What drives the NATURE of solar prices? Supply, demand, subsidies and consumer perceptions?

How solar prices and subsidies influence CONSUMERS buying behavior.

Solar panel prices are influenced by industry consolidations just as much as they are by the production chain. It seems that in the past year, PV manufacturers are failing left and right, including scandals which affect solar panel prices, like the recent Solyndra loan debacle and the newly imposed tariffs on Chinese solar panel manufacturers.  However, these events still haven’t lead to a real consensus about solar module pricing in the near term. 

Similar to trends in other industries, solar panel prices are no stranger to the changing market perspectives and fickle circumstances of different buyer types. Albeit, there are some unique aspects to the PV and solar technologies marketplace which make it a little more convoluted to navigate. For instance, purchasing solar electric equipment and installation, aka, (integration) nudges itself under a completely different consumer paradigm than to what most are accustomed.  Naturally, most orders come in from those who are connected to the grid via public utility.  Grid PV interconnection customers accounted for 99 percent of the entire industry’s sales in 2011, attributing this large market segment to the presence of solar subsidies and tax incentives.

Solar Wars for Subsidies Aside Conventional Forms of Power:

Because upfront solar panel prices still remain higher than desired, many solar proponents feel that solar subsidies will continue to be necessary to drive sales and protect trade, or at least until “grid parity” is achieved.  However, subsidies for furthering sales and consumption aren’t only for renewable technologies. In fact, regular old smoke belching power facilities receive their own subsidies.  In some areas, public and private power companies actually sell electricity for less than the cost of generating it, where the loss is made up with generous government subsidy money. Plenty of power utilities are government-owned for that matter. Hence, in the final step back through the subsidy lens, we can see that solar panel prices don’t get an equal opportunity in this sort of scheme.

Subsidy Training Wheels Designed for Weaning Off  May Backfire:

PV incentives are supposed to be phased out as solar panel prices continue to drop to a point where consumers can buy solar energy at an affordable price, or when the cost of energy is on par with coal fired electricity.  Thus, early adopters have helped pave the way to lower prices by using subsidies.  However, where current market conditions are driven by these incentives and the mere mention of a new tax rebate is enough to make shoppers rush on the market, this is a short lived event, and when the excitement wanes, so too, the market begins to sink again, and we are back on the teeter-totter of uncertainty.   

Still, the solar industry has been at over capacity in production in recent past and now oversupplied with inventory, and so it suffers from a major problem on the demand side. Manufacturer failures and the new solar anti-dumping laws in the United States have wreaked havoc on solar panel prices. Suntech is a leading manufacturer of PV systems, but the situation they’re in is hardly unique. The value chain stretches through raw materials and machinery before it even reaches people who actually put up rooftop installations. CSP and CPV manufacturers face their own problems. The prices of collector and tracker installations are often skewed, and this means that individual PV manufacturers often face low margins. The result; buyers sometimes hold off as they wait for lower solar panel prices, despite the available subsidies, which make it just as affordable now, than later.

What can you do to get a better perspective?  Consumers interested in the industry should get acquainted with the ABCs of solar panel prices.

Solar Panel Price Trends Part A:  What Does a Solar Panel Really Cost?

Different technology modules come with different price tags.  Learn to differentiate price from quality.  Individuals who buy panels out of the factory pick up the first and lowest price tab. They’re usually not an end-user, however, some savvy consumers who are broker connected and on the “inside track” may buy their solar module units this way.

Installers, distributors, module assemblers, manufacturers and integrators often buy from large facilities where price breaks are given for volume orders. From here, a markup gets added to the tag before they can be moved back on to the open market.

Also, keep in mind that solar brokering is becoming just as common in the PV industry, as is the term “broker” in any other market, like insurance, real estate, automobile, and mortgages.   Solar brokering of panels direct to consumer may prove a keen way to purchase solar modules and cut down on panel costs, especially if your broker is pre-aligned and affiliated with your installer-integrator. Why?  The broker-installer relationship is already there, and you’re more likely to have a smooth transition by utilizing a solar broker-energy consultant rolled into one… to bridge the transaction for you, in both acquiring the lowest cost on solar panels, as well as, introducing you to an installer-integrator, (the brokers affiliate) who will welcome you as a new customer.   It’s true, the installer-integrator will lose his profit margin-markup on the solar panels he could have made in selling to you.  However, what solar brokers may take away from their affiliate-installers markup, they make up for in reaching many more potential customers who will still need the project installers labor service.

Lastly, “inventory sales” among manufacturers are common even in the best economic condition. Since storage is expensive, manufacturers might engage in a fire sale to get things off of their hands. This changes up solar panel prices as well.

Solar Panel Price Trends Part B:  Economic Factors Effect Solar Panel Pricing.

Cost and actual price aren’t necessarily related in the PV industry. There’s really only occasionally a real relationship between the two. In fact, during the early 2000’s the price for PV modules was below the cost of production. During a good deal of the solar power industry’s history, it’s been a buyer’s market.

When the European Feed-in Tariff, (FIT) system came around in 2004, it started to drive demand for PV systems. Prices increased, and the price of polysilicon for making crystalline wafers increased along with demand. Rapid growth caused investors to dump a lot of money into both sides of the industry. As a result, huge multi-megawatt installations started to come into their own, and PV companies turned a profit for the first time.

However, the incentive driven market isn’t sustainable from an economic point of view, and it could eventually collapse even worse than it has already. This is a major problem for younger companies, for they haven’t had a chance to build endurance and backbone for lean and risky times.

Solar Panel Price Trends Part C:  Educating Consumers About the Market.

Teaching the PV electric buying consumers the sage wisdom of solar power can help a long way. Realistic expectations for PV industry performance are important as well. Some buyers prefer to rent their equipment, and their needs can be met by utility ownership and lease packages, while some buyers may benefit from private low interest financing. When the industry was really profitable, it didn’t do enough to educate consumers about energy independence. It focused instead on marketing itself to governmental agencies with promises of grid parity. The industry’s recovery, however, can be hastened by a strong campaign that will change the expectations of consumers.

A while back, it seemed that countless businesses were gearing up for so-called green marketing campaigns. However, it took only a few unethical public propaganda circulations to sour the solar landscape for businesses, investors, and the perceptions of consumers. Since some companies not involved in the PV market engaged in what’s called “green washing” to protect their image, consumers began to question many technologies that were marketed as environmentally friendly. Green washing is essentially claiming that an organization is helping out the environment while actually not making any real changes. Slacker’s activism is a problem in many schemes, and it’s no different when it comes to the solar energy industry. Hence, it will take a lot of work to undo this image and move past the scandals that have been inherited from the mismanaged marketing media of other entities.  However, it can be done with ONE unified message.

Instead of convincing everyone of a dream of extremely cheap installations, PV companies should focus on high quality designs and a unified message. Everyone was fighting each other for years instead of cooperating. This just wasn’t going to work, and now everyone’s learning that the hard way. Realizing that today’s dirt-cheap solar panel prices aren’t healthy is just as vital.


Article written by Jennifer Coleman of Sun Source Solar Energy Brokers, providing solar brokering and solar energy consulting services in Santa Rosa, Marin, Sonoma, Napa, Solano and San Francisco Counties.  For more information, please visit

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