What China’s subsidy pull-back means for U.S. solar (part 2): manufacturing

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In part one of our coverage, we explored how the pending global oversupply of modules which is expected due to changes in China’s subsidies for solar could affect the U.S. downstream market. The short answer is that this is great news for project developers and could revive some of the projects that were sidelined due to the Section 201 tariffs.

However, the outlook for manufacturing is not so good. And this comes at a difficult time for a number of companies that were planning to either buy or build solar factories in the United States.

But not every aspect of this global fall in prices will necessarily be bad for cell and module makers. And as always the details are more complicated.

 

Four factories

Right now there are three major factories planned for the United States, as well as SunPower’s plan to purchase SolarWorld Americas and its Oregon factory. Each of these has slightly different circumstances, and we at pv magazine reached out to these companies.

The most unambiguous situation is First Solar’s 1.2 GW factory planned in Ohio, near its Perrysburg facility. The company’s statements left no doubt that this is going forward, module price declines or no.

First Solar’s 1.2 GW expansion remains on plan as previously announced, and we have continued confidence in our pipeline,” declared First Solar.

This is a strong statement, given that First Solar sells primarily into the utility-scale sector, where the prices are lowest and the competition the fiercest. However, First Solar is in a good position going into this given that it is currently sold out through 2020.

The circumstances around SunPower’s planned acquisition of SolarWorld’s Oregon factory are more nuanced. “Our full plan is to close this and turn it into a winner,” SunPower CEO Tom Werner told pv magazine. However, as SunPower is only in the mid-point of its pre-close review of the facility, there are no guarantees what will happen.

One thing is clear. If SunPower does go ahead with this purchase, this will be a “go big or go home” situation. Werner says that the recent announcements in China and the plans for other factories in the United States make his company “incrementally more aggressive” about SolarWorld and getting approvals, as well as expanding the capacity of the factory.

SunPower expects that if the deal does close, it will make more of its P-Series in Oregon, and sooner. Werner notes that not only is there space for an expansion in the Hillsboro factory, but that his company has been able to eke out more capacity from its facilities in other nations in the past.

JinkoSolar’s 400 MW module factory in Jacksonville, Florida is more of a done deal. IHS Markit has told pv magazine that installation of machines has already begun at this factory, and that materials have already been booked for the plant to start production this summer.

JinkoSolar is also supported in this factory by long-term contracts, including its recently announced 1.43 GW contract with sPower.

As for the largest of the factories planned, Hanwha Q Cells says that it also plans to stay the course. “Hanwha Q Cells sticks to its plans to build a factory in the USA and to maintain our strong market position in the important US solar market,” declared the company.

However, it is not clear whether or not Hanwha has the long-term contracts in the U.S. market to support its factory that Jinko does. If it does, it has not publicized these.

 

Supply chains

Circumstances that represent a loss for one portion of the solar industry can be a gain for another. As such, it is important to note that analysts including BNEF are predicting that the oversupply will put pressure on manufacturers and material suppliers throughout the value chain.

This means that with less demand, the materials for pv cells and modules will be cheaper, which will bring down production costs for crystalline silicon products. SunPower notes that this is not the first time that this has occured.

“In 2011 we saw this happen,” recalls Werner. “A lot of companies benefitted from the compression in margins in the supply chain.”

However, he says that he does not yet know if this will offset the downside of the lower prices for modules overall that is expected.

 

Differentiation and DG

For SunPower and other PV makers, the secrets to surviving any downturn in prices may boil down to two factors: Which portion of the value chain they operate in, and the degree to which they can differentiate their products.

SunPower has always specialized in very high-efficiency PV, and while this has been deployed at both distributed and utility-scale installations, the company has increasingly turned its attention to the less price-sensitive residential and commercial and industrial sectors. This includes recently deciding to shed its utility-scale project development division.

This focus on the distributed sector appears to be showing results, with SunPower and its dealer network gaining market share and rising to the position of the fourth-largest installer in the California market in 2017, based on permit data. First Solar is more exposed to the utility-scale market, however it also offers a very different product than the Asian-made multicrystalline modules which are expected to be in particularly acute oversupply. First Solar’s thin-film products offer better low-light performance and temperature coefficients, meaning more output per watt. Its large-format Series 6 also offers more raw power per module than those produced by its c-Si competitors, creating a balance of systems advantage. And while First Solar will not benefit from lower prices for silver paste, diamond wire or wafers, the company has a track record of successfully reducing manufacturing cost per watt due to a combination of improved efficiency of its products, massive scale and simple manufacturing expertise developed over decades. It is unclear whether JinkoSolar or Hanwha Q Cells will be able to offer this level of differentiation. While JinkoSolar plans to make modules based on larger-format P-type mono PERC cells at the Jacksonville facility, Hanwha has merely stated that its factory would make “high-efficiency” products.

 

Update: This article was updated at 11:35 AM EST on June 8 to include a statement by Hanwha Q Cells regarding its plans for a U.S. factory.