In 2012, the weighted average operating margin for the top ten PV manufacturers (in terms of shipped product) was -19% and the weighted average gross loss was $35.5-million. This means that the industry’s pricing behavior is unhealthy and the way in which the business are run over and above price strategy is also unhealthy.
It is a useful exercise to consider the effect of low prices on an industry’s viability. The significant growth that the photovoltaic industry has experienced since the mid-2000s was stimulated by generous feed-in-tariff rates. This incentive was widely misunderstood as it was believed that it would last in perpetuity and be immune to retroactive changes. The concept of achieving grid parity with conventional energy is another fallacy effecting pricing strategy for the photovoltaic industry as the concept ignores the fact that conventional energy enjoys direct and indirect substitutes and will continue to enjoy these
subsidies for the foreseeable future. The effect of inventory on the demand
side is another factor limiting manufacturer’s choices in terms of pricing as
are expectations that prices will continue to decline. There is no other
industry where prices are expected to decline consistently over time. Another fallacy
about price declines is that volume will ameliorate the effect of low margins. Finally,
the market for solar based as it is on unsustainable cell and module prices is