. Tens/hundreds of thw.
The world's annual electricity production is only about 25 pwh (2500 twh). That will grow. But the numbers are starting to add up. We'll need some amounts of other, more expensive sources of energy (wind, nuclear, fusion, etc). But battery plus solar actually go a long way and we're going to have insane amounts of both. Also, existing fossil production capacity won't disappear overnight. Technically that's still growing and might only start shrinking towards the end of this decade. Driven by renewables replacing them and out competing them. The more interesting trend is going to be the nature of that decline. It's going to be another exponential. I.e. much faster than people currently expect/anticipate.
In short, people keep under estimating the numbers. Both conservatives and progressives keep getting surprised by this. Even people that should know better (politicians, executives of companies affected by these trends, etc.). It's because people look at the numbers and then assume they won't change much or at least ignore the clearly observable exponentials or assume some linear trend.
Regulation isn’t a good moat. Solar panels are a commodity- it’s a race to the bottom. Solar looks like (and has been) the storybook case of a positive trend that makes for a poor investment.
There's value in maintaining a manufacturing base at home, because there's often a lot of high tech expertise and knowledge of processes that are otherwise lost. If the Chinese suddenly decide to stop subsidizing their solar industry and they can pump up prices because every other country has decided to let the Chinese manufacture all the panels...Well, it won't be pleasant.
The bit of the industry that is at risk collapsing is the VC funded companies that "help" their customers get solar roofs by talking them into dodgy loans or leases they can't afford. If people can't pay off their loans or cancel their lease, these companies end up with a lot of solar panels that are stuck on roofs not generating any monthly recurring revenue. Removing them means spending more money and the second hand value is probably not amazing.
Add a lot of dodgy sales practices to the mix and the same kind of sleazy practices that banks used to talk people into mortgages they couldn't afford before the housing bubble burst in 2008 and you have a nice recipe for a company sitting on a lot of debt that is at a high risk of defaulting and not bringing in the revenue that they thought they were going to get. They'll create a big mess by twisting lots of arms to get some of their money back and bankrupting some families in the process and they'll get bogged down in expensive court cases for years to come. So, what's collapsing is the notion that these companies that took billions in investment to fund all this are going to turn into nice little rainbow pooping unicorns.
This kind of economical Darwinism is fine. Bad businesses not making it and taking some investors with them is not going to be the end of the world. But it's not going to slow down solar panel production and deployment. The US has plenty of underused roof real estate, and most of it us at a great latitude for getting some decent energy out of solar. With US grid infrastructure being as bad and expensive as it is, there are going to be plenty of people looking at getting some panels on their roofs. Just like every else in the world.
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