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Wake Up! $1 per Watt Solar is Just an Illusion

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From article of The Australian: Is it possible to get a solar power system that costs $1 per watt? Some people say yes, but many believe that systems priced at these levels must be built with smoke and mirrors.

If you shop around for solar power systems either physically or over the internet, you’ll be surprised at the number of offers from a variety of companies claiming to have $1 per watt or less. The simple truth is, the product and the company itself are unlikely to survive in the long-term, which makes it a bad investment.

According to Nigel Morris of http://www.theaustralian.com.au/, low-cost solar systems may be a good thing for the growth of the industry and the “tipping point” talks that have been going on for decades may be realised. However, in reality, pricing systems at this level have only 2 possible outcomes – the company you bought from is going bankrupt or you are simply paying for low quality products and services. Morris also said that up until late last year, the Clean Energy regulator used to publish data on OOPE or Out of Pocket Expense – the net price after STC and full installation. It’s common that the CER’s OOPE had hovered around $2 per watt, which is a bit higher than the average price seen in the market. It also highlights the difference between what is advertised versus what people actually end up buying. Since the last publication, foreign exchange rates have gone up and the PV prices have increased.

The costs are up and the sales have gone down, so why are there suddenly so many companies offering such prices? There are 3 possible reasons:

Magic Formula

Companies selling under $1 per watt may have a magic formula that most of the market has not figured out yet. Or possibly they were able to source out very cheap parts by buying clearance stock or trade STCs at a higher price with low overheads. Maybe their customer acquisition, administration and compliance costs are well refined. It’s possible, but very unlikely.

Happy to Run at a Loss

It’s possible that they are happy to run at a loss to get volume. Businesses do that from time to time. It’s a legitimate business strategy which can be subsidised by other revenues and margins through diversity. Low prices attract customers, but the issue with this method is that low prices give customers a certain expectation. If this continues, it will drag the whole solar market down into a price war.

Many Solar Businesses Don’t Understand Their Real Cost

Some solar companies don’t really understand their real cost and think they can get a small profit at very low prices, because they don’t understand what it takes to really run a business. One of the most common example of this is in commercial systems where the prices get lower and lower and the false expectation that scale equals lower cost.

Things may not be easy right now, but the solar market has to innovate, increase revenue, add value and increase the dollar margins.

Click here to read the full story on The Australian

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