SolarCity & Panasonic Announcements May Mark Beginning Of Solar Without Subsidies
Originally published on The Handleman Post.
By Clayton Handleman
Not so long ago, Sunpower’s 20+% efficiency modules were seen as high end niche products. Last week SolarCity announced that it had leapfrogged that benchmark with its 22% modules currently rolling off of its 100 MW lines and soon to be rolling off its 1 GW line at Elon Musk’s ‘other’ gigafactory. With multiple vendors at GW scale with above 20% efficient modules, PV has reached the point of commoditizing high efficiency modules, and the ripple effect on system level costs has profound implications.
Adding fuel to the fire, in a recent Cleantechnica post, Panasonic shot back with its announcement of production prototypes testing at 22.5% efficiency. And the longtime leader, Sunpower, is in the process of upping its game with 23% efficient modules planned for production in 2017 in its Fab 5, which at a planned 800MW (.8GW) is also at the GW scale and rivaling SolarCity’s fab in capacity.
The importance of these announcements cannot be underestimated. SolarCity has long stated that its plan is for its residential PV systems to be cost competitive without subsidies by the time US tax credits expire. Low cost, high efficiency modules offer the path by reducing the physical size of solar arrays and the size-related costs. The benefits of high efficiency include reduced footprint and reduced balance of system costs on a dollars per kW/hr basis and amortization of fixed costs over a larger system capacity.
Many residential systems are limited by roof space, not desired capacity. And a substantial fraction of the cost of residential systems is fixed. As such, by increasing the array capacity those costs can be amortized over a larger project. This reduces the cost per watt and therefore the cost per kW/hr. As module prices have dropped, Balance of System costs for racking, wires, etc. are contributing a larger percentage of system costs. Because more efficient modules provide more energy per square foot, they reduce the cost of balance of system components on a dollars per watt basis. This is explained clearly in this article which includes an easily understood graphic showing how the economics play out. And things have only gotten better since it was written. High efficiency modules are coming in lower than $1.00/W, further amplifying the benefits.
The final piece of the puzzle is gigawatt-scale manufacturing to provide high volume and lower price. SolarCity is doing that with its PV gigafactory, and Panasonic has the scale to develop manufacturing on a globally significant level. When Sunpower was the only game in town and it was producing a tiny fraction of the world’s PV modules, it really didn’t matter how much their modules cost, as it had no real impact on the cost of solar globally.
With high efficiency modules soon to be rolling off gigawatt-scale assembly lines, SolarCity’s vision of PV reaching grid parity even as incentives are phased out appears to be coming to pass. And in volumes with global significance. Clearly the industry is rapidly transitioning to greater than 20% efficiency as the new normal, and with it, the brass ring of cost effective solar without subsidies is rapidly coming within reach.
Reprinted with permission.
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I really believe solar panel prices will continue to drop rapidly.
One reason is that manufacturing solar panels is an energy intensive process. I
keep thinking that if you are manufacturing solar panels your energy costs are
going to decline exponentially. Why not power your operations with your own
solar panels that you get at cost? SolarCity’s plant in Buffalo is situated
near cheap hydro power. Throw in some solar energy and your energy costs
are really low. Combined with lower balance-of-system costs and higher efficiencies,
un-subsidized solar will be cheaper than subsidized fossil fuels very soon.
Does anyone know:
How many solar manufacturers are utilizing there panels to help
power the manufacturing process?
What percentage of the cost to manufacture panels comes from
energy?
I do know it’s mostly for purifying the silicon. The wafer-sawing and assembly is not very energy-intensive.
James,
I do believe you are correct. What is interesting to me; HEMLOCK Corp built a plant in Clarksville TN and upon completion mothballed the entire operation due to demand of the silicon. Clarksville TN has very low energy cost and that was driving factor for the selection of that location. Again, it is odd that a Billion dollar facility was closed due to a lack of demand. It would seem domestically produced silicon would be very cost competitive with import. However, there is a glut of silicon being produced internationally. Not sure where, but would suspect China.
The link to Motley Fool in the article points out that of SolarCity’s residential customer cost of $4.35/W only $0.65 is for the solar panel. So even if solar panels were free, it wouldn’t make much difference in customer cost.
http://www.fool.com/investing/general/2015/01/31/why-solar-panel-efficiency-matters-more-than-you-t.aspx
Solarcity doesn’t price based on cost. When they can , they just make stuff up that can be sold to less analytical and unskeptical buyers.
SolarCity in particular is a financing company, not a solar panel company. So their numbers include embedded interest costs, and they’re charging a lot.
The direct solar panel sellers… well, you *still* find very high installation markups, but it’s not as bad as SolarCity.
This article is already 8 months old.
Agreed. The additional solar installation costs are unreal. I started to look into the costs associated with installation. Some of markup was out of this world. $20 per connection cable that costs less than $2 each, etc. I’m hoping the initiative to put exiting military into the solar installation field will help bring some of this markup down to a ludicrous level.
At the moment, there’s basically so much demand for solar that all the installers are busy all the time, which means they don’t have to compete on cost. As more and more people go into the installation business I think competition will start to bring the costs down.
You’re absolutely right, a lower module cost won’t make any difference to the consumers cost. Becausr of higb overhead cost anx greed, the solar leasing companies will simply price themselves out of existence as a more educated consumer emerges.
A bit ironically, Buffalo is one of the cloudier places in the US but the eventual 6,000 employees couldn’t be more welcomed.
6,000 jobs ? To who ? Robots ? The manufacture of modules today is for the most part automated. And what will happen to those jobs when the tax credit expires ?
It seems you think there’s some virtue in a solar panel plant using only power from solar panels. That’s not important.
What is important is that we reach the point at which we produce more electricity in a year with solar panels than we use to manufacture solar panels during that year. It doesn’t matter where each electron comes from. What matters is that we finish bootstrapping the solar industry with fossil fuels.
Someone calculated that we were likely to reach that point in 2015. I don’t know if we have or not. We’re close.
It’s really better to install those panels further south where they will generate more electricity and cancel out more fossil fuel.
SunPower wasn’t the only producer of high-efficiency mono panels. SolarCity’s entry into the high-end market adds to the competition and will speed up the fall in prices all along the quality spectrum. But it’s not a game-changer, that’s just typical Musk hype.
I agree, but it will still be great if that Buffalo plant is produce 1GW of panels by the end of the decade.
Only indirectly, as Silevo panels are planned for internal process consumption. Though it adds to supply immediately.
Even if solar PV were cheaper than fossil fuels I think that incentives for them should STILL remain available. Fossil fuels should actively be discouraged due to toxic pollution and greenhouse gases.
Better than incentives would be a massive carbon tax. Then we would see fast change. =)
Sounds good to me. It would certainly get me to work on reducing (and possibly eliminating) the small amount of carbon fuel I still use (natural gas).
support https://citizensclimatelobby.org/
Right now, SunPower, SolarCity and SunRun won’t need any subsidies at all and still be obscenely profitable because of the very high prices they’re charging the retail rooftop. At production cost of less than $0.50/Watt, and if the installation have been streamlined from the permitting to delivery at the roof, it would add another $0.50/Watt for a total of $1.00/Watt as the total cost. If they charge the customers at $2.50/Watt, they would still get a mark-up of 150% gross profit from total cost of goods. A $2.50/Watt without subsidies to the end user, would mean a 3-5 year pay-off period. Or these companies can still go the route of PPA or leasing, and have close to more than 450%-750% markup over their cost of goods the term of the project.
And then there is that HERO and PACE program where you can write-off the total cost of the project plus its finance charges as a property tax deductible from your income even if the federal solar subsidies expire. If you’re a homeowner, it means that you are most probably in the higher income tax bracket of at least 20% to as much as 35% plus your state taxes too, and such amount is your savings from your cost of even if the federal tax subsidies expire.
Payoff period at what utility electricity rate and what location? You do realize that rates and solar resource varies a great deal around the country, right?
You always mention the high margins but marketing and support are a big part of any business and they cost a *lot*. The avg. homeowner doesn’t want to get caught with solar panels where the installer has gone out of business and their warranty is worthless. They also don’t want to be on hold for 2 hours while support tries to figure out whether to send someone out to fix the system. Inverters seem to go out most frequently and the avg. person isn’t going to go down to Home Depot and pick up an inverter to install themselves.
I have dealt with all variety of plumbers, electricians, and so on, and good ones are hard to find. It is worth it to most people to pay extra for a feeling of security that their expensive system will be well taken care of by professionals.
If your plumber or electrician quits business, what happens? You can’t get the furnace fixed?
But solar isn’t even a critical home system, unlike most of what other trades work on.
The $5-$10K premium solarcity charges will never be recouped in either cost or convenience. Mature markets don’t pay the ridiculous markup solarcity asks.
You forget a LOT of costs in your estimation. Things like, monitoring, insurance, warranties, long term parts and labor, capitol acquisition costs, end user software and monitoring, lead acquisition costs, paying highly qualified employees, etc. The solar products people regret are those where some “Chuck in a Truck” contractor outbids everyone, installs a system with a “warranty/guarantee” and then is nowhere to be found when inverters start need replacing, or a roof starts to leak because said contractor didn’t care that the customer needed a reroof before panels should have been put there. Why? Because Chuck and his Truck are no more. Oh, and the panel manufacturer phone number has that wonderful “this number has been disconnected” message. That is the person who will scream from rooftop to rooftop and declare to any passerby that “Solar SUCKS”. I prefer a business model that lists every single penny I will ever spend with a solid and reputable company upfront.
Leases are also not expensive, because the people that lease systems for the most part NEVER COULD HAVE AFFORDED SOLAR TO BEGIN WITH. The people who choose a $0 down lease are those with no cash to invest and no tax liability to take advantage of the ITC. If they pay less for their power from a clean and renewable source than they can from their utility then I call that a win for them, the planet, and our culture. By all means if you have cash on hand and are making less than 10% return on it buy a system or do prepaid lease. If not then the best deal in town for you is also the only deal in town, a $0 lease.
It is the efforts by companies like SolarCity, with their close to 300,000 customers and growing, that has created the delivery mechanisms, demand for technological advancements, and production volume needed for solar to survive the end of the ITC. And when stuff starts going wrong or things need replaced solar customers will actually have a company to call, or better yet BE called by their solar provider to let them know that a problem has been detected and will be fixed shortly. So instead of a doomsayer for solar that customer will be happy and hopefully tell a few of their friends about the great experience they had.
“How is this a bad plan!?”
Monitoring, insurance and warranties are free or low cost to many homeowners when they purchase a system. And long term parts and labor, capitol acquisition costs, end user software and monitoring, lead acquisition costs, etc. is unique to the behemoth leasing and PPA companies which is why it makes far more sense to deal with a low overhead, nimble, local “Chuck in a Truck” installer promoted by word of mouth if the consumer wants to save money.
“some “Chuck in a Truck” contractor outbids everyone, installs a system with a “warranty/guarantee” and then is nowhere to be found when inverters start need replacing, or a roof starts to leak” I’ve been in the PV industry for nearly 18 years and the vast majority of those “Chuck in a Truck” contractors that we’ve referred business to are still in business and are in fact thriving.
It’s the huge, solar leasing and PPA companies with their massive overhead that I would be concerned with as we approach net metering 2.0 and the expiration of the tax credit. They will never survive both of these massive blows to their bottom line.
And leases are VERY expensive, because the people that lease systems COULD HAVE GOTTEN A $0 DOWN SOLAR LOAN INSTEAD that offers tax deductible interest on a system that is priced at a much lower level from that “Chuck in a Truck” local dealer. Solar leases and PPAs don’t offer tax deductible interest and they’re priced much higher. Everyone knows that.
And as for your comment: “and no tax liability to take advantage of the ITC.” I find that amusing because even without the tax credit, the pricing offered by the “Chuck in a Truck” dealers is still far lower than the leasing company’s offering.
Higher pricing on the same quality labor, support and materials is always a bad plan that will fail as any market matures.
All the people reading and commenting on this post could learn a lot by ready the public companies 10k report. This companies are insanely unprofitable at any price. When ftc goes away I’m afraid so will the snakes. Solar is an amazing commodity. It would be so nice if someone could just figure out how to make it a profitable and sustainable business without cheating shareholders and investors. Solar is only in parity with energy costs in large scale installations (and that is only with subsidies). And the perverse thing is that the more solar is used the less demand and therefor cheaper dirty energy will become. We are so much further than everyone thinks. It’s not a game of numbers. It’s simply a spending exercise so our future generations will live better. People need to get over the idea solar is economic for our generation. It’s an investment in the future with zero possibility for financial return. It’s amazing how naive people are that don’t get this.
I agree with much you say (and esp. agree with it being silly to focus on current economical benefit, compared to actually saving the world, having an actual future). But minor correction on this:
“And the perverse thing is that the more solar is used the less demand and therefor cheaper dirty energy will become.”
is actually wrong way around. More cheap clean energy (wind, solar) that is available, more expensive thermal-fossil energy becomes: new one uneconomical to build at all; and already built plants close to unprofitability. This is all due to actual load factor going down, and although fuel costs is significant for fossils, they still only make money when they produce electricity; and they only do that when there is demand at high enough price.
So more solar (and wind) will actually kill fossil fuel plants, by starving them of revenue.
Aku, great comment. You are 100% correct, however I think my context was misinterpreted slightly (understandable). What I meant was not the energy cost, you are right, dirty energy power cost (wholesale/retail) will go up. However the underlying commodity price (fuel/gas) will continue to decline dramatically. It means the power provider will have much higher margins over much lower volumes, hence the current trend to Time of Use billing and highly demand driven rates. Ultimately (investors/wall street/banks) will still see low commodity prices as a threat to renewable energy and bring back the discussion into short term thinking, without a very rigid and highly enforced environmental cost (carbon tax) in place. Cheap commodities still tends to kill clean energy financing. Believe it or not, we are still building many coal power plants around the world today, even with low cost renewable…
50 cents per watt? The panels alone cost more than that. Then add in racking, inverters, wire, grounding lugs, grounding wire, conduit, disconnect switches, breakers, etc.
And 50 cents/watt to install? $2000 to install a 4KW system? You gotta design it, get permits, install racks, run conduit, pull wires, install the inverter, install disconnect, ground EVERYTHING, and wire it all up for $2000?
Both are pretty unrealistic.
German residential installation costs, all-in, have been around 1.6 euros ($1.8) per watt for two years (link). Module costs are slightly higher in Europe because of the “dumping” deal (aka subsidy to SolarWorld). A system price that is more than 3x the module price reflects inefficiencies (permitting costs and delays) or monopolistic ripoffs (opaque financing deals, prestige markups). SolarCity’s residential costs in the USA are close to $2/watt, according to their own statements to investors, which are actionable if false. The rest is a profit margin as high as Apple’s.
As soon as net metering 2.0 is approved by the PUC in California, it will be lights out for the overpriced leasing companies.
Congratulations for the article!
I may sound like a grammar-nazi, but the correct expression in such a case as in the 3rd paragraph is of course “…cannot be OVERestimated”, not its opposite.
🙂
“The importance of these announcements cannot be underestimated. ”
So the importance is zero?
Why in the world would we want to end solar subsidies? Subsidies are given because society wants to encourage renewable energy. That solar costs have come down is irrelevant.
What we are witnessing is the power utilities and government abnegating their responsibilities to provide clean power, and shifting that burden onto homeowners. And people argue we should end subsidies? Are they out of their cotton-picking minds?
The issue is not economic – it is existential. Solar needs huge subsidies because the external costs of fossil fuels are titanic – hundreds to more than a thousand of trillions of dollars. That’s $1.2 Quadrillion dollars (!!!) in adaptation costs by year 2100 alone, according to M.I.T.
Ending subsidies for renewable energy is the most stupendously stupifyingly stupid economic argument of all time.
Subsidies and other supports need to put strategically deployed where they are needed. Some things that would make a huge difference:
– Mandated TOU metering
– Fast tracking HVDC from the Great Plains to the coasts for the ultra high value wind there – which BTW is cost effective w/o subsidies if you can get it to the East Coast market. http://cleantechnica.com/2015/08/04/wind-could-replace-coal-as-us-primary-generation-source-new-nrel-data-suggests/
– Phase out the onshore wind PTC and focus it on offshore wind.
– $.10 / gallon gas tax to be used to provide EV purchase incentives.
– 10 year Federal ban on EV road use fees.
– 10 year federal ban on PV ‘connection charges’
Now if only we could get Congress to pass a slow phaseout of the Investment Tax Credit instead of the “instant death” at the end of 2016 version which we have today. It’s ridiculous that there will be a rush of installs in 2016, a bunch of layoffs in 2017, and then everyone being rehired in 2018 and 2019.
I hope the tax credit goes away in 2016. The leasing and PPA companies will be the only ones that will suffer instant death. The fair market priced local dealers will survive and will thrive.