There is nothing new about protectionism just as there is nothing new about aggressive pricing for market share, dumping of overproduction at low prices and the cascade of unintended consequences of government intervention on markets.

A free market is precisely what the word free implies that is, market prices and the choice of goods are set by the interactions of market participants. Under this definition, there are few, if any, free markets in the world.

Governments intervene to subsidize or incentivize production of goods and the acquisition of goods. In the US, farmers sometimes received subsidies not to produce under the assumption that over production would lead to a price collapse. Electricity rates in US states must be approved by state PUCs. Subsidies provide affordable housing for poorer populations. Pick a market and you can find a government incentive, subsidy or a control of some sort.

So, seriously, there are few, if any, free markets.

The global solar industry relies on mandates, subsidies and incentives for its demand. Though it has enjoyed extraordinarily strong growth overtime this growth has come about because of, again, subsidies. Current low prices for PV modules are possible because of China’s support for its PV manufacturers.

The 2012 US resulted in higher prices for small buyers and, frankly, no price change for larger buyers. In sum, for larger buyers the sellers absorbed the tariff. The primary goal of sellers was sales, margin was secondary. Higher margins were gained from smaller sellers who also absorbed the tariff. Exporters were then not truly punished because the goals of the exporter (seller) were not properly understood.

The lesson is that market regulations, incentives, subsidies, mandates and tariffs come with unintended consequences. When tariffs are enacted the primary entity punished via higher prices is the buyer. The price pain felt by buyers is almost always the unintended consequence of the imposition of tariffs.

Just as markets are not entirely free, markets are also not entirely rational or controllable. Tastes change. Competing products rise. Drought and heavy rains affect agriculture. People go on strike. Recessions effect buying ability. Finally, sometimes people make irrational buying choices. Consider the cell phone which went from the size of a person’s arm to the size of a watch face to practically the size of a laptop computer screen and is now migrating back to not just watch face size, but to being an actual watch.

The point is that controlling buying patterns is close to impossible and punishing sellers for low prices typically punishes the buyers and worse … almost never brings back manufacturing jobs.

A good example of the unintended consequence of government intervention is the Smoot-Hawley Tariff Act of 1930. In the 1920s an excess of agricultural production in Europe led to low price imports of produce into the US. Farmers suffered and Herbert Hoover promised that if he were elected president he would help US farmers. (As an aside … if this seems familiar it should.)

Enter Willis Hawley, Congressman, Oregon, and Reed Smoot, Senator, Utah. Smoot-Hawley began as a protection for farmers but after much debate fed by many special interests it was eventually attached to a wide variety of imports (~900). Other countries retaliated with their own tariffs. The US trade deficit ballooned. Smoot-Hawley did not push the world into the Great Depression but it certainly was a card in the Depression playing deck.

In 1934, as part of the New Deal, President Franklin Roosevelt pushed the Reciprocal Trade Agreements Act through and the short reign of protectionism in the US ended … just in time for the beginning of World War II in 1939.

The Solar Point

Following Suniva’s bankruptcy talk began, primarily in the solar press and SEIA, of a new US solar tariff. (Another aside, this may happen but it is a bit cart before the any animal you choose.)

Proponents say that it would protect US solar manufacturing but as there is very little US manufacturing and the reasons for its demise are complex, there is little to protect.

Tariff opponents argue that cheaper prices for cells would help module assemblers and cheaper prices for modules would increase solar deployment.

The fact is that larger entities continued to enjoy low prices and will always enjoy lower prices than smaller demand side participants.

The fact is that bringing back US solar manufacturing is close to impossible at this juncture using tariffs. It would require a lot of time (a lot of time), favorable taxes for producers as well as other manufacturing subsidies and most important, a healthy incentive for buyers to purchase modules made in America with crystalline and thin film cells made in America and … even then … the aluminum, the glass, the backsheet – something in the module will come from some other country.

The fact is that the products bought in the US, including the foods we eat, are often produced using components from other countries.

Finally … well-meaning or crowd-pleasing government intervention in the not-so-free-not-so-rational-extremely-complex global market always brings a host of complications with it and always brings a host of unintended consequences. Just ask Mr. Smoot and Mr. Hawley.

From the Price Chapter of the Report: The subject of price in the photovoltaic industry is easily misunderstood and often assumed to be synonymous with the cost of manufacturing. Misunderstandings are typically over the difference in inventory pricing, pricing from distributors and pricing directly from manufacturers. Spot prices for modules can fall into any of these three categories and are thus highly uninformative. Observing so-called spot prices daily, weekly or monthly price fluctuations without understanding whether the module comes from manufacturer inventory or is being resold from developers from failed projects does not aid in coming to an understanding of current pricing trends.

The subject of cost is also significantly misunderstood. Observers assume that prices for PV cells and modules relate directly to the cost of manufacturing these products. This is not the case. In many cases significant subsidization of domestic manufacturing completely obscures the true cost of manufacturing cells and modules without subsidies. In some cases manufacturers purposely obscure the true cost of manufacturing in order to appear both more profitable and more efficient. China is the most recent and most significant country to both subsidize its domestic PV manufacturing and thus obscure the true cost of this manufacturing but it is by no means the only government/country do so. Among the other countries that have supported domestic manufacturing by offering incentives and subsidies for manufacturers are Germany, Japan and to a lesser degree the U.S.

Many times the assumed cost of manufacturing is arrived at by back-engineering from a price point using methodology that assumes a gross margin of, for example, 20%. This method of arriving at an assumed cost of manufacturing typically yields incorrect data for cost that continues to support prices that are too low.

In 2004, the global PV industry entered a period of prolonged accelerated growth stimulated by the European feed in tariff incentive which spread quickly from Germany to other countries. In its early iterations, this incentive was simple and profitable and as such invited investors to take risks on non-commercial technologies. The utility scale (multi-megawatt) application was an outgrowth of investor interest in seemingly stable FiT returns. During the early 2000s capacities to produce technology increased significantly while prices decreased significantly; for example, prices decreased by 42% in 2009 over the previous year, by 16% in 2010, by 23% in 2011 and by 45% in 2012. Unfortunately, these price decreases were misunderstood as a sign of economies of scale and it was widely assumed that the industry had reached grid parity. These assumptions were largely based the misunderstanding that price was closely correlated with cost and that price decreases represented progress.

During this period of strong activity, manufacturers in China entered with aggressive pricing strategies that rapidly drove PV manufacturers into a prolonged period of negative margins, company failures and consolidation.

In 2001 global shipments were 352-MWp and China’s photovoltaic manufacturers had <1% share. In the mid-2000s the market for solar deployment accelerated, driven by the feed-in-tariff incentive model. Between 2004 and 2009 accelerating demand for solar deployment met with a severe shortage of polysilicon starting material and therefore crystalline module product. Prices for modules increased and smaller markets outside of Europe had trouble sourcing module product. In 2004 China’s manufacturers had a 1% share of the global shipment total, 1.1-GWp. By 2007, China’s manufacturers had a 21% share of global shipments. By 2010 China’s manufacturers had a 38% share of global shipments.

How China’s manufacturers accomplished this feat has been and still is debated. On one hand the country’s manufacturers enjoy significant and generous incentives and subsidies from the central government as well as local governments. Initially labor was far cheaper in China than it was in other countries and other costs, such as electricity were also less expensive. Debt has always been a murky topic concerning China and its manufacturers expand, in some cases, using grey market debt (shadow lending).

China’s astounding and rapid success and domination of photovoltaic manufacturing also owes a lot to the market reform of Deng Xiaoping. Under Deng Xiaoping in the 1990s a new breed of businessperson came into being laying the groundwork for the country’s PV pioneers in the mid-2000s.

Aside from significant government support, China’s pseudo-capitalists operate like free market capitalists and, as long as they do not run afoul of the central government as Suntech famously did in 2013, are free to succeed relatively margin-free. China’s PV manufacturing sector is less risk adverse than in other countries and more willing to move rapidly past historic PV industry norms such as, in some cases, pilot scale manufacturing. There are also fewer manufacturing regulations.

Much has been written recently about the relationship of the US stock market to the rapid growth of China’s photovoltaic manufacturing sector. Suntech filed its IPO in 2005; Trina Solar filed its IPO in 2006 while Yingli and LDK filed their IPOs in 2007. It cannot be denied that the proceeds from the IPOs fueled rapid expansion for many of China’s PV manufacturers however, it is equally true that the foundation for success for all its manufacturers were grants as well as loans at favorable repayment terms from the central government and local governments.

Recent rapid expansions of manufacturing capacity in South East Asia that are, in some cases, relocation of equipment from China to Thailand, Vietnam and Malaysia, are the result of high levels of manufacturing capacity and price pressure significant enough to finally give the minimum price (MIP) in Europe and tariffs in the US some weight.

PV industry pricing began recovering in 2013 for many reasons including recovering economies and government price intervention in Europe, the US and other countries.

In Q3-2016 prices for photovoltaic crystalline cells and modules decreased dramatically driven downward by an unfortunate stew of overcapacity, vulnerable markets as well as aggressive pricing (China) and defensive pricing (India).

In Q1 2017 manufacturers began selling future production of modules in the $0.30/Wp to $0.40/Wp range. Though this range is typically only available to larger buyers it coincides with inventory sales from manufacturers and distributors that has dipped into the $0.20/Wp to $0.30/Wp range.

This situation, sales of future production, cements the current low pricing phase while potentially increasing prices to the smaller buyers.

The average price (ASP) includes a wide range of price strategies and differs country by country. The average prices for modules in 2016 by country were:

  • U.S., $0.61
  • Japan, $0.62
  • Europe, $0.61
  • China $0.47
  • Taiwan (primarily for cells), $0.22Wp
  • Malaysia $0.53/Wp
  • South Korea $0.76/Wp
  • Singapore $0.65/Wp
  • Philippines $1.47/Wp
  • India $0.44/Wp
  • Vietnam $0.43/Wp
  • Thailand $0.51/Wp
  • Global Module ASP: $0.54/Wp
  • Global Cell ASP: $0.22/Wp
  • Global Multicrystalline ASP $0.44/Wp
  • Global Monocrystalline ASP $0.67/Wp
  • Global High Efficiency Monocrystalline ASP $0.86/Wp
  • Global Thin Film ASP $0.59/Wp



Expect manufacturer revenues for 2016 and throughout 2017 to have little relationship to current prices as manufacturers continue selling tomorrow’s production today. Moreover, the ability for manufacturers to raise prices in the near, medium and long term has likely been permanently eroded. For most manufacturers current prices do not reflect costs and as margin expectations – that is, the gross margin necessary to run a thriving business – are little understood by analysts, observers, academics, researchers and even industry participants there is little possibility that the dire consequences of continued underpricing will be addressed.

Price Manipulation

The global solar PV industry is a bastion of price manipulation with significant government support in some countries and punitive tariffs on imports in others. As neither the governments providing support nor the countries imposing tariffs understand the intricacies of the market for solar panels and other components the result is an artificial marketplace where outcomes are never as intended or expected.

In markets where import tariffs have been imposed in order to offer support for domestic manufacturing recovery, no recovery was forthcoming and the tariffs had little effect on the price paid for modules.

Governments offering significant support for manufacturers find that the robust manufacturing sector that relies on the support cannot raise prices and jobs are only stable while support continues.

For example, though manufacturers of cells and modules based in China control the market, the expectation of lower prices on the part of buyer’s means that they cannot exercise their market control – that is, they cannot raise prices. Thus, the unintended consequence of market control for manufacturers based in China is the opposite of what is theoretically expected – the ability to control the price function when market control has been established.

In their 2012 paper, Market Failure and Government Failure, William Keech and Michael Munger, Duke University, and Carl Simon, University of Michigan wrote “Market failure is the standard justification for government action in neoclassical welfare economics.” The two assumptions discussed by the authors in their paper are:

  1. The presumption that market processes are the default for allocating scarce resources, essentially, perfect competition, where price information will direct self-interested market participates to correct mistakes or Pareto dominated allocations, in resource use.
  2. When competition is imperfect, the consequent market failures can and should be corrected by government. This claim amounts to an assumption that political actors have both appropriate incentives and accurate information so that Pareto optimal allocations of resources can be achieved.

Welfare economics is the theory that individuals make rational buying and selling decisions. Pareto dominated allocations refer to Vilfredo Pareto’s 80/20 rule that 20% of the effort is responsible for 80% of the resulting output.

Concerning the PV industry a much longer discussion could be had as to whether rational decision making is possible in a market where the price of inputs and the cost of manufacturing are manipulated by governments.

On the supply side sellers of modules cannot raise prices and increase margins.

On the demand side buyers of modules, though enjoying low prices, lack control over quality and do not realize that the negotiating power is also out of their control.

The buyers of electricity from the utility grid, aka the end users, have only illusory control over the price they pay for electricity as the price of this commodity and necessity is set by utilities and governments. When comparing the value of owning or leasing a solar system the point of comparison is government controlled and not an example of free market value (price) setting.

Meanwhile, market observers assuming logical supply and demand forces to be the primary factors in establishing incorrectly describe the market thus exacerbating the problem.

Assumption 2 is of particular interest when observing government intervention in the supply/demand PV industry behavior in that political actors are acting on insufficient and often incorrect information and so are unable to correct imbalances in the market. Simply put, in decision making if the input is a fallacy the output will be a fallacy and the result a mess.

The Unintended Consequences of Inexpensive Components

Price pressure to fulfill the low price expectations of the market has pushed PV manufacturers into a situation where margin must be preserved at any cost including quality. One way in which manufacturers preserve margin is to shift manufacturing to developing countries where jobs are needed, wages and other costs are low and regulations are generous to the manufacturer – that is, regulations, quality control, and worker and community protections are far more lax. One example of poor manufacturer behavior is the 2011 contamination of a river in Zhejiang province, China, by PV cell and module manufacturer Jinko Solar.

In the beginning workers are thrilled at the increase in available jobs. Overtime, safety, wages and quality of life become important to workers and they begin to demand change. Wages increase and manufacturers look for new ways to save money.

One way to save money is to source lower cost components such as backsheets, glass, EVA, aluminum and junction boxes among other components and raw materials. Quality problems arising from the sourcing of low cost inputs – and all manufacturers do this – are often not discovered in testing, not apparent visually and are discovered in the field thus increasing O&M costs for developers and installers.

When manufacturing shifts to low cost countries buyers benefit from lower prices but hidden behind those lower prices are lower quality, increased pollution, low wages and unsafe working conditions for labors. As production shifts to low cost countries manufacturing slows in areas with higher costs, jobs are lost and the country shouldering the job losses also shoulders higher medical and other costs for the unemployed.

The unintended costs of government support and punitive measures and ongoing low margin manufacturing are eventually felt by all industry participants. These costs are the slippery slope down which the global solar industry has been sliding for decades.

The Trolley Problem is a set of ethical dilemma scenarios developed by British philosopher Philippa Foot in 1967.

Assume you are the driver of an out of control train. Ahead of you on the main track there are five people tied up and unable to move to safety. If you pull a lever the train will barrel down an alternate track to which one person is tied, unable to move. No matter what you choose you will be safe.

What do you choose?

Now re-imagine the Trolley Problem in terms of Climate Change

You are driving the climate change train. Ahead of you trapped on the main track is every living creature on earth including insects and plants. If you choose this route no one will be asked to conserve, deployment of renewables will continue but at a slower pace, the climate will continue to warm, severe weather events will become more common, sea levels will rise, the air will eventually become unbreathable and the dire effects of climate change will become irreversible. Eventually everyone will suffer.

But, aha – there is an alternate route and on this route is, again, every living creature on earth including insects and plants. If you choose this route most people will be temporarily inconvenienced by an initial increase in the cost of energy as the switch to renewables is accelerated and conservation habits settle in and a few will see lower profits from coal, oil and natural gas as they make the technology switch but in the end all will be better off.

Here are your choices:

A: Do nothing and allow climate change to barrel ahead, the air to be poisoned, the climate to warm, extreme weather events to become more common and future attempts to ameliorate the damage to be unmanageably expensive. This choice does not immediately inconvenience anyone and it is profitable for a few. Eventually, of course, it inconveniences everyone and is costly for all.

B: Pull the lever and barrel down the alternate track where everyone pays a little more initially as renewables are deployed and all must learn to conserve energy while a few suffer lower profits initially but everyone is saved from future disaster.

What do you choose?


The tragedy of the commons is an economic parable that refers to greed.

The tragedy of the solar commons refers to continued selling of modules and deployment of projects for market share with the goal of being on a top ten list as the biggest developer, or installer, or the number one manufacturer without healthy margins and without consideration that these activities leave the entire industry out of balance and vulnerable.

The global solar industry has been low margin all along the value chain for so long that profit has paradoxically become anathema to it. The tragedy of the solar commons is that an industry with the core mandate of ameliorating climate change, bringing electricity to populations far from the grid and providing electricity independence to everyone appears focused on keeping itself unprofitable.

The result of low margins is continued reliance on the very incentives, subsidies and mandates that the solar industry insists it a) does not need or b) wants to be free of. The solar industry will continue to hold itself hostage to government intervention as long as it pursues a strategy of being the least expensive source of electricity. This is irony at its best as if subsidies were removed from conventional energy and if the conventional energy infrastructure had to be built anew every time it was deployed … well, the playing field would not be even, it would likely shift to solar and other RE. One reason for this shift is low running costs. The fuel for solar generated electricity is the sun. Solar system components mine the sun. DG solar – power at the point of use – shifts control to the system owner.

The argument for shifting to solar as a primary electricity source requires a shift in the electricity buyers understanding of just about everything to do with how they source their electricity.

The good news is that the trend is towards clean energy and this trend will not abate despite the current political climate. The global solar industry has time to change focus, work together and build a quality, profitable solar industry that offers value to participants and stakeholders all along its value chain.


2016 was a wild year and not just for solar. Voters seem to be rejecting the status quo in favor of the unknown in many countries. After decades of reliance on government incentives, subsidies and mandates the global solar industry may be inured to unpredictability but the industry as a whole should be wary of global trends.

No matter what and for everyone, 2016 was a heck of a year. Here is a roundup of a few events that rocked and rolled their way through solar’s 2016.

Donald Trump was elected president of the United States: 58.6% of eligible voters cast ballots in the 2016 presidential election with Hilary Clinton earning slightly over 48% and president elect Donald Trump earning slightly over 41% of votes cast. Secretary Clinton won ~2.5-million more votes than president elect Donald Trump but … Donald Trump won the Electoral College. The president elect appears to be committed to undoing many of President Obama’s progress on climate change, immigration and women’s rights.

Trump’s victory revealed a great divide in the US with great anger on either side. This was a populist victory but certainly not a wholehearted one. A nasty campaign kept many voters home and opened the door to drastic changes that over half the country does not seem to really want. This is less a mandate than an object lesson of the danger of voting angry, voting for change simply for the sake of change, and a bored electorate that would rather sink into depression and not vote than cast their ballots on the basis of the issues.

What it means for solar: The ITC is safe, the Clean Power Plan is not safe and the direction of energy policy and the budgets for RE and solar will be at the mercy of a likely climate skeptic energy secretary. This is not the time for infighting on the part of the US renewable energy industry. All technologies and stakeholders including solar and other RE customers need to band together on the issues that unite them. Specific to solar – the industry is big business now contributing to the US economy.

The UK voted to leave the European Union – Brexit: 2016 has certainly not been bereft of surprising election results but Brexit stands out as the first result to catch global attention and shock pretty much everyone. Brexit, like the US presidential election, the failed peace vote in Venezuela, and upcoming elections in Italy, Austria and France (among others) is a populist uprising against the status quo. Following the vote to exit the EU many in the UK were shell shocked. The result of Brexit may take years to play out. In the meantime, it may indicate weakness in the EU – an example and a precedent has been set.

What it means for solar: Brexit probably does not mean much for solar – at least yet. Tenders are trending in Europe and replacing incentives. Demand is cooling – demand is not dead, but it has cooled enough for major manufacturers in China to withdraw from the MIP because the market in Europe is no longer strong enough to warrant compromise. Should more countries vote to exit the common currency will no longer be common and this would affect trade for all goods and services.

The global populist movement: The global populist movement did not begin in 2016. It has been rumbling around the globe since the housing crisis and recession of the late 2000s, gaining momentum as job security became a quaint memory, as victims of horrific civil war in the Middle East ran for their lives immigrating en masse to anywhere they could, as terrorism destroyed personal security, as austerity measures in many countries ripped apart cherished livelihoods and seemingly secure futures and as people demanding change got more of the same from leaders. Jobs were lost and many are not coming back. Progressives and conservatives alike demanded change. People felt left out of any economic recovery and revolted with their ballots.

It is worth remembering that throughout history political upheaval has typically come from economic inequality and a feeling of powerlessness. Without a ready and clear solution the outcome of upheaval for upheaval’s sake is, well, historically the French Revolution is a good example. After years of anger and few solutions from leaders, voters all across the globe threw out the status quo and replaced it with a heap of grievances and no plans or solutions.

In 2015 voters in Greece sent a loud message by voting down EU imposed austerity – without a plan.

In 2016 UK voters ushered in an uncertain future by voting to exit the EU – without a plan.

In the US, angry voters surged to Donald Trump’s rallies and succeeded in electing him president – without a plan.

Elsewhere in 2016 voters in Spain, France, Italy, Australia, the Philippines, Venezuela and even Iceland – pretty much every election has been effected by populist anger.

What it means for solar: The populist movement ushered in a president who has historically been a climate change skeptic in the US, potentially isolated the UK from Europe and has rendered trade agreements highly vulnerable – but, the populist movement is not responsible for the solar industry’s vulnerability.

Decades of ignoring margins and celebrating low prices for components and system deployment have done their work. Business models such as the US solar residential lease established no money down and free solar as a standard. Low bidding on tenders and PPAs have left the impression that solar no longer needs subsidies – and maybe this is true … the industry does not needs subsidies it can keep on losing money all on its own.

Here are some suggestions for the solar industry as we segue into the ill-defined populist reality in which we find ourselves:

First, when setting targets and goals for module and system deployment costs remember that these are actually prices. All along the value chain a gross margin sufficient to run an entire business must flow in order for a company and an industry to remain viable. A shout out to SunShot – if it survives – goals are wonderful things, but, insist that margins above 30% and ideally above 40% are maintained.

Second, stop using LCOE as a standard for progress. It is a highly manipulative model filled with assumptions, biases and supported with very few facts. It is meaningless.

Third, the people who ushered in the populist movements have been displaced. In the US for example, coal workers are out of work and they are suffering. Coal miners are not anti-solar or RE they are just trying to make a living. While the US solar industry has been celebrating job growth it failed to develop a plan to include the displaced. This is an area where SEIA has failed to act and needs to act.

Fourth, the current populist movement was informed primarily by people who felt disenfranchised. There is no reason that a populist movement with a climate change agenda cannot flourish. This movement should involve all renewable energy generating technology sectors and their customers as well as people who benefit from clean air. Solar has traditionally been grass roots and it is time it got back to those roots.

SunEdison finally fails: In 2015 SunEdison was still buying up companies, developing projects, sponsoring conferences and was viewed – though skeptically by some – as an industry leader. Now pieces of the company, including projects in various stages of development, are available for pennies on the dollar.

What it means for solar: For developers and investors looking for a good buy there is a lot available at, again, pennies on the dollar. Not all of SunEdison’s orphaned projects will be developed, and not all will be developed by the buying company, but many will be developed and at the bargain they were acquired may even be profitable.

SunEdison’s failure, one of poor executive decision making and lax, poor oversight, cast good people adrift. Most will find their way back to solar jobs and some will not. The true victims of the SunEdison debacle were its own employees.

SolarCity and Tesla merge their debts and companies: No one should have doubted that Mr. Musk would prevail in the merger of one highly flawed business model and two highly leveraged companies. A SolarCity failure would have had repercussions far beyond those of SunEdison as employees and residential lessees and PPA holders would have been affected. This is not reason enough to cheer bad business, but it is something salvaged.

What it means for solar: As with Tesla’s non-announcement about its non-existent solar roof tiles and its MOU with Panasonic Solar, expect a lot of PR announcements about upcoming product releases as well as a lot of slipped release dates. All this marriage of debt means for solar right now is, basically, nothing.

China’s market soars to a likely 30-GWp: Solar PV deployment in China ballooned in 2016 to double the goals of its government and make no mistake, solar deployment in 2016 would be 15-GWp lower if developers in China had not continued installing systems.

China serves as a perfect example of solar industry behavior for decades. Developers have not been paid the FiT regularly, curtailment is high and yet developers (while complaining of unprofitability) continued installing systems. This is, again, a perfect example of solar industry behavior for decades. It is illogical and trying to understand why an entire industry would continue to act against its own self-interest could make a logical person’s head explode.

What it means for solar: The solar industry once again finds itself vulnerable to one big market much as in the mid to late 2000s when Europe consumed over 80% of module product. The excess of activity in China could come to an abrupt halt leaving the industry overcapacity and desperate for a new multi-gigawatt market.

It is not too late for the solar industry to change. Growth for unprofitable growth’s sake is not healthy. Some business is not worth doing.

Module prices drop to historic lows: Over 60% of global PV cell and module manufacturing is either in China or owned by Chinese manufacturers. At 30-GWp China’s market for PV deployment is over 44% of global demand. An illustration of what happened to module prices in 2016 is as follows: A company has one primary customer. This customer buys close to 50% of the company’s product. The customer cuts its demand for the company’s products suddenly also indicating that demand the following year will be 50% of its current level. The company has several choices: A) sit on inventory, B) find new customers to absorb the excess production, C) sell the product at a significant discount and reduce capacity to serve the current level of demand or D) all of the above.

Late in 2016 China’s government moved to control demand and several gigawatts of product flooded into the market at historically low prices. Manufacturers outside of China and some Chinese manufacturers reduced staff. The rapid drop in price was, as usual, celebrated by some as an example of progress.

What it means for solar: Prices have already ticked up but full price recovery depends on another record year for solar PV deployment in China. Meanwhile other manufacturers face some tough decisions concerning pricing strategy for 2017. It’s a bad time to be a PV cell and module manufacturer.

Utilities push back on net metering in the US: Blame utility pushback on net metering in part on the US solar residential lease model. Beginning in 2012 demand for residential solar leases accelerated driven primarily by the lure of no-money-down. Eventually utilities pushed back and net metering programs began changing. Hawaii ended its program. Fees were added for homeowners with systems on their roof. In some cases, Nevada for example, initially the changes were applied even to past system owners and lessees. Meanwhile, time-of-use rates also altered the economics for homeowners with solar systems on their roofs.

This is a good time for the US solar industry to pull its customers into its lobbying effort. It is also a good time to change the residential solar lease and PPA business model so that it offers value to all stakeholders. Unfortunately doing so will make this business model even less economically viable for the solar leasing companies.

There is a moral here and it is one the global PV industry should know well: When you rely on any sort of a government or utility program you’d better be vigilant because it will change.

What it means for solar: The economics have changed in most states for homeowners with solar installations on their roofs. As the economics for lessees and PPA holders were never really in the favor of the homeowner (that pesky escalation charge) leasing a system is significantly less attractive.

First Solar changes shifts its strategy more than once: Though First Solar indicated recently that 2017 would be a transition year there is no indication from the company’s behavior in 2016 that it knows what it is transitioning to. The company has been restructuring since Q1 2016. Early in the year it pulled the plug on TetraSun, shifted focus from its EPC and its O&M businesses while vacillating between strategy focusing on module sales and/or community solar deployment. Recently it leapfrogged over deploying its Series 5 module, which it showcased at the 2015 Solar Power International Trade Show, launched its Series 6 module and announced 1600 layoffs.

What this means for solar: Pardon the pun but First Solar would not be the first solar company to fail to read the market and stumble strategically. It is easy to step back and suggest that a focus on module sales in an industry with historically painful price pressure is a mistake and to applaud an implicit admission that expansion via acquisition into crystalline may have been an unnecessary loss of focus from its core competency. The global solar industry is brutally competitive internally – and this is before the competitive effect of cheap natural gas is thrown into the mix. Solar industry participants should hope that this industry pioneer and  largest thin film manufacturer globally, rights the ship.

SunPower struggles and restructures: High efficiency monocrystalline cell pioneer and manufacturer began signaling its competitive structure in early 2016 and over the course of the year it shifted its focus from utility scale (a sector in which it is not cost competitive) to rooftop deployment (a sector in which it is still not cost competitive), shuttered module assembly in the Philippines and laid off 1200 people, and acquired JV partner AUO’s stake in the 800-MWp cell manufacturing facility in Malaysia for $170-million paid over four years. In December SunPower announced that it would shutter 700-MWp of its cell capacity in the Philippines and lay off an additional 2500 people. The cuts were attributed to cost cutting measures.

During an interview with Reuters, SunPower CEO said: “We are planning for (price) stability, meaning they won’t materially decrease or impair. They might be plus or minus a few percent, maybe 5 percent, on a high side 10 percent, so we expect stabilization, not necessarily price increase.”

Translated the quote means that prices are un-competitively low and we fervently hope that they will not continue to fall and though we do not expect prices to increase and we frankly have no idea what stabilization means at this point.

What it means for solar: As the robot said repeatedly on the 1960’s TV show Lost in Space: Danger Will Robinson. SunPower’s struggles in 2016, and earlier, indicate that high quality may no longer command a premium. As with First Solar, SunPower finds itself in a situation where visibility into future market direction is clear (price pressure will continue) and where an appropriate strategy has yet to emerge.

Ivanpah catches fire and Solana gets fined: In 2016 short cuts taken while installing and operating CSP came to light and yet Solar Reserve still announced a future 2-GWp installation. CSP requires a lot of level land and a lot of time for installation. In the volatile solar industry where time is money and where government programs change overnight CSP is at a disadvantage in competition with inexpensive solar PV. Pressure on CSP developers is significant. It is not going to get less intense.

What this means for solar: All solar technologies including CPV contribute to growing the share of solar generated electricity. For CSP the highly visible concerns revealed in 2016 offer a lesson; when the choice is to lose money or cut corners, unfortunately losing money should be the only choice.

Chinese manufacturers exit the EU MIP: Let’s see, the market in Europe softens a bit more every year while new markets in Latin America and on the continent of Africa emerge and despite the outcome of the US election the US market still offers stability for a few years. Under these circumstances why would Chinese manufacturers agree to continue with an agreement that has little upside for them?

What this means for solar: As there is not enough manufacturing capacity in Europe to fulfill its own demand it means developers and installers will pay more for modules whether they come from Malaysia, Japan, Europe or China. In any negotiation the party that can walk away from the table wins.

 Stuck in recession, Brazil, one of solar’s most hyped markets, considers austerity: In 2016 Brazil hosted the Olympics, impeached its president, delayed its solar auction more than once and struggled with a historic and deepening recession. Now it faces austerity measures.

What this means for solar: The solar industry should have learned the lesson of Greece, Spain and other countries – austerity measures are market killers. Countries in Latin America have historically volatile economies and governments. Macro and micro economic realities should always be factored into a company’s strategy.

Tender bidding in some markets dips below $0.03/kWh: Every day it seems a new low is set in tender bidding. Unfortunately when the new lows are announced details about how heavily these bids are subsidized are lacking as well are picky little details about possible curtailment.

What this means for solar: The solar industry continues to celebrate cheap prices for components and low tender and PPA bids without considering that the result of this ongoing trend is low quality and systems that may either not be built or may be built poorly. Referring back to number 10 about CSP, poor quality will catch up with the developer and the manufacturer and low margins will eventually drive a company out of business.

PR driven solar news: William Randolph Hearst said: “News is what people do not want you to print. Everything else is ads.” The news that the solar industry and its observers read on a daily basis is almost 100% PR driven and is not newsworthy. It also lacks enough detail to be useful.

What this means for solar: The more PR driven and biased news people read the less informed they become. Journalism done well will educate and inform and it will also push the reader’s confirmation bias to the limit and perhaps over the limit leading to better informed industry participants.

The Tragedy of the Solar Commons

The tragedy of the commons is an economic parable that refers to greed.

The tragedy of the solar commons refers to continued selling of modules and deployment of projects for market share with the goal of being on a top ten list as the biggest developer, or installer, or the number one manufacturer.

The global solar industry has been low margin all along the value chain for so long that profit has paradoxically become anathema to it. The tragedy of the solar commons is that an industry with the core mandate of ameliorating climate change, bringing electricity to populations far from the grid and providing electricity independence to everyone appears focused on keeping itself unprofitable.

The result of low margins is continued reliance on incentives, subsidies and mandates. The solar industry will continue to hold itself hostage to government intervention as long as it pursues a strategy of being the least expensive source of electricity. This is irony at its best as if subsidies were removed from conventional energy and if the conventional energy infrastructure had to be built anew every time it was deployed … well, the playing field would not be even, it would likely shift to solar and other RE. One reason for this shift is low running costs. The fuel for solar generated electricity is the sun. Solar system components mine the sun.

The argument for shifting to solar as a primary electricity source requires a shift in the electricity buyers understanding of just about everything to do with how they source their electricity.

The good news is that the trend is towards clean energy and this trend will not abate despite the current political climate. The global solar industry has time to change focus, work together and build a quality, profitable solar industry that offers value to participants and stakeholders all along its value chain.


The US presidential election is over and half the country feels like a big black swan swooped down and left a very big and impolite reminder of its passage.

Black swan events are unexpected and have a traumatic effect on economies, governments, industries and people. Once the black swan departs the details of the surprise it represents are unpicked and everyone offers reasons why the event occurred. Remember derivatives and the housing crisis that took down the global economy, destroyed livelihoods, lives and damaged the global solar industry? Systems had been set up to create a landscape perfect for a black swan to swoop down and, well, leave an ugly reminder of its passage. People may have been shocked to find piles of unsecured debt underlying the global economy, but the signs were always there.

In 2016 Brexit seemed like a black swan event to those in the United Kingdom. In Venezuela the vote against the peace accord ending a 50 year seemed like a black swan event. In the US an undisciplined, angry, billionaire business man who insulted all his competitors was elected president.

In 2016 all around the world people have been voting their anger over the status quo, politics, immigration, and their economic prospects among other things. Amid the celebrations and wakes surrounding these momentous elections one thing seems clear – the signs of all these decisions were out in the open and should not have surprised anyone.

Polling Problems

During the US republican primary Mr. Trump behaved brashly, used his twitter account freely and insulted competitors and anyone seeming to disagree with him, and yet he kept winning primaries. Media pundits discussed this as a phenomenon and the polls continued to show him losing the primary. He won the Republican primary.

Following the Republican primary media pundits talked over what went wrong with the polls and the pollsters cried mea culpa and promised to do better.

During the general election most polls showed Mr. Trump behind – often well behind — Secretary Clinton. Throughout the election season Mr. Trump continued insulting his opponent and anyone who disagreed with him while tweeting his way through the early morning hours.

He also drew crowds to his rallies and he won the election.

Half of the US electorate and all of the media fell into deep shock. Unhappy voters began wondering if a move to Canada was possible. People wandered the streets muttering “how could this happen?” The media pondered what they missed and the pollsters cried mea culpa and promised to do better.

The US media as well as half the country missed what was directly and clearly in front of them the same deep, disenfranchised rage that was missed in the UK, in Venezuela and in many other voting countries during this year of voting angrily. It was obvious. It was seen. It was disregarded.

The pollsters, well, they failed to do their job correctly. Polling is a subset of market research that is, it is a research discipline. The researcher:

  • Establishes the population to be studied, including its size, and makes an assessment as to the sample size that would appropriately represent the whole population
  • Develops a survey instrument – even the simplest survey instrument has to be carefully crafted
  • Tests the survey instrument
  • Corrects the survey instrument
  • Gathers the data
  • Tests the data for validity
  • If necessary, a larger sample size is gathered

The researcher also understands that all surveys have bias. End user surveys, essentially polling, are highly vulnerable to bias. First, respondents often lie. Second, the analyst (or pollster) may have a bias for a certain result and may make assumptions that would force the poll in a certain direction.

The point of any market research is to set the experiment up so that the possibility of result altering bias is reduced.

In the case of the 2016 US presidential election incorrect polling during the Republican primary should have rung a really big bias warning bell and the pollsters should have course corrected. Doing so may not have changed a thing but it would have lessened the shock on Election Day.

Aftermath of the US election

The US election will have an effect on US climate policy potentially swaying it much more towards conventional energy including fracking for natural gas and oil and away from deployment of renewables and incentives towards this end. The Clean Power Plan as established will not survive and states will start pulling back plans – not all states, but many of them. After election concerns pertinent to the solar industry include:

  • The Three Branches of Government: The Republican Party now controls the Executive, Judicial and Legislative branches of government this means it controls the agenda followed by the country for at least two years until the midterm elections and potentially for decades because of the Supreme Court.
  • The Supreme Court: The next justice will set the tone for the country on wide ranging cases including the Clean Power Plan.
  • The Clean Power Plan: President Elect Trump has vowed to turn back all reforms and likely will – and – cases reaching the Supreme Court may not fare well.
  • The DoE and NREL: The new president will select the energy secretary who will set the direction, tone and budget at the DoE. Funding for solar and all renewable energy generating technologies is at risk. Mr. Trump has chosen Republican Ken Blackwell to head the transition team for the DoE. Mr. Blackwell has lobbied on the behalf of Koch Companies, Southern Company and Dow Chemical among others.
  • The ITC: Though this is a bipartisan agreement and a law, it can be overturned by an act of congress. Best case, it continues as planned. Worst case it is overturned by the new president and congress. However, the odds of the ITC being overturned are low. Very low. Not worth betting on. Again, the ITC is a law and it was bipartisan.
  • The EPA: President Nixon, a republican, established the EPA so it is not a foregone conclusion that its powers will be decreased. However, the president appoints its administrator and President Elect Trump has chosen Myron Ebell, a climate change skeptic to lead the EPA transition team.
  • The Paris Climate Change Agreement: President Elect Trump has made it clear that he plans to exit the agreement and he is likely to do so.

The US Market Going Forward

Just a few pre-election weeks ago the US was a stable market, at least for the commercial application. The commercial application includes utility scale, small to mid-market DG solar deployment and large wholesale DG deployment. The US presidential election inserted instability and shifted the focus back to oil, gas and coal A hiccup in the US market for solar deployment would affect business plans and forecasts for all participants and observers – globally – because the market for solar components and systems is global.

The focus on solar deployment in the US going forward is likely to be driven by the states and the ITC. Once it becomes clear that the ITC is not vulnerable stability should return to the US market for solar deployment.