Friday, May 18, 2012

US Tariffs on Chinese Solar Panels will not effect installation prices in the near term for smart installers

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Some solar installation companies have been crying that the sky is falling over the 31% tariffs that the US Commerce Department has imposed on Suntech, one of China's biggest photovoltaic cell maker and found that Trina, Yingli and other Chinese manufacturers that have captured a significant share of the US market should pay a 31% tariff for selling their products for less than fair value.  This all stemmed from a complaint filed by a US subsidiary of Germany's SolarWorld with the US federal government. 

Here's why it won't effect anyone interested in solar installations in the short term if they are partnered with the right solar energy company.  Smart solar energy companies that have invested in infrastructure, research and development and supply chain diversity are largely immune to disruptions from Chinese suppliers or any one supplier.  At Mercury Solar Systems, headquartered out of Port Chester, NY for example, they have multiple American, German, Korean and Chinese panel suppliers capable of filling orders as needed with a diversity in their supply chain specifically to avoid market disruptions that might effect one supplier or group of suppliers like the Chinese.

Mercury Solar Systems deploys a smart growth strategy and risk mitigation model within their management structure which has enabled them to grow and lead the industry's growth on the east coast. By employing top tier engineering and designers in house, Mercury Solar Systems keeps installation costs low while putting out a superior overall product that is bankable by investors, expertise sought after by other solar companies, electric utility companies looking for solar installation expertise and suppliers clamoring to try new technologies in the field with the NY State Energy Research & Development Authority (NYSERDA) which uses the Mercury Solar Systems headquarters in Port Chester, NY as their proving grounds for new technologies.  They currently have 10 different photovoltaic technologies and mounting configurations on the company's headquarters.  While other solar installers have exited the industry, face disruptions due to tariffs and see the sky falling, Mercury Solar Systems sees opportunity to differentiate and make smart growth decisions.  Mercury Solar Systems executives are regularly approached by smaller solar installation companies in states like Maryland who look to be acquired by Mercury Solar Systems as they expand their reach into new states.  The smart approach and focus on the solar installation business has given Mercury Solar Systems a leadership position in the industry that can easily weather any disruption to price from Chinese suppliers.

Mercury Solar Systems expert supply chain wizardry and software maintain a just in time inventory level that anticipates and prices in market disruption and variability from multiple suppliers as a redundant back stop to fill orders as needed.  According to one wizard, the key to affordable solar energy is in efficiencies from every step of the process including site optimization design (pre-sale), panel choices, size of inverters, length and type of conduit run (overhead, underground), as well as optimized design and engineering configurations for each specific site.  Most other solar installation companies either outsource or have to figure out on the job what will work with engineers and installers who lack the experience of Mercury Solar Systems engineers and installation teams.  The company has completed over 2000 different systems with  close to 35mW under operations and maintenance.  The company can easily claim there isn't a roof or ground mount system configuration they haven't already seen or already tested on the east coast.

The photovoltaic panels themselves represent less than 20% of the overall installation costs in typical commercial or residential installations on the east coast, and less than 33% on larger utility solar farm projects.  Installation companies that relied to heavily on Chinese suppliers with too little inventory to meet their current or near term demand will be most affected by the US tariffs imposed on Chinese suppliers.

As new and innovative solar technologies evolve, smart solar installation companies who are large enough in scale to attract research and development investment partners (like NYSERDA), investment bank capital, diverse suppliers, engineering, design, installation and sales talent won't be affected over the long term.  Those companies don't want to be in the panel manufacturing business nor too reliant on one technology or supplier because of the evolution and advancements like the new Absolute Black Silicon Cell which almost eliminates reflectance loss and captures 99.7% of the solar radiation compared to 96% reflectance from standard silicon cells as demonstrated in the video from Natcore Technology and featured on ABC News.com.

Technology will be the driving factor for the most efficient and lowest cost for customers as American and other country's panel manufacturers compete for the US solar market.   Market dynamics force industry consolidation among installation companies, engineering companies and panel manufacturers to align themselves strategically and embrace the newest technologies and efficiencies.   We are not that far off from reaching grid parity with distributed solar energy in certain markets ideally suited for it.  The evolution of efficiency gains bring the solar energy industry closer each year with or without subsidies, tariffs or the efforts of the American Petroleum Institute (and their wholly owned subsidiary, the GOP) to slow that advancement down. 
Please leave your comments on this blog or send your feedback to EnergyChoices@rajdwivedi.com.

2 comments:

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