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PV-Tech research reveals ranking tool for manufacturing strength of global module suppliers

This article continues our series of features introducing new methodology that allows leading PV module producers to be categorized, ranked and short-listed by manufacturing and financial strength metrics; ultimately providing an investor-risk (or bankability) profile of PV module suppliers for non-residential end-market selection.

This is the fourth of six articles on PV-Tech.org providing full transparency on the methodology used to assign investment risk to PV module suppliers selling to commercial, industrial and utility segments of the industry. The full dataset captures research findings by PV-Tech going back more than 10 years.

The first article, PV-Tech research set to reveal investment grades for global PV module suppliers, introduced the research methodology, focusing on the supply strength ranking of PV module suppliers. The second feature, PV-Tech research reveals how to assess PV module suppliers’ capacity claims, explained how these companies can be ranked based on their capacity strength. This was followed by the feature titled PV-Tech research establishes technology-leadership scorecard for top-100 module suppliers that examined technology leadership.

Collectively, these articles covered the three key contributions to the overall manufacturing health score of PV module suppliers. How these parts are combined to form the final manufacturing health output is the subject is this, the fourth article in the series.

The ongoing research and methodology tracking the investment rankings of PV module suppliers will be explained in greater detail during my opening talk at the forthcoming PV ModuleTech 2019 conference in Penang, Malaysia on 22-23 October 2019.

Methodology overview

Previous articles revealed the basic relationship between module supplier bankability (B), manufacturing (M) and financial (F) scores as:

where k is a scaling factor that maps bankability scores to a 0-10 band, m and n are power coefficients derived from regression analysis, and i is a variable that is module-supplier and time-period specific. The manufacturing health score/ranking is expressed as:

where a, b, and c are factor-dependent weightings, scaled to generate manufacturing health scores for each company by quarter (i) in a 0-10 band; S, C and T are the module supplier shipment, capacity and technology ratios introduced above; p, q and r represent power factors derived from regression analysis.

With the S, C, and T scores explained in the first three articles, we now focus on how these are combined to form the M values for each company at each quarter-end.

Manufacturing strength (M) score methodology

The analysis considers the dependence of the three manufacturing variables (supply, capacity and technology), treating the contributions as independent quantitative factors, and finding solutions to the coefficients (a, b and c) and the powers (p, q, and r) shown above.

Of course, in practice, there is correlation between almost everything related to a specific company’s operations (across the full range of inputs within any financial and manufacturing analysis), but the choice of discrete supply, capacity and technology factors within the manufacturing score analysis does have resonance with PV module suppliers’ modus operandi, as discussed now.

Module supply levels are driven by in-house capacity to a large degree, but almost every c-Si module supplier operates with some degree of flexibility where third-party outsourcing is used. For some PV module suppliers, third-party supply dominates module shipments for example.

This was always a feature for Chinese based module suppliers in the past (although rarely disseminated in words), but moved to a new level when Europe and the US imposed tariffs on Chinese-produced modules. This in turn stimulated a multi-GW capacity allocation across various OEM suppliers in Vietnam (and to a lesser degree, the whole Southeast Asia region). Japanese companies also use this model frequently.

This was the principal reason for decoupling the supply (S) and capacity (C) terms. In short, module supply can vary significantly when compared to each company’s in-house capacity or, moreover, capacity conversion (utilization) rates.

Next, the degree of correlation between the technology factor (T) and other manufacturing terms meant that the decision to decouple the dependence of technology from other variables was more obvious. Capex and R&D investments should certainly be treated in isolation for a host of factors in the PV industry. Here are a few reasons now.

Many companies (especially new entrants seeking to commercialize a disruptive technology type) often burn capex and R&D spending for several years, but fail to translate this into any meaningful shipment volumes. Also, Chinese companies have taken capex spending on c-Si additions to incredibly low levels today, and are also prone to have effective in-house capacity increments through absorbing mothballed or zombie-based facilities (zero cash spend) after restructuring of bankrupt entities. Also, there are large variances in R&D allocations, depending simply on the location of corporate headquarters. Most Chinese companies for example spend a fraction of a percentage point on R&D every year; by contrast, western PV companies tend to allocate 3-5% of annual revenues (or higher) to R&D spending, regardless of capex/industry cycles.

To keep the statistical overview to a minimum, I will bypass the workings, and move straight to the validation stages.

One way to understand the dependence of the S, C and T variables is to consider the final model accuracy (goodness-of-fit) for the supply, capacity and technology terms. This is shown in the figure below (two upper graphs and the lower-left one). For each of these graphs, the value of S, C and T is plotted (x-axis) against the original qualitative entries for each company’s M scores (y-axis), with the sold line fit based on the final terms a.Sp, b.Cq, and c.Tr, scaled to the 0-10 scoring band.

The scatter plot variation across the S, C, and T graphs goes some way to backing up the initial discussion in terms of the dependence of S, C and T on the observable, M: strong dependence of the first term (supply, S); low correlation arising from the technology term, T. Essentially, the closer the scatter points are to the line fit, the stronger the dependence.

Basically, the profile of the curves, in each of the S, C, and T plots above, drives the power factor determination for the variables. The coefficients are then derived by combining the power dependency of each variable with the corresponding data fit accuracy and the 0-10 scaling inputs (to ensure all M values fall into this range). Collectively, the coefficients and the power factors form the overall weighting of each variable, S, C, and T. (It should be pointed out that the overall weightings by default must be positive in value. There are many case-studies in the PV industry to support this point.)

The final graphic above (lower-right) provides the last check on the analysis (validation). The fit between the original qualitative M values (observable, y-axis) should ultimately be as close to a 1:1 linear fit, when calculating M using the modelled equation for M (after all coefficients and factors are determined), plotted on the a-axis.

The next major validation of the analysis involves comparing company-specific scores over a multi-year period until now, and seeing if the scores fully capture the manufacturing strengths as seen by the industry at large.

Manufacturing strength (M) score output

Across all the articles so far in the bankability study/methodology, we have sought to show validation of the approach by looking at the overall scores derived from the different metrics used. Supply, capacity and technology graphics to this end were discussed in the previous three articles of the series. Different companies were selected to validate the analysis, at each stage.

The graph below follows this validation process, by highlighting some of the major PV module suppliers to the industry today, and seeing how their manufacturing strength (M) scores have varied over the past five years.

In reference to the above graph, I have highlighted four leading PV module suppliers (all top-10 by module shipment volumes in 2018/2019 to the non-residential end-market segments). Let’s check and validate the analysis for these four companies now.

JinkoSolar’s manufacturing strength growth has indeed been a carefully-considered ramp of in-house wafer, cell and module capacities, with frequent capex allocations and an uptick over the time period to R&D spending. The prudent choice of capacity located within China and across Southeast Asia has also been key to maximizing the value/strength of its manufacturing base at any given time. The net result is evident in the graphic by viewing the gradual Y/Y manufacturing strength score growth, ultimately confirmed by the delta between JinkoSolar’s end-2019 score and the rest of the industry.

LONGi Solar’s manufacturing scores over the past five years confirms the rapid manufacturing strength growth (scoring approximately 1/10 in 2014 to about 6/10 in 2019), and the upward trending in particular during 2019 that is setting up the company to be the second strongest module supplier from a manufacturing perspective, going into 2020.

First Solar’s manufacturing strength cycle is entirely consistent with the company’s manufacturing operations over the past five years, and has been discussed during previous articles within this series. The uptick in manufacturing strength scores from 2017 is in contrast to many of the other multi-GW (c-Si) module suppliers that are having to reset manufacturing operations in 2019 (as shown by the range of downward trend lines in the upper half of the graphic above). The uptick in manufacturing strength scores from First Solar during 2017-2019 is consistent with the company being largely sold-out today for its manufacturing output for the next couple of years, and reveals that the model here is also very good for predictive forecasting.

Finally, I have chosen to look at Risen Energy in the graphic above. Risen is one of several Chinese-headquartered PV module suppliers that has been operating the past few years with multi-GW module supply levels, but somewhat deprioritizing manufacturing investments against module supply volume levels (in-house and third-party blended) and downstream investment/EPC activity. The manufacturing score trend for Risen reflects this accurately, with modest long-term performance, aligned with manufacturing in-house kept at levels needed to support its downstream drive, but not subject to any major swing Y/Y.

We have gone through this type of anecdotal validation for more than 50 of the leading PV module suppliers today. In each case, the score at any given time (year-end, quarter-end) for the company’s manufacturing health (from 0 to 10) not only confirms our previous assessment of the company in question, but also provides new insights from a benchmarking perspective.

At this point in the series of articles, we have now developed a robust methodology to allow us to score all PV module suppliers by their manufacturing strength. We will return to using the M scores in the final article, when pulling together ultimate bankability scores for the PV module suppliers.

Previewing the next part of the article series

Two more articles will be released in the coming days, bringing the six-article set to a close. The next article (number five) will look at how PV module suppliers can be ranked purely on financial strength (the F values in our analysis).

The final article will explain how the manufacturing strength (M) and financial strength (F) values are combined to form an overall bankability/risk score for PV module suppliers, offering the first fully-researched benchmarking tool for investors, developers, EPCs, and asset owners of global solar PV sites today.

Attend PV ModuleTech 2019 to hear the first presentation on the findings

The full results of the overall study will be released by the PV-Tech market research team before the end of August, with the key findings presented, explained and discussed in the 45 minute opening talk I will be giving at the forthcoming PV ModuleTech 2019 event in Penang on 22-23 October 2019.

PV Tech’s bankability analysis series links are below

Part 1. PV-Tech research set to reveal investment grades for global PV module suppliers

Part 2. PV-Tech research reveals how to assess PV module suppliers’ capacity claims

Part 3. PV-Tech research establishes technology-leadership scorecard for top-100 module suppliers

Part 4. PV-Tech research reveals ranking tool for manufacturing strength of global module suppliers

Part 5. PV-Tech research ranks PV module suppliers by financial health

Part 6. First PV module supplier bankability ratings tool created by PV Tech research team

Read the entire story

PV-Tech research establishes technology-leadership scorecard for top-100 module suppliers

This article continues our series of features introducing new methodology that allows leading PV module producers to be categorised, ranked and short-listed by manufacturing and financial strength metrics; ultimately providing an investor-risk (or bankability) profile of PV module suppliers for non-residential end-market selection.

This is the third of six articles on PV-Tech.org that will provide full transparency on the methodology used to assign investment risk to PV module suppliers selling to commercial, industrial and utility segments of the industry. The full dataset captures research findings by PV-Tech going back more than 10 years.

The first article, PV-Tech research set to reveal investment grades for global PV module suppliers, introduced the research methodology, focusing on the supply strength ranking of PV module suppliers. The second feature, PV-Tech research reveals how to assess PV module suppliers’ capacity claims, explained how these companies can be ranked based on their capacity strength.

The third part of the series here outlines PV technology leadership among the top 100 global module suppliers, forming the final part of the inputs that allow manufacturing strength to be fully understood for each company.

The output from the overall analysis – accumulated by the PV-Tech research team over the past five years in particular – will form a key part of my opening talk at the forthcoming PV ModuleTech 2019 conference in Penang, Malaysia on 22-23 October 2019.

The first article introduced the basic relationship between module supplier bankability (B), manufacturing (M) and financial (F) scores as:

where k is a scaling factor that maps bankability scores to a 0-10 band, m and n are power coefficients derived from regression analysis, and i is a variable that is module-supplier and time-period specific. The manufacturing health score/ranking is expressed as:

where a, b, and c are factor-dependent weightings, scaled to generate manufacturing health scores for each company by quarter (i) in a 0-10 band; S, C and T are the module supplier shipment, capacity and technology ratios introduced above; p, q and r represent power factors derived from regression analysis.

This article focuses on the technology score (T) and how this is derived.

Manufacturing technology (T) strength score methodology

The manufacturing technology factor (T) ranks PV module suppliers, by looking at investments into capital expenditure (capex) and research and development (R&D).

Extensive efforts are taken by PV module suppliers to create a perception with customers of technical differentiation and leadership; often this has the appearance of brand positioning, rather than supported by any major performance benefits, or matched by investments into capex (in particular for line upgrades) and R&D.

However, today in the CIU segment – with the exception of First Solar (by virtue of being technology-differentiated) – the non-residential segments of global demand are dominated by p-type c-Si modules, with most companies having near-identical module specifications across their datasheet sets. Performance differentiation tends to come out mainly during reliability and pre-shipment testing stages.

As such, it is inappropriate (and largely misleading) to rank module suppliers based purely on product specifications. This conclusion is further justified by looking at cell and module developments over the past decade, and the ability of new entrants into PV manufacturing to replicate production lines and process flows of the current state-of-the-art p-type manufacturers, and claim technology-equivalence very quickly.

The solar PV industry is certainly not like adjacent technology segments such as semiconductor and flat-panel displays, where a small group of companies control technology roadmaps and market-share, in part arising from major capital expenditure and R&D spending that prohibits the marketplace from becoming crowded.

However, despite these observations, there is a direct relationship between technology investment levels (capex and R&D spending) and sustained module supply leadership to non-residential PV segments. 

Indeed, major shifts in allocations to capex and R&D (either through increased investments or dramatic cuts) still tend to be a leading indicator of changes 12-18 months out across both shipment volumes and operational performance.

The market-leaders also tend to have meaningful investments (across both capex and R&D) over extended time periods, and especially during industry downturn cycles that are normally pre-empted by sharp declines in total capex across the sector.

However, there remains a sizeable group of companies (almost exclusive to China) that operates with practically no R&D investments of note, and that appears to be able to add new capacity volumes at capex levels a fraction of those typical of the sector as a whole. In this respect, simply rationalizing capex investments across the top 100 PV module suppliers can be further complicated when distressed capacity from insolvent entities gets transferred to new or existing manufacturers on a zero-cash basis.

In order to derive technology strength (T) scores (across capex and R&D terms), each of these terms needs to be isolated for all the module suppliers by quarter. This turns out to be highly time-intensive and challenging, and has taken the PV-Tech research team almost five years to establish a robust methodology here.

Very few companies issue PV-specific capex and R&D numbers any more. Those that do tend to have many different contributions to capex (PV and other segment spending allocations, PV project site acquisition and related downstream spending line-items) or lump R&D into whole-company reporting data. Furthermore, no company today segments capex by ingot/wafer/cell/module, unless of course they are pure-play at a single part of the value-chain.

For the capex part of the analysis, we focus only on the cell and module stages of the value-chain, and remove polysilicon, ingot and wafer capex for any companies that have backward-integrated capacities in-house. The rationale for limiting capex to only cell and module stages is similar to that outlined in the previous blog where we outlined the factors driving PV module supplier capacity (C) values. We went through various iterations of capex segmentation, checking at each time the results of the analysis against the perceived market brand/positioning/bankability (the qualitative dependent variable).

The clear outcome from this was not to confine capex for PV module suppliers at the module assembly stage only, but to include company spending on both cell and module stages. This turns out to be extremely powerful in the context of the study, because of the trend of cell-dominant players (mainly Chinese companies) using this as a stepping-stone to having global module supply aspirations.

This has happened frequently over the past 20 years, going back to the move by JA Solar from pure-play cell maker to global module brand supplier status. Other similar tactics have been deployed with success by LONGi Solar (prioritising the move from wafer-leader to cell production and module supply driven), and GCL (through GCL-Poly and GCL-SI affiliate operations).

The fact that multi-GW cell producers in China have been following internal mandates to play on the global (overseas) stage at the module supply level should not come as too much of a surprise. 

Indeed, today, the climate with China as a whole is only supportive of companies seeking to sell the China technology-leadership brand outside the country, and the solar sector is prime for this type of behaviour.

Therefore, module suppliers that have recently expanded upstream (cell to cell/module)  – and have established multi-GW cell production status (and are already embedded in the cell supply chain to the leading PV module suppliers) – are likely to be among the next wave of companies from China what will evolve into global module brands going forward. More on this later in the article. For now, the key takeaway from a capex standpoint is that is it critical to look at both cell and module capex by company, when benchmarking company technology ranking scores.

The analysis starts by going through all module suppliers, isolating total PV capex (sometimes called manufacturing capex) by quarter. The next step is to remove PV capex allocations to polysilicon, ingot or wafer stages, where necessary, leaving cell and module contributions; Capex(CM).

The quarterly capex data for each module supplier is then simply the sum of cell and module investments. No factor weightings are applied to cell and module contributions here, due to capex into cell and module capacity generally being equally advantageous in terms of technology-related health of any specific module supplier organization.

Capex is included across facilities, maintenance, upgrades and new production lines; in reality today, site costs for leading c-Si makers (especially when new sites are in China or Southeast Asia) are very low and often partially gratis on somewhat barter terms, when investing in new countries or new Chinese provinces.

For reference, when dealing with thin-film capex, it is necessary to normalize (or derate) capex allocations due to the much higher spending in recent years when adding GW-levels of new thin-film capacity. Derating factors are therefore applied (and adjusted annually) to thin-film capex contributions to allow direct comparison with typical values of leading Chinese c-Si module suppliers when adding GW-levels of new cell and module capacity. (If this is not done, the capex levels by First Solar, for example, would be excessively high and not aligned with new capacity levels ultimately coming online.)

For each module supplier (i), the respective quarterly cell/module capex values are then converted into t24m sums (previous eight quarter totals, at the end of any given quarter). This is essential when ranking the companies, as capex on a quarterly basis tends to be lumpy in nature. In addition, return on capex investments in the PV industry can be anywhere from six months to three years, depending on the company/country in question.

Capex scores (in the range 0-10) for each module supplier (by quarter) are then established by analyzing the data distribution and normalizing each quarter (u) for correct benchmarking purposes. 

In fact, capex must be normalized in this way, in order to rank companies regardless of where the industry as a whole is on capex cycles: capex is by nature cyclic, and is normally one of the first leading indicators of a pending market downturn (as related to listed company valuations and profitability). Therefore, companies investing during downturns see higher scores, regardless of the total capex levels at the time.

The analysis of R&D spending by the module suppliers follows the same methodology as capex, discussed above. In contrast however to capex allocations being restricted to the cell and module stages of the value-chain, R&D entries are based on total PV spending, with the exclusion only of polysilicon contributions; R&D(PV).

This involves quarterly PV R&D spending being assigned to each module supplier, t24m values being determined at the end of each quarter, and scores being converted to a 0-10 scale based on normalization each quarter (v). Similar to the discussion on capex investments during downturns, priority is given to companies investing in R&D.

To establish the final technology-based quarterly score (T) by module supplier (i) for any given quarter, the two scores (capex and R&D spending) are combined through applying weightings (prioritized to capex), denoted by the t coefficients below. The last step is again to normalize each quarter to a 0-10 band, to standardize each of the S, C, and T contributions for the overall manufacturing health/strength parameter, M, through the quarterly coefficients k below.

The final expression then for the technology strength value for each company by quarter, can be written as:

Manufacturing technology (T) strength score output

Similar to the analysis covered in the previous articles within this series, the manufacturing technology (T) study can be adapted to look at only capex and R&D, or through further manipulation, capex across the different manufacturing zones discussed in the capacity feature.

The graphic below shows PV module supplier technology scores from the top 100 companies in the industry today, with a few highlighted again to convey key trends arising from the analysis.

Capex and R&D spending are of course accounting terms, and investments are mostly connected to company turnover, profitability and investment-related financial metrics. During our research phase in building up the final module supplier bankability whitelist for the investment community, we explored the option of amalgamating capex and R&D within the financial part of the study, and isolating ratios such as return-on-capital-employed or return-on-invested-capital. This ultimately proved overcomplicated, and detracted from having a single universally-recognized financial health metric that ensured full audit trail understanding.

Other reasons for keeping capex and R&D spending within the manufacturing health section are explained in more detail when looking at the overall manufacturing analysis (M); the subject of the fourth article in the series.

The discussion on this now is in reference to the graphic shown above. Clearly, strong technology scores are more likely to come from companies that have healthy financial health status. This in part explains the segmentation of SunPower and Shunfeng in the graphic above, compared to the three other companies highlighted here: Tongwei, First Solar and LONGi Solar.

In fact, analysis alone of the technology strength score is also a strong leading indicator for future company success (or declines) when it comes to module supply levels and ultimate investment risk. This should come as no surprise, since capex and R&D investments are both investment-based and are placeholders for increased productivity, higher-performing product, etc. When time allows, it is our intention to return to the technology analysis here, and explore correlations over the past 10 years to see how true this hypothesis is.

However, simply looking at the trends between 2014 and 2019 of the highlighted companies above suggests that this term could be incredibly useful in isolation to investors seeking to project future investment risk for module makers during short-listing and final due-diligence ahead of supplier selection.

LONGi Solar’s upward trend, to become the clear technology-leader in our analysis (from 2017) is a prime example in this regard. The company was still setting out its transition from leading-wafer supplier to global module entrant during 2015-2017, and it is only in the past couple of years that LONGi has been added to the global bankable brand short-list of most-suitable suppliers.

First Solar’s cycle above is also fully consistent with the 2016 inflection point in the graphic coinciding with the start of the Series 6 expansion plans that will have the greatest impact on the company’s expected upside growth (on many counts) during 2020 in particular.

Finally, returning to the issue I discussed before about the value of extending the capex analysis of PV module suppliers to be inclusive of both cell and module capex investments, the inclusion of Tongwei above is another clear sign that the technology analysis alone could be one of the most important means of forecasting company-specific investment risk levels going forward.

Tongwei today is the leading cell producer globally, and the first to make a business out of being a 10-GW-plus annual producer; and with the same aggressive capacity expansion (and market-share growth) model that was seen several years ago by LONGi (from wafer supply standpoint). Tongwei’s move to module-status is lost in the news only because any GW-based plans pale into insignificance compared to the 10-20GW cell capacity growth strategy being unfolded.

Clearly, the overall manufacturing health score for PV module suppliers has other (and more important) contributions coming in particular from the supply (S) terms that is driven mainly by t24m module shipment globally to commercial, industrial and utility applications. In this respect, the overall (module supplier) score for Tongwei would be reset based on this factor, but as soon as module supply increases – and overseas projects are supplied to – the immediate bankability of the company as a credible module supplier becomes very real (assuming of course financial health is in place).

Previewing the next part of the article series

The next article in this series will focus on the overall manufacturing health score (M), the contributions of the individual supply (S), capacity (C), and technology (T) scores, the results of the regression analysis, and validation by way of comparing the results of each company between 2013 and 2019.

Ultimately, for companies to be ranked in the top categories of bankability for module supply (lowest investment risk) for large-scale solar deployment, both manufacturing and financial health status must be in place at the same time, and shown to be stable over periods longer than just the trailing quarter under investigation.

Attend PV ModuleTech 2019 to hear the first presentation on the findings

The full results of the overall study will be released by the PV-Tech market research team before the end of August, with the key findings presented, explained and discussed in the 45 minute opening talk I will be giving at the forthcoming PV ModuleTech 2019 event in Penang on 22-23 October 2019.

PV Tech’s bankability analysis series links are below

Part 1. PV-Tech research set to reveal investment grades for global PV module suppliers

Part 2. PV-Tech research reveals how to assess PV module suppliers’ capacity claims

Part 3. PV-Tech research establishes technology-leadership scorecard for top-100 module suppliers

Part 4. PV-Tech research reveals ranking tool for manufacturing strength of global module suppliers

Part 5. PV-Tech research ranks PV module suppliers by financial health

Part 6. First PV module supplier bankability ratings tool created by PV Tech research team

Read the entire story

PV-Tech research reveals how to assess PV module suppliers’ capacity claims

This article continues our series of features introducing new methodology that allows leading PV module producers to be categorized, ranked and short-listed by manufacturing and financial strength metrics; ultimately providing an investor-risk (or bankability) profile of bankable module suppliers for non-residential end-market selection.

This is the second of six articles on PV-Tech.org that will provide full transparency on the methodology used to assign investment risk to PV module suppliers selling to commercial, industrial and utility segments of the industry. The full dataset captures research findings by PV-Tech going back more than 10 years.

The first article, PV-Tech research set to reveal investment grades for global PV module suppliers, introduced the research methodology, focusing on the supply strength ranking of PV module suppliers. This (second) feature focuses on the capacity factor used within the bankability rankings study.

The output from the overall analysis – accumulated by the PV-Tech research team over the past five years in particular – will form a key part of my opening talk at the forthcoming PV ModuleTech 2019 conference in Penang, Malaysia on 22-23 October 2019.

Methodology overview

The first article introduced the basic relationship between module supplier bankability (B), manufacturing (M) and financial (F) scores as:

where k is a scaling factor that maps bankability scores to a 0-10 band, m and n are power coefficients derived from regression analysis, and i is a variable that is module-supplier and time-period specific. The manufacturing health score/ranking is expressed as:

where a, b, and c are factor-dependent weightings, scaled to generate manufacturing health scores for each company by quarter (i) in a 0-10 band; S, C and T are the module supplier shipment, capacity and technology ratios introduced above; p, q and r represent power factors derived from regression analysis.

This article focuses on the capacity score (C) and how this is derived.

Manufacturing capacity (C) strength score methodology

The manufacturing capacity factor (C) ranks PV module suppliers, by looking at in-house cell and module effective quarterly capacities across different global PV manufacturing zones, and factoring in the access these manufacturing zones have at any given time to global module supply end-markets.

This type of analysis turns out to be incredibly insightful, and explains why the common practice of PV industry observers to consider one capacity number (often based on unsubstantiated nameplate single-entry data points) is both misleading and inappropriate within a changeable trade-barrier influenced global landscape where origin-of-manufacture is of the utmost importance.

First, I will explain some of the key issues related to capacity within the PV industry today.

Excluding thin-film PV technologies, all c-Si based module suppliers operate with different levels of backward-integration capacity, across cells, wafers and ingots. While various Chinese companies have subsidiary operations that produce polysilicon, no company today in the PV industry operates with a full value-chain model where every component is made in-house.

Across the ingot-to-module stages, the most critical parts in terms of module supply are cell and module production. Wafer supply has now become a China-centric commoditized offering, and crucially this part of the value-chain has been exempt from trade-related origin-of-manufacturing. Indeed, with more than 95% of c-Si wafers produced today within China, there is even less prospect of wafer supply being incorporated into any meaningful tariff-related policy.

Moreover, such trade-related duties have typically focused on the cell and module segments of the value-chain. Therefore, in assessing company-specific capacity-based strength metrics, it is the cell and module stages that are important to evaluate. This becomes further justified when recalling that module specifications are mostly driven by cell performance and quality.

In addition to the need to have high levels of in-house cell and module capacities, most Chinese c-Si module suppliers have routinely relied upon strong third-party outsourcing of cells and modules.

At the two extremes of the Chinese module supply practice are the fully-integrated in-house supply-constrained model, and the so-called ‘fabless’ alternative.
Leading multi-GW module suppliers – that adhere to using only in-house produced cells and modules – are the exception within the PV industry today. Indeed, the practice of relying on third-party companies for production has only increased in recent years, with Southeast Asia based companies often being called upon when shipping modules without prohibitive duties to the US (and until recently, to Europe).

By default, the only multi-GW thin-film producer (First Solar) is mandated to use in-house product, as a result of being technology-differentiated; this is an exception to the rule today, with the company being the only truly-differentiated alternative to non-residential (commercial, industrial and utility, or CIU) applications.

The fabless model – where all manufacturing is outsourced – remains popular within adjacent technology sectors (in particular, the semiconductor industry), but has been largely ineffective until now within the PV industry. The only company that sought to pursue a cell/module fabless model was SunEdison several years ago.

Other companies (including several Japanese module suppliers) did shift to strong outsourcing in an attempt to stay competitive (quasi-fabless), but such efforts were largely short-lived. In reality, a host of factors has prevented the fabless model working in the PV industry, including single-digit production margin constraints, and the need to quickly adjust to market dynamics resulting from technology and tariff related issues.

In assessing the relative strengths of module suppliers, in terms of manufacturing capacity, it proved necessary to fully understand how much effective cell and module capacity was owned by each company, and across which manufacturing zones globally. In particular, the levels of cell and module capacity by zone turns out to be crucial in assessing which end-markets are on offer through in-house cell and module production. The growth of cell and module capacities across Southeast Asia in recent years illustrates this point succinctly.

The analysis of manufacturing capacity strength (C) starts by splitting each company’s effective cell and module capacities across eight pertinent manufacturing zones globally: China, Taiwan, India, Japan, Southeast Asia, the US, Europe and the Rest of the World (RoW). These locations are chosen in part from a legacy manufacturing standpoint (in particular Japan), and crucially because trade-related import barriers tend to differentiate between cell and modules produced and shipped from these areas (origin-of-manufacture).

This type of segmentation is also important because ultimately the strength of in-house capacity depends on the served addressable market (SAM) available; namely which end-markets are absent of prohibitive import conditions at any given time.

This has been most pronounced in the case of China over the past decade. As such, it can be concluded a Chinese company having multi-GW of in-house cell and module capacity only in China sees a lower SAM for its factory output, compared to a competitor that has domestic and overseas manufacturing capability. While this alone is a simplistic case-study, the reality is a rapidly evolving global landscape that needs a robust methodology constructed in order to deal with changes by manufacturing zone and regional end-market supply (export and import).

The first part of the analysis here therefore requires the effective quarterly cell and module capacities (Cap) by quarter, for the top-100 module suppliers globally, to be segmented into each of the eight manufacturing zones (p=1…8), as outlined above.

For reference, effective capacity refers to the available/ramped capacity and its maximum productivity levels if operated 24/7. Very few fabs operate under these conditions in the PV industry, with only First Solar having a consistent track-record of fab productivity in the 95-100% range over a multi-year time period. The key issue here though is to differentiate between erroneous and misleading capacity figures that are all too commonly used within the PV industry, such as nameplate capacity or ‘available’ capacity (which is often no more than an ambitious summation of in-house and third-party capacities that can be called upon if needed).

Effective capacities in general go up and down every quarter, due to efficiency/power improvements at the module level, technology upgrades, debottlenecking, routine maintenance, or temporary factory mothballing. 

A key indicator of capacity definition used within the industry by any company/observer can be understood quickly, by noting that effective capacity figures are different every quarter: erroneous nameplate or ‘available’ capacity figures are often quoted to the nearest 100MW or GW and don’t change, by comparison. 

Another guide may come from related utilization rates cited that exceed 100%, reflecting inaccurate capacity allocations: capacity conversion is a more accurate means of quoting utilization rates in practice.

With the eight segmented module capacities (Cap) by manufacturing zone location established, the next stage is to determine how much effective in-house cell capacity is available to each of the module suppliers in these zones. 

This is important as it allows us to differentiate between modules produced by any company (in any zone) using in-house cells (IHC) or third-party cells (TPC). As discussed above, a major part of module quality, performance and reliability can be traced back to the origin of cell manufacturing; additionally of course, module trade-barriers routinely extend to cell component origin-of-manufacture.
The resulting module capacity (Cap) value by company (i) by manufacturing zone (p=1…8) can therefore be expressed as:

where the c coefficients are weighting factors that depend on whether module capacity uses in-house cells made in the same manufacturing zone, Cap(IHC), or by third-party cell producers, Cap(TPC).

This clearly promotes the strength of module suppliers that use in-house made cells only, produced local to module assembly activity. This is entirely consistent with how the industry operates today, and is a key issue for any investor-led due-diligence process as it pertains to module quality and bill-of-materials integrity.

The weighting factors, c, are qualitative data entries by nature, and can be adjusted by quarter or by manufacturing zone depending on how important in-house vertical integration of cells and modules is. The precise relative weighting between the factors turns out to be somewhat secondary within the overall bankability studies, and as such it is not essential to overcomplicate this part of the analysis, other than to have a means of differentiating between IHC and TPC supply-chains.

For reference, First Solar’s manufacturing is split up into cell and module capacities, although a single thin-film line incorporates the equivalent of c-Si cell/module stages. By default therefore, all First Solar product is cell/module matched, as it is for other thin-film makers in general.

The next stage of the analysis is the most important and valuable part of the overall capacity strength factor studies, because it introduces the impact of trade (export) restrictions on modules produced within any of the eight (p=1…8) manufacturing zones shipped to any of the six (j=1…6) end-market regions (Reg) that were introduced in the first part of the article series before.

Simply put, the value of having module (and cell) capacity in any part of the world is only as useful as the SAM available at any given time, factoring in trade-barriers that tend to be somewhat binary in nature when it comes to market accessibility (either the end-market region is ‘open’ or ‘closed’ with limited scope for any middle-ground).

One of the most insightful example of this relates to Chinese cell/module capacity (one of our eight manufacturing zones) and shipments into Europe (one of our six end-market regions). Prior to the establishment of the minimum import pricing (MIP) constraints imposed by the European Union on Chinese imports, Europe was fully accessible to Chinese produced modules. Once MIP was imposed, shipments from China to Europe collapsed to near-zero. Then when the MIP was removed, Europe than became fully-accessible again to Chinese produce.

In order to restate module capacity by company/quarter within the eight manufacturing zones globally, each capacity value (obtained through the summed term above) is multiplied by an end-market ‘access-related’ factor that is both manufacturing region and end-market specific.

To do this, the module sum factor (above) for each module supplier is multiplied by a quarterly-variable term based on combining the total quarterly CIU demand (Dem’) (for each of six end-market segments (j=1…6) for shipments) with a qualitative access percentage term (Access) that defines the availability of end-market j for module production in manufacturing zone p at any given point.

For example, returning to the Chinese module capacity example above, where the manufacturing zone is China, then China-specific access percentage terms would be 100% for China (naturally), and near-100% for regions such as Europe (today), Japan and most of the RoW sub-segments. By contrast, percentage levels would be very low for shipments to the US market, and fluctuating for supply to the Indian market.
The pro-rated regional contributions for each manufacturing zone are finally scaled by dividing by the total global CIU market demand in each quarter. This overall scaling factor can be expressed as:

Therefore, this type of analysis not only adjusts module capacity by manufacturing zone, it also scales the size of served end-market by the importance of each region, by looking at the ratio of the demand (CIU) from that region and the total CIU demand each quarter.

The steps above turned out to among the most insightful within the overall study, in building up the manufacturing strength of PV module suppliers in the industry. This analysis clearly takes capacity assessment (previously largely misunderstood and erroneously presented) to a new level of scrutiny, and finally allows for capacity to be valued based on where the product is made, how much incorporates in-house and local cell supply, and which end-market is being targeted; for all module suppliers, by quarter.

The final capacity score (C) of each module supplier is then simply the sum of the scores derived for all eight manufacturing zones, by quarter. The full equation can be written finally as:

where k is a variable quarterly scaling factor, to map capacity scores into a 1-10 band; again based on distribution and standard deviation checks done by quarter.

It should also be pointed out that the capacity analysis here is confined to quarter-only data points, and not any trailing for forward-looking time periods (as was entirely valid for the supply/shipment analysis before). This is done because capacity strength is an instantaneous variable (has a specific value at any given moment in time) that is entirely dependent on regional trade-access conditions.

Manufacturing capacity (C) strength score output

Similar to the analysis covered in the manufacturing supply (S) analysis outlined in part 1 of this series, the manufacturing capacity (C) study yields a vast quantity of benchmarking for different PV module suppliers, when isolating manufacturing zones and end-market shipment regions over different time periods.

For now however, we look at the final C values for PV module suppliers, choosing to show year-end values for simplicity, although the analysis of course tracks scores by quarter.

The graphic below captures PV module supplier scores from the top 100 companies in the industry today, with a few highlighted again to convey key trends arising from the analysis.

While the highlighted companies show a range of different fortunes for PV module suppliers’ capacity strength factors, the most interesting ones to discuss are those of Canadian Solar and Hanwha Q CELLS. Each of these companies has maintained capacity effectiveness by having a flexible strategy that allows modules made in different manufacturing zones to be prioritized at different times, depending on which end-markets are favourable to origin-of-manufacture. 

The case of Hanwha Q CELLS is perhaps the most robust in this regard, with the company able to adjust product availability from China, Korea, Malaysia (and now the US) as and when trade conditions apply; only companies with strong balance sheets can purse this strategy for any meaningful length of time.

Previewing the next part of the article series

The next article in this series will focus on the last term in the manufacturing health score analysis; technology (T). This allows us to incorporate R&D spending (confined to PV operations) and capex (restricted to cell and module stages) for each of the 100-plus module suppliers under review, again analysed by quarter.

The conclusions will be shown during the article to reveal the unique way in which R&D spending and capex (the hallmarks of technology leadership in other technology sectors) impact on PV manufacturing strength and module bankability rankings.

Attend PV ModuleTech 2019 to hear the first presentation on the findings

The full results of the overall study will be released by the PV-Tech market research team before the end of August, with the key findings presented, explained and discussed in the 45 minute opening talk I will be giving at the forthcoming PV ModuleTech 2019 event in Penang on 22-23 October 2019.

Read the entire story

PV-Tech research reveals how to assess PV module suppliers’ capacity claims

This article continues our series of features introducing new methodology that allows leading PV module producers to be categorised, ranked and short-listed by manufacturing and financial strength metrics; ultimately providing an investor-risk (or bankability) profile of bankable module suppliers for non-residential end-market selection.

This is the second of six articles on PV-Tech.org that will provide full transparency on the methodology used to assign investment risk to PV module suppliers selling to commercial, industrial and utility segments of the industry. The full dataset captures research findings by PV-Tech going back more than 10 years.

The first article, PV-Tech research set to reveal investment grades for global PV module suppliers, introduced the research methodology, focusing on the supply strength ranking of PV module suppliers. This (second) feature focuses on the capacity factor used within the bankability rankings study.

The output from the overall analysis – accumulated by the PV-Tech research team over the past five years in particular – will form a key part of my opening talk at the forthcoming PV ModuleTech 2019 conference in Penang, Malaysia on 22-23 October 2019.

Methodology overview

The first article introduced the basic relationship between module supplier bankability (B), manufacturing (M) and financial (F) scores as:

where k is a scaling factor that maps bankability scores to a 0-10 band, m and n are power coefficients derived from regression analysis, and i is a variable that is module-supplier and time-period specific. The manufacturing health score/ranking is expressed as:

where a, b, and c are factor-dependent weightings, scaled to generate manufacturing health scores for each company by quarter (i) in a 0-10 band; S, C and T are the module supplier shipment, capacity and technology ratios introduced above; p, q and r represent power factors derived from regression analysis.

This article focuses on the capacity score (C) and how this is derived.

Manufacturing capacity (C) strength score methodology

The manufacturing capacity factor (C) ranks PV module suppliers, by looking at in-house cell and module effective quarterly capacities across different global PV manufacturing zones, and factoring in the access these manufacturing zones have at any given time to global module supply end-markets.

This type of analysis turns out to be incredibly insightful, and explains why the common practice of PV industry observers to consider one capacity number (often based on unsubstantiated nameplate single-entry data points) is both misleading and inappropriate within a changeable trade-barrier influenced global landscape where origin-of-manufacture is of the utmost importance.

First, I will explain some of the key issues related to capacity within the PV industry today.

Excluding thin-film PV technologies, all c-Si based module suppliers operate with different levels of backward-integration capacity, across cells, wafers and ingots. While various Chinese companies have subsidiary operations that produce polysilicon, no company today in the PV industry operates with a full value-chain model where every component is made in-house.

Across the ingot-to-module stages, the most critical parts in terms of module supply are cell and module production. Wafer supply has now become a China-centric commoditised offering, and crucially this part of the value-chain has been exempt from trade-related origin-of-manufacturing. Indeed, with more than 95% of c-Si wafers produced today within China, there is even less prospect of wafer supply being incorporated into any meaningful tariff-related policy.

Moreover, such trade-related duties have typically focused on the cell and module segments of the value-chain. Therefore, in assessing company-specific capacity-based strength metrics, it is the cell and module stages that are important to evaluate. This becomes further justified when recalling that module specifications are mostly driven by cell performance and quality.

In addition to the need to have high levels of in-house cell and module capacities, most Chinese c-Si module suppliers have routinely relied upon strong third-party outsourcing of cells and modules.

At the two extremes of the Chinese module supply practice are the fully-integrated in-house supply-constrained model, and the so-called ‘fabless’ alternative.
Leading multi-GW module suppliers – that adhere to using only in-house produced cells and modules – are the exception within the PV industry today. Indeed, the practice of relying on third-party companies for production has only increased in recent years, with Southeast Asia based companies often being called upon when shipping modules without prohibitive duties to the US (and until recently, to Europe).

By default, the only multi-GW thin-film producer (First Solar) is mandated to use in-house product, as a result of being technology-differentiated; this is an exception to the rule today, with the company being the only truly-differentiated alternative to non-residential (commercial, industrial and utility, or CIU) applications.

The fabless model – where all manufacturing is outsourced – remains popular within adjacent technology sectors (in particular, the semiconductor industry), but has been largely ineffective until now within the PV industry. The only company that sought to pursue a cell/module fabless model was SunEdison several years ago.

Other companies (including several Japanese module suppliers) did shift to strong outsourcing in an attempt to stay competitive (quasi-fabless), but such efforts were largely short-lived. In reality, a host of factors has prevented the fabless model working in the PV industry, including single-digit production margin constraints, and the need to quickly adjust to market dynamics resulting from technology and tariff related issues.

In assessing the relative strengths of module suppliers, in terms of manufacturing capacity, it proved necessary to fully understand how much effective cell and module capacity was owned by each company, and across which manufacturing zones globally. In particular, the levels of cell and module capacity by zone turns out to be crucial in assessing which end-markets are on offer through in-house cell and module production. The growth of cell and module capacities across Southeast Asia in recent years illustrates this point succinctly.

The analysis of manufacturing capacity strength (C) starts by splitting each company’s effective cell and module capacities across eight pertinent manufacturing zones globally: China, Taiwan, India, Japan, Southeast Asia, the US, Europe and the Rest of the World (RoW). These locations are chosen in part from a legacy manufacturing standpoint (in particular Japan), and crucially because trade-related import barriers tend to differentiate between cell and modules produced and shipped from these areas (origin-of-manufacture).

This type of segmentation is also important because ultimately the strength of in-house capacity depends on the served addressable market (SAM) available; namely which end-markets are absent of prohibitive import conditions at any given time.

This has been most pronounced in the case of China over the past decade. As such, it can be concluded a Chinese company having multi-GW of in-house cell and module capacity only in China sees a lower SAM for its factory output, compared to a competitor that has domestic and overseas manufacturing capability. While this alone is a simplistic case-study, the reality is a rapidly evolving global landscape that needs a robust methodology constructed in order to deal with changes by manufacturing zone and regional end-market supply (export and import).

The first part of the analysis here therefore requires the effective quarterly cell and module capacities (Cap) by quarter, for the top-100 module suppliers globally, to be segmented into each of the eight manufacturing zones (p=1…8), as outlined above.

For reference, effective capacity refers to the available/ramped capacity and its maximum productivity levels if operated 24/7. Very few fabs operate under these conditions in the PV industry, with only First Solar having a consistent track-record of fab productivity in the 95-100% range over a multi-year time period. The key issue here though is to differentiate between erroneous and misleading capacity figures that are all too commonly used within the PV industry, such as nameplate capacity or ‘available’ capacity (which is often no more than an ambitious summation of in-house and third-party capacities that can be called upon if needed).

Effective capacities in general go up and down every quarter, due to efficiency/power improvements at the module level, technology upgrades, debottlenecking, routine maintenance, or temporary factory mothballing. 

A key indicator of capacity definition used within the industry by any company/observer can be understood quickly, by noting that effective capacity figures are different every quarter: erroneous nameplate or ‘available’ capacity figures are often quoted to the nearest 100MW or GW and don’t change, by comparison. 

Another guide may come from related utilization rates cited that exceed 100%, reflecting inaccurate capacity allocations: capacity conversion is a more accurate means of quoting utilization rates in practice.

With the eight segmented module capacities (Cap) by manufacturing zone location established, the next stage is to determine how much effective in-house cell capacity is available to each of the module suppliers in these zones. 

This is important as it allows us to differentiate between modules produced by any company (in any zone) using in-house cells (IHC) or third-party cells (TPC). As discussed above, a major part of module quality, performance and reliability can be traced back to the origin of cell manufacturing; additionally of course, module trade-barriers routinely extend to cell component origin-of-manufacture.
The resulting module capacity (Cap) value by company (i) by manufacturing zone (p=1…8) can therefore be expressed as:

where the c coefficients are weighting factors that depend on whether module capacity uses in-house cells made in the same manufacturing zone, Cap(IHC), or by third-party cell producers, Cap(TPC).

This clearly promotes the strength of module suppliers that use in-house made cells only, produced local to module assembly activity. This is entirely consistent with how the industry operates today, and is a key issue for any investor-led due-diligence process as it pertains to module quality and bill-of-materials integrity.

The weighting factors, c, are qualitative data entries by nature, and can be adjusted by quarter or by manufacturing zone depending on how important in-house vertical integration of cells and modules is. The precise relative weighting between the factors turns out to be somewhat secondary within the overall bankability studies, and as such it is not essential to overcomplicate this part of the analysis, other than to have a means of differentiating between IHC and TPC supply-chains.

For reference, First Solar’s manufacturing is split up into cell and module capacities, although a single thin-film line incorporates the equivalent of c-Si cell/module stages. By default therefore, all First Solar product is cell/module matched, as it is for other thin-film makers in general.

The next stage of the analysis is the most important and valuable part of the overall capacity strength factor studies, because it introduces the impact of trade (export) restrictions on modules produced within any of the eight (p=1…8) manufacturing zones shipped to any of the six (j=1…6) end-market regions (Reg) that were introduced in the first part of the article series before.

Simply put, the value of having module (and cell) capacity in any part of the world is only as useful as the SAM available at any given time, factoring in trade-barriers that tend to be somewhat binary in nature when it comes to market accessibility (either the end-market region is ‘open’ or ‘closed’ with limited scope for any middle-ground).

One of the most insightful example of this relates to Chinese cell/module capacity (one of our eight manufacturing zones) and shipments into Europe (one of our six end-market regions). Prior to the establishment of the minimum import pricing (MIP) constraints imposed by the European Union on Chinese imports, Europe was fully accessible to Chinese produced modules. Once MIP was imposed, shipments from China to Europe collapsed to near-zero. Then when the MIP was removed, Europe than became fully-accessible again to Chinese produce.

In order to restate module capacity by company/quarter within the eight manufacturing zones globally, each capacity value (obtained through the summed term above) is multiplied by an end-market ‘access-related’ factor that is both manufacturing region and end-market specific.

To do this, the module sum factor (above) for each module supplier is multiplied by a quarterly-variable term based on combining the total quarterly CIU demand (Dem’) (for each of six end-market segments (j=1…6) for shipments) with a qualitative access percentage term (Access) that defines the availability of end-market j for module production in manufacturing zone p at any given point.

For example, returning to the Chinese module capacity example above, where the manufacturing zone is China, then China-specific access percentage terms would be 100% for China (naturally), and near-100% for regions such as Europe (today), Japan and most of the RoW sub-segments. By contrast, percentage levels would be very low for shipments to the US market, and fluctuating for supply to the Indian market.
The pro-rated regional contributions for each manufacturing zone are finally scaled by dividing by the total global CIU market demand in each quarter. This overall scaling factor can be expressed as:

Therefore, this type of analysis not only adjusts module capacity by manufacturing zone, it also scales the size of served end-market by the importance of each region, by looking at the ratio of the demand (CIU) from that region and the total CIU demand each quarter.

The steps above turned out to among the most insightful within the overall study, in building up the manufacturing strength of PV module suppliers in the industry. This analysis clearly takes capacity assessment (previously largely misunderstood and erroneously presented) to a new level of scrutiny, and finally allows for capacity to be valued based on where the product is made, how much incorporates in-house and local cell supply, and which end-market is being targeted; for all module suppliers, by quarter.

The final capacity score (C) of each module supplier is then simply the sum of the scores derived for all eight manufacturing zones, by quarter. The full equation can be written finally as:

where k is a variable quarterly scaling factor, to map capacity scores into a 1-10 band; again based on distribution and standard deviation checks done by quarter.

It should also be pointed out that the capacity analysis here is confined to quarter-only data points, and not any trailing for forward-looking time periods (as was entirely valid for the supply/shipment analysis before). This is done because capacity strength is an instantaneous variable (has a specific value at any given moment in time) that is entirely dependent on regional trade-access conditions.

Manufacturing capacity (C) strength score output

Similar to the analysis covered in the manufacturing supply (S) analysis outlined in part 1 of this series, the manufacturing capacity (C) study yields a vast quantity of benchmarking for different PV module suppliers, when isolating manufacturing zones and end-market shipment regions over different time periods.

For now however, we look at the final C values for PV module suppliers, choosing to show year-end values for simplicity, although the analysis of course tracks scores by quarter.

The graphic below captures PV module supplier scores from the top 100 companies in the industry today, with a few highlighted again to convey key trends arising from the analysis.

While the highlighted companies show a range of different fortunes for PV module suppliers’ capacity strength factors, the most interesting ones to discuss are those of Canadian Solar and Hanwha Q CELLS. Each of these companies has maintained capacity effectiveness by having a flexible strategy that allows modules made in different manufacturing zones to be prioritised at different times, depending on which end-markets are favourable to origin-of-manufacture. 

The case of Hanwha Q CELLS is perhaps the most robust in this regard, with the company able to adjust product availability from China, Korea, Malaysia (and now the US) as and when trade conditions apply; only companies with strong balance sheets can purse this strategy for any meaningful length of time.

Previewing the next part of the article series

The next article in this series will focus on the last term in the manufacturing health score analysis; technology (T). This allows us to incorporate R&D spending (confined to PV operations) and capex (restricted to cell and module stages) for each of the 100-plus module suppliers under review, again analysed by quarter.

The conclusions will be shown during the article to reveal the unique way in which R&D spending and capex (the hallmarks of technology leadership in other technology sectors) impact on PV manufacturing strength and module bankability rankings.

Attend PV ModuleTech 2019 to hear the first presentation on the findings

The full results of the overall study will be released by the PV-Tech market research team before the end of August, with the key findings presented, explained and discussed in the 45 minute opening talk I will be giving at the forthcoming PV ModuleTech 2019 event in Penang on 22-23 October 2019.

PV Tech’s bankability analysis series links are below

Part 1. PV-Tech research set to reveal investment grades for global PV module suppliers

Part 2. PV-Tech research reveals how to assess PV module suppliers’ capacity claims

Part 3. PV-Tech research establishes technology-leadership scorecard for top-100 module suppliers

Part 4. PV-Tech research reveals ranking tool for manufacturing strength of global module suppliers

Part 5. PV-Tech research ranks PV module suppliers by financial health

Part 6. First PV module supplier bankability ratings tool created by PV Tech research team

Read the entire story

PV-Tech research set to reveal investment grades for global PV module suppliers

This article introduces a new methodology that allows leading PV module producers to be categorized by manufacturing and financial strength metrics, ultimately providing an investor-risk (or bankability) profile for non-residential end-market selection.

This is the first of six articles on PV-Tech.org that will provide full transparency on the methodology used to assign investment risk to PV module suppliers selling to commercial, industrial and utility segments of the energy industry.

The output from the analysis – undertaken by the PV-Tech research team over the past five years – will form a key part of my opening talk at the forthcoming PV ModuleTech 2019 conference in Penang, Malaysia on 22-23 October 2019.

Summary of the investment-risk methodology used

Investment-risk (or bankability) scores for all PV module manufacturers are obtained by combining manufacturing and financial health scores, through nonlinear/power regression analysis. The data used is dominated by quantitative inputs (six years back and two years forward in the case of forecasted variables), with qualitative data kept to a minimum. At each stage of the analysis, comparison is made with how the module makers have been perceived in the market from a bankability/investment perspective.

The basic relationship between module supplier bankability (B), manufacturing (M) and financial (F) scores will be shown during the series of articles to follow the nonlinear relationship:

where k is a scaling factor that maps bankability scores to a 0-10 band, m and n are power coefficients derived from regression analysis, and i is a variable that is module-supplier and time-period specific.

The manufacturing health score, M, for any individual module supplier, at any given time (quarter, year-end, etc.) is determined through gathering a wealth of data for all module suppliers, annually back to 2013 and by quarter back to Q1’15, and analysing the dependency of this data on overall company-specific manufacturing status within the industry at any given time period.

The full series of articles will explain this in detail. The manufacturing score, M, will be shown to be a combination of module supply (shipment), capacity, and technology ratios. The manufacturing score, M, will be shown to be derived by the relationship:

where a, b, and c are factor-dependent weightings, scaled to generate manufacturing health scores for each company by quarter (i) in a 0-10 band; S, C and T are the module supplier shipment, capacity and technology ratios introduced above; p, q and r represent power factors derived from regression analysis.

The above relationship is therefore a linear combination of nonlinear/power terms, with the presumption that the three terms S, C and T independently affect the dependent M values. Over the course of the articles, I will discuss the dependency of factors used to establish final module supplier bankability ratings, as this is not simple by any means. However, I will show that certain parameters dominate company-specific metrics (in particular, when calculating the manufacturing health metric and the final bankability metric), minimizing the impact of other inputs (for example, R&D spending, that may be valuable to track in other adjacent technology sectors, but for PV and module bankability has limited bearing).

This article focuses on the manufacturing supply score (S) and how this is derived. Following articles will cover the other manufacturing score factors (C and T), the overall manufacturing health score (M), before finally I address the financial analysis (F) and the overall bankability scores (B). The bankability scores form the basis of investment risk grades that will be of great value to investors looking to short-list and compare different module suppliers and technologies for large-scale site selection globally.

All six of the articles will be archived within a specific section of the PV-Tech website, allowing any interested party to understand fully how the final bankability metrics of all PV module suppliers are derived and calculated.

Manufacturing supply (S) strength score methodology

The manufacturing supply factor (S) captures market-share by branded module shipment volume, and has routinely been part of solar PV ranking tables for many years, albeit in a very simplified and generic version.

Shipment of branded modules includes modules assembled at company-owned facilities, in addition to outsourced (or third-party) supply where end-market shipped product is relabelled to that of the company making the sale. Third-party outsourcing has been used frequently within the solar industry for many years, either to supplement short-term spikes in order pipelines, or to circumvent origin-of-manufacturing location constraints arising from trade tariffs or related (production) barriers.

Ranking tables for module supply are often done on an annual (calendar year) basis, typically confined to top-10 shipment estimates. These rankings should always be restricted to branded-module shipments to end-market customers (sometimes called merchant shipment volumes, specifically excluding any OEM supply or subcontract production line leasing). Many times however, the definitions are lacking, or the rankings were compiled in the absence of any understanding of the different factors that make up any module supply shipment numbers in the first instance.

Therefore, shipments volumes for our analysis are defined as own-company branded, including both in-house produced and third-party/OEM supplied. This is essentially how most leading module suppliers operate in the PV industry, with the exception of a few that are technology-specific.

The analysis starts by identifying each company’s megawatt (MW) shipments (Ship) by quarter. These quarterly shipments are then allocated to one of six (j=1…6) end-market regions (Reg). Each of these segmented numbers is then split into non-residential contributions (Ship’).

Non-residential allocations are comprised of commercial, industrial and utility-based shipments, abbreviated here as CIU. While the PV industry does not have universally accepted nomenclature for end-market segments (as defined by customer type or mounting arrangement), the use of residential/non-residential is the most important grouping mainly because residential deployment is largely absent of supplier due-diligence and bankability studies (common to larger utility-based projects). Non-residential is routinely labelled as commercial, industrial or utility, by different PV companies, with the terms somewhat interchangeable.

Having removed the residential part of the quarterly/regional company shipment volumes, this completes the company specific quarterly segmentation of the input data. The remaining analysis now uses these data values combined with historic and future market demand, as explained below.

Shipment strength is often considered in the PV industry to be based on market-share, whether globally or sometimes by region/country, and mostly covering calendar year periods in the past.

However, market-share claims are rarely substantiated, qualified or confirmed by any independent agency. Furthermore, market-share studies often lack country/region segmentation, time-period determination and deployment specifics (e.g. residential or non-residential).

One of the most important issues when looking at supplier shipment strength is to track this over defined time periods, and then adjust these values on a rolling basis each quarter.

In this regard, the next step in the analysis is to look at the trailing 24 months (t24m) of data within each subset above. Looking at a two year period at the end of each quarter (eight quarters, 24 months) turns out to be of greater value than a specific quarter; or indeed any 12 month or calendar year period which is not long enough to smooth out any short-term abnormalities in supply, possibly arising from adjustments to trade-related issues or technology-upgrades, etc.

For each company (i), quarterly CIU shipment volumes by region are summed over the eight previous quarters (t24m period at quarter end), and converted into regional market-shares by dividing this by the t24m sum of the total module shipments (CUI specific) into each of the six global regions. This now provides meaningful market-share information, being quarterly, regional and CIU specific, expressed as:

While the output from the above analysis sheds light on the sales tactics of PV module suppliers globally, it is nonetheless confined to historic activity, which may or may not have significance going forward. Put another way, market-share in any given region is only relevant if strong demand levels are expected in this region going forward. Often, within the PV industry, this is not the case, as has been seen on countless occasions when policies are changed, new governments come to office, or markets get saturated (short-term) with energy supply from renewables.

To understand this better, one can consider Chinese companies prior to 2010 when supply was dominated by module sales to Europe (in particular Spain, Germany and Italy). Policy changes in these countries then meant that historic market-share allocations to Europe were less meaningful going forward. There are many other examples where served market sizes of specific countries/regions have changed almost overnight in the PV industry, rendering legacy sales/marketing efforts as somewhat irrelevant to future company operations in this region/country.

This proved to be a critical part of the overall manufacturing supply rankings analysis. To address this, it is necessary to use two scaling factors applied to the regional market-share data obtained earlier.

The first scaling factor considers the total future CIU market demand (Dem) in each of the global regions considered, as a percentage of the overall total global CIU demand, two years out at the end of each quarter, shown as forward-24-months (f24m) to be consistent with the historic (t24m) terminology.

The inputs here are among the few qualitative data entries within the overall studies, to the extent that the data is based on forecasted demand (module supply) two years out for any given quarter. Obviously, when looking at any historic data more than eight quarters in the past, the data moves from qualitative to quantitative since the f24m entries have already occurred. The first scaling factor can therefore be expressed as:

The second scaling factor is equally important, and it is here that end-market risk is introduced. This is critical to understand since end-market regional policy or similar demand-related market factors create risk to future deployment. Any market-related issue that introduces risk to demand has to have a direct impact on the value of any legacy market-share coverage (shipment volumes) of any module supplier into that region.

This is done by assigning a demand-specific risk factor (Risk) by quarter/region, based on the f24m period at any given time. The resulting scaling factor is therefore expressed as:

Through this analysis, supply scores are assigned to all module suppliers at the end of each quarter; for CIU deployment into each of the six global regions considered; based on historic market-shares (ratioed against t24m global CIU demand); and scaled against future (f24m) regional CIU demand and associated demand-risk/uncertainty at the regional level again.

The final score for all module suppliers (by quarter-end) is then the sum of the scores for each of the regions, and can be expressed as:

The scaling factor k is used to put the scores in 0-10 bands, and is set quarterly by looking at the overall distribution of scores and standard deviation values each quarter. This allows the relative manufacturing supply strength of any company to be understood each quarter, benchmarked against other companies.

It should be noted that if just the historic terms are summed up (t24m), this yields module shipment rankings by shipped volume only. If the t24m period is then changed to 12 months (ttm), and the point of reference is at year-end (end Q4), then the output is simply the annual module tables, routinely cited by industry observers, but confined in this case to the CIU segments (i.e. non-residential).

Manufacturing supply (S) strength score output

Aside from the manufacturing supply score (S) that forms one part of the overall manufacturing health score (M), there is a wealth of output metrics that arises from the analysis above. However, the main objective here has been to score all PV module suppliers based on the strength of supply going forward, and to benchmark companies with one another over time on a common 0-10 band/scale.

The graph below shows the supply scores (S) for the top 50 module suppliers (by volume) within the analysis, with the t24m periods fixed in this case at the end of each calendar year from 2014 to 2019 for ease of display. Therefore, the 2019 scores should be indicative of the industry as seen today (July 2019).

To help illustrate the value of this analysis, four companies are highlighted in the graphic, characteristic of changes seen within the six-year period illustrated in this case. The companies chosen here are JinkoSolar, First Solar, LONGi Solar, and Yingli Green.

The trending fortunes of all PV module suppliers can be understood by looking at the relative t24m scores, whether at calendar year-end (as in the above graphic) or during the year at each quarter-end. The four companies highlighted above serve to illustrate this statement.

Going bottom-to-top in the list of highlighted companies, Yingli Green (a previous market leader) has seen its manufacturing supply strength collapse between 2013 and 2019, despite the company still being a multi-GW module producer. While shipment volumes have been falling in recent years, the decline is mainly coming from overreliance on one regional market (China) that has been subject to various policy and future-demand risk factors over the past 18 months.

LONGi Solar’s supply strength profile is coming mainly from increased module shipments since 2014, with the current upward trend also driven by having a more global end-market reach (that by default helps to smooth out any country/regional specific demand risk).

First Solar’s profile in the graphic above illustrates the impact of having a broader (non-China) end-market supply split, while staying away in recent years from high-risk regions such as India, coupled with greater volumes available from production with new capacity.

Finally, JinkoSolar’s trending and scores (in particular from 2016) illustrates just how dominant the company has become within the industry over the past 2-3 years. Aside from having the greatest shipment volumes recently (by quarter, calendar year or t24m period), the delta between JinkoSolar’s supply score and all other companies is coming from the focus on high-growth, and low risk regions. This is explained in part by the company diverting shipments away from China and India for example during 2018/2019.

JinkoSolar’s leading manufacturing supply strength status is therefore further evidence that companies increasing module shipment levels need to be ahead of the curve in terms of the end-markets that sales/marketing efforts are assigned to, and not simply grabbing market-share in areas that have limited long-term strategic growth potential; more on this topic across the six articles making up this series.

Finally, it should be pointed out also that the methodology above can be adapted to be end-market specific, revealing the strength of supply for all companies into certain regions, at any given time period, and can be used to model the effect of abrupt policy/political changes in the future.

Previewing the next part of the article series

The next article in this series will focus on the middle term in the manufacturing health score analysis; capacity (C). This incorporates the value of module capacity available in-house to each company (segmented by in-house and third-party cell supply) across eight different global manufacturing regions; and how this allows certain companies to be well positioned to navigate trade-related issues based on module (and cell) origin-of-manufacture.

Attend PV ModuleTech 2019 to hear the first presentation on the findings

The full results of the overall study will be released by the PV-Tech market research team before the end of August, with the key findings presented, explained and discussed in the 45 minute opening talk I will be giving at the forthcoming PV ModuleTech 2019 event in Penang on 22-23 October 2019.

PV Tech’s bankability analysis series links are below

Part 1. PV-Tech research set to reveal investment grades for global PV module suppliers

Part 2. PV-Tech research reveals how to assess PV module suppliers’ capacity claims

Part 3. PV-Tech research establishes technology-leadership scorecard for top-100 module suppliers

Part 4. PV-Tech research reveals ranking tool for manufacturing strength of global module suppliers

Part 5. PV-Tech research ranks PV module suppliers by financial health

Part 6. First PV module supplier bankability ratings tool created by PV Tech research team

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PV ModuleTech 2019 speakers to explain trends in bankable, quality & high-performance modules

The agenda for the forthcoming PV ModuleTech 2019 conference, to be held in Penang, Malaysia on 22-23 October 2019, has just been announced by PV-Tech, and can be viewed on the Agenda ‘tab’ through the link here.

Once again this year, PV ModuleTech is shaping up to be the go-to event to learn which module suppliers are the ones being consistently chosen for large-scale global PV projects. The event is now firmly established in the PV events calendar, and the session topics reflect the new trends in module assembly, factory auditing, inspection and related due-diligence studies.

This article reviews the topics and speaker line-up for PV ModuleTech in October 2019, and highlights key issues that attendees can expect to understand better, ultimately leading to more informed decision-making by global EPCs, project developers and asset-owners.

Opening talk to reveal much-needed module company health rankings

In the past couple of years, I have tended to limit my own contributions on-stage to moderating most of the 2-day event, while adding various inputs as and when needed.

This time around at PV ModuleTech 2019 – and in recognition to increasing concerns raised by asset owners and investors today – I have decided to deliver the opening talk at the event. The extended 45 minute presentation will effectively outline the results of a five-year period of in-house research at PV-Tech across more than 100 leading PV module suppliers.

The scope of the talk will be based upon detailed analysis that considers the key factors underpinning module supplier and technology choice for global PV projects within the industry today, and going forward; and crucially, how investors and developers can properly assess which companies have the lowest risk profile.

Leading module suppliers on show with latest module technologies and field data

A key part of PV ModuleTech is to have content and technology-led presentations by the major global PV module suppliers, which represent a small percentage of the 300-plus module makers that exist in the PV industry today.

In fact, it remains true that when module selection for institutional-driven PV projects are considered, there are only about 10-20 module suppliers that end up on any given buyers short-list. As the projects get larger (100MW plus), then the grouping shrinks to below ten normally.

Indeed, many of the companies showing on various ‘Tier-1’ lists have never supplied any meaningful large-scale PV projects, and may never, due to limited capacity availability or to a fundamental limitation from an investment-risk perspective. The PV industry really needs to move to a far more sophisticated and meaningful metric urgently.

The module suppliers speaking at PV ModuleTech 2019 this year are from the 10-20 large-scale providers of global PV projects today, including JinkoSolar, First Solar, LONGi Solar, Hanwha Q CELLS, Risen Energy, Talesun, Jinergy and Seraphim.

With the audience at PV ModuleTech 2019 largely comprised of decision makers from downstream segments (developers, EPCs, investors), it is therefore hugely important that module selection processes use current metrics from the top 10-20 module suppliers, in addition to knowing what is likely to be supplied by this grouping going into 2020.

Talks from the above-mentioned module suppliers feature across the two days of PV ModuleTech this year, with bifacial supply again being a hot topic for the conference, as explained more below now.

Bifacial modules; the road from curiosity to niche to commercially-practical

As soon as rear side Al-BSF passivated cells were phased out of the industry by the so-called PERC method, bifaciality (by way of rear-side availability for light absorption) simply became a natural option for any PERC-based product. Indeed, the only thing that has held back every module being double-sided (or bifacial) was the established backlog of monofacial (and often low-cost p-type multi modules) already being specified for global projects.

Bifacial also came at a time when project economics was seeing a massive boost purely from ASP erosion, and the investment community was more than happy to have IRR’s met through an established, low-risk offering (as p-multi has been for the past decade).

However, once PERC became the 100 GW manufacturing capacity segment it is today, bifacial product was then seen as something that could only boost site yields (and IRRs): the only question being how much, and show-me-the-data!

Over the past couple of years, sessions at conferences and workshops on bifacial module technology have tended to be somewhat academic or aspirational-led, broadly characteristic of any niche market offering. Often, downstream companies have left with more questions/worries than they had in the first instance!

With two years now of projects (some tens of MW in size, or more) globally, and the unexpected (but most-happily-received) windfall arising from the 2019 US Section 201 exclusion for bifacial imports, bifacial is set to be everywhere in 2020, even on residential rooftops where the advantage is next-to-zero!

The industry in the past was happy to use generation models that had tilt and latitude/longitude inputs, alongside degradation forecasts, as a means to predict kWh/kW outputs. Many of the models for this were desktop study driven, and essentially ran off datasheet numbers. However, when the surface is a factor (as of course it is for bifaciality) then this type of computerised modelling stops.

The replacement has yet to be established within the industry, and the questions continue to come from site investors and asset owners in terms of how to model accurately bifacial yields over the lifetime of the investments.

This neatly frames the bifacial session focus at PV ModuleTech 2019, with many module makers now able to show meaningful field data over a multi-year time period. The conference will also feature key findings by the likes of NREL and PV Evolution Labs, in terms of field performance and reliability testing.

Manufacturing quality still dependent on production equipment, material-choice and third-party agency approval

Another major part of PV ModuleTech involves the contributions from factory auditors, test/inspection/certification bodies, and independent engineers. In fact, the event is now the only global PV event structured around the contributions from these organizations.

Sitting in the middle of the value-chain between module producer and site investor/builder, these third-party agencies are the stamp-of-approval for large-scale PV investments in terms of checking the product, the manufacturing processes and the shipped modules.

Speakers from Clean Energy Associates and Kiwa Group are among several that will be on stage at PV ModuleTech this year.

Module equipment and material availability continues to see advance

Increased throughput of higher-efficiency modules has been a key feature of the PV industry in the past few years, and this is often coming from the use of more advanced production equipment and material selection.

Contributions will be provided this year from Meyer Burger, 3M, DuPont, DSM and Mondragon, with a focus on new innovations that will see first market introductions during 2020.

Technology-transfer still a key enabler for Asian module fabs

Getting new module-based processes into mass production for many of the Asian PV producers still relies upon successful technology-transfer projects. Research institutes have been featured heavily at PV ModuleTech during the past couple of years, with many likely to return in 2019 such as CEA-INES based in France.
Still options to contribute to 2019 PV ModuleTech agenda

With 3 months left until the event in Penang on 22-23 October 2019, we are in the final stages of firming up the remaining topics and speakers for the event. Anyone wishing to offer contributions or sign up to attend (our early-bird rate is open until the end of this month, July 2019), should contact us ASAP through the options at the event website here.

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PV industry benchmarks for module technology and bankability are driven by JinkoSolar

The PV industry roadmap – and related metrics of technology and bankability – are now being driven by leading module supplier, JinkoSolar, with others seeking to replicate Jinko’s product line options, trying to differentiate in markets that are receptive to low-cost alternatives, or focusing only on rooftop markets where volumes are lower and sales/distribution efforts are more intensive.

That a leading industry supplier should be setting trends for others to follow may seem rather obvious, but this is the first time it has happened in the PV industry. In previous growth phases, groups of companies sought to maintain a status-quo approach to technology-change, or put so much effort into being number-one for shipments that fiscal diligence was overlooked and came back to hit cash-flows and ongoing business concerns.

The article explains how the current landscape – in which one company is not only dominating supply volumes, but also driving the technology roadmap of the industry – has come about, what this means for global technology and supply offerings for the next 12-18 months, and what other companies are having to do in order to remain competitive going into 2021.

The data and analysis shown is taken from the most recent (June 2019) release of the PV Manufacturing & Technology Quarterly report. The topics and scope of the discussion is also shown to be integral to the forthcoming PV ModuleTech 2019 event in Penang, Malaysia on 22-23 October 2019.

The article also addresses some of the key issues impacting the industry during 2019, including module bankability, bifacial supply, and issues that are ultimately holding back n-type share-growth in the industry today.

JinkoSolar’s multi-to-mono transition close to being complete

There have always been companies in the PV industry that chose to focus on using only mono wafers (either n-type or p-type), either through cell technology selection (HJT or IBC), or as part of a rooftop-only niche product offering to the market.

In recent years, LONGi Solar moved from being a mono ingot/wafer maker to having multi-GW cell/module capacity, and sought to create a brand image whereby mono-only was the strategy, matched with a long-term expansion roadmap that remains loyal to its mono dedication.

However, until a few years ago, multicrystalline ruled PV, with market-share levels of more than 70% typically, and even higher when filtering out non-rooftop and non-China based deployment. In fact, all the module supply leaders of the past decade (with the exception of First Solar) were multi-advocates, and saw ongoing market-leadership status being sustained by the technology type.

JinkoSolar was the first market-leader that got to number-one status (on the back of being one of the me-too multi panel suppliers), and then moved from supply-leader by volume to technology trendsetter. This is something that companies such as Sharp, Suntech, Trina Solar, Yingli Green did not achieve, in part due to erroneous investment decisions but also because the climate for technology-change was not a recognized concept within the industry then.

Indeed, while each of Sharp, Suntech, Trina and Yingli has various forms of backward integrated capacity (mainly across ingots and wafers), there was certainly no plan to collectively change all stages in order to have a new type of ingot-to-module capacity base feeding through to higher specification module supply. This is one of the things that differentiates JinkoSolar, as will be discussed in more detail below.

First, let’s look at JinkoSolar’s in-house cell technology changes, and compare to the industry as a whole (actual cell production). This is best done by looking at the seven-year period from 2013 to 2019, splitting out technology by c-Si/thin-film, p-type/n-type, and Al-BSF/passivation process flow variants. In the graph below Standard is Al-BSF, and Advanced is PERC.

It should be noted that while there are many other technology variants promoted by different module suppliers (half-cut cells, shingled-arrangements, bifacial, etc.), the basic cell types used for all modules should still be grouped (process-flow mandated) into the three simple segmentations outlined before.

The key issue from Jinko’s perspective was to make the multi-to-mono move as soon as it became clear that mono ingot production was becoming a China-based commoditization, and no longer a capacity-constrained and cost-limited low-throughput offshoot of modified semiconductor pullers using equipment made in Germany or Japan.

As soon as LONGi established its first few gigawatts of made-in-China ingot pulling capacity, the dye was cast. This was made even more evident when Zhonghuan joined in and the two companies here set up multi-GW per-annum mono puller additions, almost irrespective of what was happening in the market, with pricing or non-p-type-mono cell proponent. (It almost seems that, like the country as a whole, both companies had a 5-year plan that was not for changing.)

For every c-Si cell maker, either you could sit back and watch the technology-revolution happen (which most did) and enjoy periods when wafer pricing was attractive, or decide to be a front-runner by making the necessary move to mono.

Those that decided to change cell lines (and by default have more mono module supply options), through moving to mono-PERC and having a route today to being competitive in 2020 with bifacial mono-PERC, have been fully vindicated. However, this alone is not enough, and can be seen still as reactive in nature.

The problem with companies that made multi-to-mono moves (or indeed almost every company that made investments into n-type cell lines in the past few years) is that they are completely beholden to LONGi and Zhonghuan when it comes to wafer supply.

Many still view China-solar majors (especially those making polysilicon/wafers) as being somewhat cartel-like (different corporate entities collectively plotting what the landscape looks like to the benefit of one another): therefore, if you want to be a global module supplier and have control over your full cost structure, you cannot have something as important as wafer supply/cost/quality being outside your direct control.

Today, almost every mono-based module supplier is in this predicament. In fact, things get more complicated when the main mono-wafer supplier is itself a company seeking to be a leading global module supplier. When this set of conditions applies, normally there is not a happy outcome for all parties concerned.

Perhaps more relevant then to being a technology-leader is putting in place a c-Si value-chain (ingot-to-module) that is low-cost, high-efficiency mono-based, and this is what JinkoSolar has done in the past few years, and is the only company to make this move. The graphic below shows metrics supporting these changes for JinkoSolar, with Jinko moving towards 100% in-house mono wafer supply during 2020. As part of having a fully-controlled in-house manufacturing supply-chain, this move is highly significant, and allows Jinko to have control over issues such as wafer quality, size (dimensions), thickness and (most importantly) cost/price.

Other factors to be a leading bankable utility-scale supplier

Until now, within this article, I have not mentioned anything to do with capacity-location (origin-of-manufacture), sales/marketing channels globally, or having the foresight of wisdom to diversify supply allocations to avoid the perils of being locked into a short-term bonanza occurring on your doorstep.

Now let’s explain these, and show that being a supply and technology leader in the PV industry needs to have the above issues in place and working effectively.

Manufacturing capacity location is the single most critical factor for any Chinese module supplier, in terms of being able to deal with any tariff-related issue that is at play today, or may happen in the future. Simply put, having China-only cell/module capacity (ingot/wafer is not relevant) is a fundamental roadblock in terms of being a global module supplier. There are options of course, in terms of supplying to China and other made-in-China open markets, as shown most aptly today through the strategy of Risen Energy. Otherwise, Chinese-based companies are left to be part-producers and part third-party customers of the Southeast Asia OEM engine.

It is no coincidence that Jinko, and JA Solar and Canadian Solar in particular, have been at the forefront of Southeast Asia owned cell/module facilities, with Jinko being the only company to have a specific cell-and-module owned strategy (as opposed to still relying on OEM cell or module supply channels, or focusing mainly on either cell or module capacity overseas).

Sales/marketing acumen is directly related to having a successful diversified module channel outlet that allows strong market-share allocations to be achieved in every key utility-scale region of the PV industry. Historically, this has been one of the hardest challenges for all Asian-based module suppliers, not just Chinese. 

Being brand-recognized globally (especially for non-residential PV deployment) is something that most Japanese and Korean companies (with the exception of Hanwha Q-CELLS) largely failed to achieve, and only a small number of Chinese companies have come close also.

Only Trina Solar, Canadian Solar, JA Solar and JinkoSolar have managed this, with Jinko and Canadian today being the front-runners. Others are left to win business (at least for major utility-scale projects) by aligning with parent-owned project-financing (such as Jetion), putting cash up-front with local JV partners or funding vehicles (such as BYD and GCL-SI for example), or playing in cut-throat markets that most wish to avoid at all costs (such as India).

While every Chinese module company has spoken about wanting to be a global player, and seen as a quality supplier while investing heavily in technology, only four companies have managed this: Jinko, JA Solar, Canadian and Trina. 

However, only Jinko has taken this to a non-Chinese based extreme, by basically setting out a goal a few years ago to get Chinese market shipments to single-digit percentage levels at all costs. China has over 100 module suppliers today that have no option but to sell domestically; this is not a good market to be reliant on while global-stage credibility is the ultimate goal.

Does Jinko now hold to key to n-type as a viable contender?

Following through the rationale that the leading module supplier is the technology trend-setter today, it would therefore make sense that any major changes to module technology type would be driven mainly by this company.

This frames nicely the dilemma within the industry over the past few years, where we have companies with limited market-share, heritage in manufacturing, and global strategies being the ones advocating the not-insignificant move from p-type to n-type as a mainstream contender.

The parallels to the a-Si/uc-Si and CIS/CIGS investments a decade ago are evident, with many of the companies announcing n-type investments (this time largely China based) have little or no in-house expertise, and are relying almost entirely on know-how of equipment suppliers. The China example for n-type is even more precarious when the equipment suppliers of choice are themselves China located.

Similar to a-Si/uc-Si and CIS/CIGS thin-film variants, there is no doubt that n-type cells can be made in mass production and high-volume. The problem though is not one of efficiency potential (as it was in part for a-Si and CIGS), but cost and ease-of-manufacture. Indeed, the question of in-house technology-ownership is now more pronounced than ever before in the PV industry; a fact made clear by Jinko’s move to have in-house control of ingot/wafer and cell technology leadership and not dependent on third-party wafer or cell suppliers.

If n-type is to challenge p-type for non-residential/small-rooftop applications, then a global market-share leader has to prioritize the change; this is not happening today other than marketing-related press releases to convey R&D profiles to the outside world.

It may simply be the case that, if Jinko and others (JA Solar, Canadian, LONGi) choose to ignore n-type, and focus purely on a continued efficiency/cost roadmap for p-type mono PERC bifacial variants, then n-type ends up moving from niche (today) to firmly-on-the-backburner (next 2-3 years).

In contrast to previous thin-film differentiated investments of the past however, n-type cannot be discounted, as it still offers the only route to higher cell efficiencies. But the best technology is not necessarily the market champion (think Betamax and VHS video recorder analogy here).

PV deployment is an LCOE/return-on-investment based proposition, and module costs are now a small part of site capex with other factors (mono-facial versus bifacial) way more important today compared to p-type or n-type module offerings. End-markets are being created on a subsidy-free basis also, without the requirement to make any radical technology-driven change in GW-scale manufacturing plants. GW-scale module suppliers are also trying to navigate still-changing trade-based conditions, while holding gross-margins at acceptable double-digit levels.

Logic would therefore support the continued focus on p-type, and this is what we are seeing today. However, if Jinko (or one or two of the other top-5 module suppliers) were to change plans, things would move very quickly as others rushed to stay competitive. But with scales of manufacturing now at the 10GW-level, the barrier-to-entry from any disruptive offering is way higher than it was in the days when GW-scale was the de-facto measure of global supply leadership.

Anyone needing to know exactly what is really happening in technology today – across the top-100 leading global module suppliers – can access this in PV-Tech’s PV Manufacturing & Technology Quarterly report, though this link.

Ranking bankable module suppliers must have a robust ranking metric system

The evolution of the PV industry in 2018/2019 is also highlighting some other major gaps in bankable module supply for investor-driven projects. These type of projects are now the driving force of PV (utility-solar), but the industry is still using rather misleading metrics to rank module suppliers as credible and reliable.

Many companies are still using Tier-1 lists. However, there are typically 35-40 companies ‘claiming’ to be ‘Tier-1-status’. But, for utility projects globally, there are rarely no more than 10 companies (max.) ever considered as bankable. So something is not quite right here it would seem.

Essentially, the Tier-1 lists use quantitative judgements based on somewhat tentative qualifiers, and often lack any systematic methodology that is explained clearly to the industry as whole. Indeed, some Tier-1 lists show the companies by some sort of manufacturing qualifier, such as Annual Module Capacity, often rounded to the nearest GW or 100MW band. Is this nameplate or effective, in-house used or OEM-assigned? Is this using in-house cells or outsourced? In fact, are the numbers even real?

At the forthcoming PV ModuleTech 2019 event in Penang, on 22-23 October 2019, researchers from PV-Tech will be outlining in a series of talks a new ranking methodology that will finally provide utility solar investors with a robust tracking system, upon which to make risk-free investments when choosing module supplier and technology-type deployed. More on this, on PV-Tech, in the coming months.

PV ModuleTech 2019: the must-attend event for global developers, EPCs and asset owners

During the past few years, PV ModuleTech has become firmly established as the leading global event to understand which module suppliers are going to be dominating the global utility-scale deployment stats over the next couple of years.

Only the leading module suppliers are on-stage outlining product availability, volumes on offer to different global regions, and the module technologies that are optimum for each market and site application. Supporting these talks are the leading module materials and equipment makers, providing key indicators for module assembly enhancements likely to flow into mass production next year and how these improvements will increase module performance, quality and reliability.

The other main company category of speakers comes from the important segment that includes factory auditors, independent engineers, and test/inspection/certification labs. The speakers here are often the ones that satisfy due-diligence needs of investors.

In addition to the request from many of the past attendees for a new and robust module supplier/technology ranking system, the other big request for PV ModuleTech this year is to have more detailed presentations and discussions on bifacial modules. Bifacial modules are not a novelty offering anymore, and there is a strong need now for a fully commercial-oriented discussion platform, as opposed to the research-institute led forums that were important to introduce the basics to the industry as a whole.

There are still many ways to participate in PV ModuleTech 2019</a>; please get in touch with us using the contact information at the link here.

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Increased solar module choice needs investor approval before adoption – PV ModuleTech 2018

Choices, choices and more choices; this is the reality facing anyone hoping to procure solar modules over the next few years as the PV industry looks beyond its traditional trappings of 60 or 72-cell aluminium back-surface field (Al-BSF) based cell technologies. As if the array of new module offerings was not already bewildering to developers, EPCs and investors, the chances are it will be even more so in 12 months time as yet more innovations are presented to the sector, according to Finlay Colville, head of research at PV Tech & Solar Media. That is unless independent engineers (IEs) and third-party labs manage to reach consensus quickly not just on how to evaluate the latest technologies, such as bifacial or half-cut cells, PERC, HJT and n-type, to name a few, but also how they perform in specific conditions and on different mounting systems like trackers.

It was with this atmosphere of excitement mixed with uncertainty that PV ModuleTech kicked off for its second year, this time in Penang, Malaysia, with the whole value chain of the industry trying to come to terms with the newest module products. Traditional technologies look set to stay in play for a while longer, however, wherever cost or wafer supply remain constrictive to the spread of newer modules. Moreover, one key question was whether a standard 72-cell p-type multi-crystalline module is at present the only bankable module in the world, being the only relevant product to have had 20-plus years in the field.

Nonetheless, it wasn’t all rosy for the tried and tested technologies, with some shocking statistics presented about variability in solar panel supply. For example, Michelle McCann, partner at test lab, PV-Lab Australia, showed that when manufacturers knew their product coming into Australia would be examined, tests showed modules performing generally at or above nameplate power. However, when manufacturers did not know their product would be tested, deviation from nameplate power was far more variable, with up to 12% less power than billed in the worst case.

“We do get good product in Australia; we just don’t always,” added McCann. “Manufacturers can and do choose where to ship certain product.”

It seems the trick is no longer just about what you buy, but also the way you buy.

Indeed, Lawrence McIntosh, another partner at PV-Lab Australia, showed evidence that product from the same tier-one supplier going to two different customers in the same country can often have significant variation in performance tests. The findings harked back to this time last year when we covered the inaugural PV ModuleTech 2017 conference in Kuala Lumpur; from which the takeaway phrase was ‘all modules are not created equal’.

Scrutinising bifacial

However, the overriding focus this year was grappling with the whirlwind of new technologies. One of the major questions facing the industry is how, when and whether to adopt bifacial modules, because if bifacial were to become the industry norm it would force all EPCs and plant designers to completely rework their assumptions about how to optimize site yields over 20-30 years. Many procedures that are standard to monofacial module installations are turned upside down by the bifacial concept given its ability to generate power from albedo on the ground on the backside of a sun-facing module. A whole new game in terms of Balance of System (BOS) would need to be played.

IEs and certification bodies all showed their work on bifacial testing so far, but it seems that a benchmark test for bifacial has eluded the industry and as one delegate put it “the industry is really excited but confused about bifacial technology”. While there is puzzlement and risk-aversion, there are also early adopters taking the sector into unchartered territory. Offering one of the more bullish forecasts on where bifacial will be in 12 months’ time, Paul Wormser, VP of Clean Energy Associates, reminded us in the final panel session that some players are starting to invest in and install hundreds of megawatts of bifacial modules already.

“We are going to see not just the data coming from the test labs and the pilot sites, but we’re going to empirically see really big projects going in the ground now,” said Wormser. “It’s going to accelerate and so we’re at the tipping point and I think when we come back here next year it’s going to be the normal thing to do.”

This suggests that some players have done their due diligence and fully trust this technology, having moved on from the pilot phase. Of course, only time will tell us how performance will be out in the field.

Colville noted a tendency in the solar industry for innovations to either vanish or become almost universal very quickly and this is why everyone in the sector needs to watch closely if bifacial starts catching on.

Another suggestion that bifacial technology simply cannot be ignored came from Helen Zhou, module technical director at China-headquartered manufacturer JA Solar, who said the firm would soon start only producing bifacial cells and even putting them in monofacial modules due to the prices coming down so far on bifacial cells…This was certainly food for thought.

Multi not dead…yet

The issue of multi vs. mono is still a huge question given that these technologies account for roughly 90% of the market still.

The rise of mono PERC modules has been undeniable, perhaps symbolised by some players in the aggressively price-obsessed Indian market starting to come to terms with it.

For Colville the global market is utterly dependent on wafer supply now and he went as far as to suggest that if there was enough mono wafer availability to supply the whole market today, then “multi is dead”. However, wafer supply constraints mean multi should still be supplying multi-Gigawatts over the next three years and can still utterly dominate specific markets, with some Indian players, for example, likely to be procuring multi right up until the last standard polycrystalline module comes off the production line for an extremely low price in a few years’ time.

In his analysis of the event, Vinay Rustagi, managing director of consultancy firm Bridge to India, aptly wrote: “There has been a common perception in India that solar industry is highly commoditized with multi-crystalline modules accounting for over 98% market share. But these modules are turning obsolete – worldwide share has already fallen from over 70% in 2015 to less than 50% now.

“As for the developers, there seemed to be a feeling that their job is becoming difficult in trying to evaluate different technologies and picking the right one. Some developers mentioned that they have to run as many as 30 different project design combinations before settling on a final plan.”

What and when to pick

Indeed, Frank Faller, VP Technology, 8Minutenergy Renewables, one of the largest solar IPPs in the US, said that not only is p-type multi “disappearing” but there are easily 15+ technology options for modules and the trend is increasing. This dramatically increases the number of modelling iterations the company has to run to optimise its projects. This has made predicting the LCOE of a project more complicated and performing due diligence both more difficult and strenuous.

Faller also said that from a general developers’ point of view, degradation modes on panels are still not fully understood, particularly as “degradation modes depend on the BOM and components and are unique for each single PV module brand and mode”. He also described the finding that quality varies even between different workshops of the same manufacturer as “quite disturbing”.

A major difficulty is how to instil confidence in developers that in six months time the frontrunner technology won’t completely change again, added Colville. The speed of technological progress means a newer, better module could be around the corner just three months into a project that takes 18 months to build, so how does one factor that into LCOE calculations?

“Everyone thinks it’s great that there’s all these higher performing modules and all this extra capability, but actually that’s a problem if you are trying to develop something and have a fixed plan that you are giving to investors and demonstrating what the returns are going to be for 20 years,” he said.

Besides the wafer supply issue already discussed, downstream growth will also play a key role in deciding the future of p-type multicrystalline. Colville said that if the market suddenly needed an extra 40GW next year, it is multi that would supply that demand, simply because there is not enough mono.

However, he added the caveat: “In a world of low-cost mono you have got the sky in terms of what might happen next. You have to deal with change quickly because in 12 months time or in 18 months or two years there could be a rapid transition to tens of Gigawatts of heterojunction (n-type) and then everything changes again. So maybe this is actually a warning time in the industry that it’s just different now, that the industry and the cell processing have moved and we’ve got low-cost high purity wafers coming through for the first time.”

Solar Media’s cell technology-focused event PV CellTech will also be held in Penang on 12-13 March 2019, and the inaugural India-focused event PV IndiaTech will be held on 24-25 April 2019.

Bouncing back from 531

China’s policy upheaval in May this year, that significantly cut the industry leader’s projected growth, sent shockwaves through the industry, however, this week saw news emerge that the Asian giant may be considering enlarging its overall solar target to a huge 250-270GW by 2022. This will be sure to affect the rising demand from the rest of the world across Southeast Asia, Latin America and the Middle East, which have been absorbing the surplus capacity in China caused by the 531 announcement.

The resulting decline in ASPs has caused the whole industry to squeeze. Colville said this decline is entirely due to the supply of polysilicon and wafers, which is controlling both technology and pricing  – adding: “The pricing of modules in the last few years has been held relatively high you’ll be disappointed to hear if you’re a manufacturer.”

Quality

Declining ASPs of course puts pressure on manufacturers to increase energy yield while also decreasing costs.

“The gap between the ASP and module cost is quite small and this is a huge pain for all of us in the industry, which means nobody is really earning money,” said Mirko Meyer, head of product management, at major equipment supplier Meyer Burger. “So then the question is how can we overcome this? Of course we can reduce module costs but this is hard without suffering on quality. The whole industry is squeezing and quality becomes a pain.”

To make matters harder, Colville also added that a rebound on prices is very unlikely anytime soon.

“There’s not a lot of margin in module manufacturing especially after China 531,” said Tristan Erion-Lorico, Head of PV Module Business, Laboratory Services, at quality assurance and risk management company, DNV-GL. “People are getting squeezed, but for the most part they are surviving, but if they are not getting a healthy margin to survive then cutting corners is an inevitable thing to turn to rather than closing the company down.”

Quality was indeed a major feature of PV ModuleTech and we heard throughout the conference a long list of problems including underperforming modules, poor quality backsheet choices, replacement of modules after only a few years, and micro-cracks, to name a few.

For example, due to many first-time Indian developers entering the market during the “gold rush” of 2014/15, Vinay Rustagi said: “There is a big problem in India that many projects don’t have the necessary amount of quality focus that they should have had. Many projects we know are underperforming very badly. There is high module degradation, there are warranty problems being reported etc.”

Sudeep Tiwari, senior manager, PV Module technology and Supply Quality at Indian developer and EPC Mahindra Susten, said the firm has been actively taking a stand over quality before signing contracts and looking at BOM very carefully, perhaps marking a steady change of habits in India, and Rustagi said quality is likely to even out over a period of time with the industry consolidated and new government-led quality standards being introduced, but it will remain an issue for another 1-2 years.

However, besides emphasis on price, many delegates noted the importance of third-party labs and IEs having a strong voice for the industry to rely on.

Lou Trippel, vice president of Product Management at US-based thin-film solar manufacturer and developer First Solar, said: “In terms of energy prediction – these things are hard enough without even considering some of the biases that may be present. We end up with a bit of an arm wrestling match here and we luckily have some referees that can jump in. As an industry we need to recognise the importance that these independent roles play in trying to drive toward that level of unbiased and absolute correctness.”

Fabian Wany, head of sales EPC, SEA, at developer Conergy, also said it was easy to be “puzzled” by all the module innovations on offer – adding that the firm had been lucky over the last few years to build projects using either mono or multi modules and then simply having to work out the best radian, structures and cables. However, now “everybody is getting into a panic”, worrying about missing out on the latest trend and extra energy uplift that it could yield for a project.

Wany added: “The precedence of the tech is not there yet. We need more evidence in order to trust the data. Some people have tried their luck and tried to make it work and that’s helpful for the industry to push forward, but essentially we need more third-party certification.”

Bankable bifacial

Ralph Romero, senior managing director, Black & Veatch Management Consulting, which plans to introduce the industry’s first bifacial module rankings through tests in the Nevada desert, said: “In the US, there is a lot of excitement about bifacial modules, but the reality is there is still a lot of uncertainty with regards to module availability and module quality and first and foremost is the lack of a widely accepted energy forecasting tool for bifacial module performance. That’s probably the single most significant limitation today that I see in the US market for deployment of bifacial technology. There are still hurdles to be overcome – it’s not that everybody is now going crazy about bifacial modules; there’s still a lot of hesitation.”

Romero said that B&V’s bifacial tests show on average a 5% module efficiency gain over mono, which is significantly less gain than the 15%+ gains that many manufacturers have touted. He added that the large variability in bifacial forecasts across the industry means that they need to be taken with a grain of salt. Regardless of that, the conference still heard of some developers considering sites of up to 300MW capacity using bifacial modules.

Nonetheless, Romero added: “The reality is that most manufacturers have bifacial products, but not very many actually have high volume commercial production of them.”

Repowering

Other themes that emerged during the conference were:

  • a strong desire for data on how PERC technology is performing in the field after its rapid adoption over the last year;
  • manufacturers highlighting the increasing importance of working with tracker and mounting suppliers for mutual benefit when designing new modules, especially for example in the US market which is now dominated by single-axis trackers;
  • Light and elevated Temperatures Induced Degradation (LeTID) becoming a hot topic;
  • more types of tests being discovered regularly.

As a final thought, Colville asked a panel if repowering – replacing the entire module selection from old plants with cheaper and more efficient new modules – could become economically viable in the near future. We then heard of potentially Gigawatts of such repowering happening in Italy over the next few years. However, manufacturers said there are Balance of System (BOS) problems when replacing older vintage modules with new ones, because the new module specifications often have different sizes.

Solar Media’s cell technology-focused event PV CellTech will be held in Penang on 12-13 March 2019, and the inaugural India-focused event PV IndiaTech will be held on 24-25 April 2019.

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PV ModuleTech 2018 to grow by 30% as interest in module supply and quality hits new heights

The solar industry, in terms of deployment, will sadly not be growing by 30% in 2018. However, the good news is that the PV ModuleTech 2018 event – taking place in Penang, Malaysia on 23-24 October 2018 – will see more than 30% growth in the number of companies taking part and the number of attendees on site.

The huge uptick of interest in PV ModuleTech 2018 reflects the importance today of module supply and quality, with higher performing modules widely available on the market today, at ever-declining prices.

What’s the catch? The answer is reliability and long-term operation in the field, and how to understand where the risks are in choosing the correct module supplier and respective technologies. This has seemed to be a constantly-moving target in 2018, and has left many developers and EPCs with more problems than solutions, and a wider range of options to choose from.

This article reviews some of the key issues expected to be discussed, evaluated and debated during the PV ModuleTech 2018 event. Having started the PV ModuleTech annual event just last year in 2017, it has in just 12 months now become the must-attend conference in the PV industry to keep abreast of module availability and trends on the global stage.

Under one roof – the global supply-chain and knowledge base for PV modules

The goal of PV ModuleTech is simple. Assemble the leading global module suppliers in a neutral venue (Malaysia), and bring in the leading global test/inspection, auditing/certification and related independent engineering firms and related third-party agencies. And then have as many of these companies on the stage talking real issues for utility module supply to the industry.

Thereafter, the full networking potential of the event is supplemented by having as many of the leading global developers, EPC’s, O&M’s, and asset owners/managers at the event – learning supply options, risks, opportunities, and hopefully pencilling in chosen module suppliers/technologies for large-scale PV project deployment in 2019/2020.

Completing the line-up are the leading equipment/materials suppliers to module assembly factories and research labs and institutes active in module production, testing and market analysis.

The first PV ModuleTech event last year kick-started this dedicated annual forum. The 2018 event in Penang next week (23-24 October 2018) looks set to move things to the next level, with demand for the event outstripping our supply! That is – we have been frantically adding more rows of seats at the back of the hall to make sure everyone can be accommodated.

Now let’s have a quick look at some of the companies confirmed to be at PV ModuleTech 2018. The first listing is for global module suppliers, where you can see quickly that was basically have the ‘full-set’ when it comes to bankable GW-scale global module supply options:

The next category shows some of the test/inspection, auditing/certification and IE companies that are crucial to risk-assessment and bankability studies undertaken for company and technology selection of modules for commercial solar projects.

The other category I have pulled out in this article are the downstream stakeholders (developers, EPC’s, etc.) that represent the buy-side of PV ModuleTech, and the ones that need to understand what modules are available and which ones they should select for site deployment going forward. Some of the companies within this grouping are shown now:

Therefore, looking at the numbers above, while there are well over 200 companies attending PV ModuleTech, by far the largest-represented grouping will come from the downstream (module buying) category.

What will be the key issues debated this year at PV ModuleTech?

If last year is anything to go by, then module supply, quality and reliability will dominate the proceedings. But this year has an added twist, in that we have now moved beyond the multi (poly) domination of modules and what had been predicted for years (more mono, more glass/glass, bifacial, more variety of modules) is firmly in evidence.

In the past 12 months, there is probably not a single large-scale module buyer (from local installer to global developer/EPC) that has not been pitched about 5 or 6 different module technology types. The only thing they all have in common is declining market pricing!

Having each of the options (72-cell multi, mono, PERC, bifacial, n-type, half-cut, multi-wire interconnected, thin-film Series 6 panels) discussed and presented without bias is perhaps one of the most valuable aspects of how we set up PV ModuleTech. If anyone wants one-sided pitches, there are plenty of exhibitions on the PV calendar to choose from!

So, in this respect, I for one want to really understand the performance of each of these options as it related to high-volume bankable MW-level project supply in 2019. There are going to be many large-scale projects deployed in 2019 using each of these options, and this will extend across testing, auditing and inspecting. Therefore, while it is important to know overall market-share trends, the industry is still relying on different module types from a wide range of suppliers that have been shown to be bankable in different countries, regions and climates.

Supporting this is my next key goal: to piece together the different third-party agencies that have developed the skills, know-how and capability to qualify these module technologies. This part of the industry has had to develop new tools, new measuring techniques and advanced processes in order to capture the risk elements across the evolving module technologies and performance attributes. If I was a developer or EPC today, I would want to know exactly who to turn to when any decision on module supplier or technology was being evaluated.

Finally, the role of new module assembly production equipment and materials has also been moving at a frantic pace in the past few years. Increasingly, factory audits and BoM examinations are being done to ensure than 20-30 year IRRs are maximized, and in setting of fair but challenging performance ratios to O&M’s. Many of the leading equipment and materials suppliers will be at PV ModuleTech again this year, and each has a host of in-field data that can be traced back to module assembly stages also.

How to get involved at PV ModuleTech 2018

As one of PV-Tech’s flagship PV technology events, PV ModuleTech 2018 will feature coverage of PV ModuleTech 2018, but this is no substitute for being at the event at all. During the 23-24 October of the two-day event, we have loaded the time with networking activities, through to late evening on each of the days at the location venue (outside ideally, indoors if monsoon rain and thunder prevails!).

When I last checked earlier today, we have about 15 available seats still left in the extra capacity we added in the hall at the start of this week, so still time to be in Penang if you are quick off the mark! Visit the event website here for details on how to attend. Looking forward to the event – expect to hear more from me once the event is over with my perspectives and conclusions!

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Sunrun shifting solar panel selection to high-efficiency p-type and n-type mono

Following-on from our recent analysis of Tesla’s solar panel supply base changing rapidly, the same is true of leading public listed US residential installer, Sunrun. 

The data used to compile this analysis comes from Philip Shen, financial analyst at ROTH Capital and in its basic from, data comes from the California Distributed Generation Statistics, which publishes all IOU solar PV net energy metering (NEM) interconnection data from the three large California Investor Owned Utilities (IOUs) which include Pacific Gas & Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E).

Sunrun recently surpassed Tesla in the US residential market, primarily by default as Tesla continues to restructure its solar operations towards sustainable profitability but Sunrun should gain recognition for maintaining around the double digit deployment and revenue growth over the last several years, despite the residential market flat lining and more market share taken by smaller, regional installers.
 
Although seasonality plays a part in deployments and revenue recognition, Sunrun’s solar rooftop deployments have increased from 65MW in the second quarter of 2016 to a record 91MW in the second quarter of 2018. 

The same can said of its quarterly revenue figures, which have increased from US$122.5 million in the second quarter of 2016 to US$170.5 million in the second quarter of 2018. In more recent quarters, revenue gains have been offset by lower panel and therefore system prices but boosted by incremental increases in energy storage additions. 

The company noted in its second quarter 2018 financial results that it had added over 12,000 new customers, supporting around a 20% increase in deployments. 

Changing panel supplier base

Like Tesla, Sunrun has been selective in the number of PV panel manufacturers it has used for its residential installations since 2015. 

Previously, around 15% of installs in California used a number of panel suppliers but this was narrowed down to around three key suppliers (REC Group 74% and Hanwha Q CELLS 10%).

However, the chart below shows that Sunrun had drastically shifted away from using mainstream multicrystalline panels from REC Group, which accounted for 74% of deployments in 2015 to only 33% by the end of 2016. 

REC Group was supplanted by increased selection from Silicon Module Super League (SMSL) members Hanwha Q CELLS (33%) and Canadian Solar (29%) at the end of 2016. Both had been mainstream multicrystalline-based panel manufacturers. 

Further changes occurred in 2017. Although the share (2%) is insignificant in the timeframe, Sunrun had started using LG Electronics panels by the end of 2016, although distinguishable for being N-type mono technology, carrying the then niche label of being high-efficiency.
 
Yet the use of LG panels took a significant turn upwards in 2017, accounting for 26% of California deployments by year-end.
 
A similar rate of increase was also noted with a surge in panels from long-term supplier, REC Group, which recovered its share to 60% by the end of 2017, up from 33% at the end of 2016. 

REC Group and LG Electronics gains resulted in major share declines for SMSL members, Hanwha Q CELLS and Canadian Solar, both ending 2017 with 7% shares, down from 33% and 29%, respectively from 2016. 

From a PV panel perspective, it would seem Sunrun had further simplified its supply chain, choosing REC Group for mainstream multicrystalline deployments and LG Electronics for high-efficiency deployments. 
 
However, panel selection trends changed again in the first four months of 2018.

Again, REC Solar’s share declined significantly to an average of 38% of deployments, while both SMSL members, Hanwha Q CELLS and Canadian Solar lost virtually all custom from Sunrun. 

Supplanting REC Solar, Hanwha Q CELLS and Canadian Solar was another SMSL member LONGi Solar, a subsidiary of the largest high-efficiency monocrystalline wafer producer, LONGi Green Energy.

LONGi Solar has started as a new supplier to Sunrun at the beginning of 2018, achieving a 25% average share in the first four months of 2018. 
As the deployment chart (Jan – May 2018) shows, LONGi Solar had become Sunrun’s largest high-efficiency P-type mono-PERC (Passivated Emitter Rear Cell) panel supplier, accounting for 45% of installations. 

N-type mono PERT (Passivated Emitter Rear Totally Diffused) and N-type mono IBC (Interdigitated Back Contact) panel supplier, LG Electronics with SunPower equivalent high-efficiencies had taken a 39% share of deployments by the end of May. 

Once again, REC Group took a hit with its share declining to its lowest level at 13% at the end of May. 

According to the data so far available, Sunrun’s mainstream products are coming from LONGi Solar with its high-efficiency P-type mono PERC panels instead of being P-type multi-PERC based panels from REC Group. 

Although the charts have yet to technically align after only four months of 2018 data, clearly Sunrun has been shifting to high-efficiency p-type and n-type mono panels at the expense of suppliers of multi-PERC. 

There are some obvious reasons for the shift to high-efficiency panels, importantly for balance of system (BOS) costs. Fewer panels are required for a given rooftop PV system, which translates into less racking and wiring as well as short installation times. 

In California you could add higher overall system yield due to the cell technologies being used, coupled to better temperature coefficient factors of mono over multi. 

But not least is the benefit of lower performance degradation rates of mono over multi over a 20 to 25-year life-cycle, further boosting overall yields. 

Another not insignificant factor influencing Sunrun’s panel technology supplier base is its long-standing solar lease business model. Being able to pass-on ownership to the lease holder after 20 years would seem more advantageous when it related to high-efficiency mono panels with less degradation than P-type mono and limits reliability risks on Sunrun. 

Of course with Tesla and SunPower being close residential rivals with high-efficiency panel product offerings, keeping competitive across many business metrics is fast becoming the new norm, most recently highlighted in PV Tech’s recent preview of panels showcased at Solar Power International in Anaheim. 

It is also worth noting that the announcement by LG Electronics that it would establish a 500MW panel assembly plant in the US.

The company is planning to initially produce its ‘NeON ’ series panels in 60 and 72-cell configurations for residential, commercial and utility-scale markets as well as the ‘NeON 2’ series that includes a transparent backsheet that improves residential system aesthetics by blending the roof colour through the spacing of the cells.

This would be a differentiated high-performance module for the US residential market.

 

A special thankyou to Philip Shen, financial analyst at ROTH Capital for sharing the volume of data gathered and assimilated for PV Tech to produce the data and analysis in this article.

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