The solar market is booming, but what if we told you we might be entering a paradox… one that might overwhelm your company’s growth? Well sadly, we are already there and the solar manufacturing paradox has already been affecting companies worldwide. So what is driving this paradox?
The Solar Manufacturing Paradox
The major driver of the solar manufacturing paradox is, in fact, the costs that are associated with the technology. Consider this, if a government decided to produce a solar power plant tomorrow, by the time they move to the procurement process of the bid, their cost structure might be obsolete. Solar costs are falling by the quarter, and companies build production plants based on projected revenues, but as solar cell costs plummet as do their revenues. Thus, a production facility might be losing money by the time they start producing, and that is not a feasible way to run a business. Production might be down, but what about developers?
Solar developers seem to be the obvious beneficiaries of these dropping costs, but they are facing their own challenges when it comes to the new solar market. See, solar developers rely on front end investment to fund their projects, and as they grow their pipeline, they need more financing. It is a vicious circle, but the biggest issue is not solar panel costs or the installation, it is themselves. See, developers want to grow, which means funding new projects. This would not be a bad thing if there were not dozens of other companies who are doing the same thing, which results in these companies dueling for growth. These duels have only shrunk the already thin profit margins resulting in many companies closing shop in a booming solar market.
Is this Sustainable?
In this boom and bust time, the question of sustainability often comes up. Simply put, a solar company that is seeing its overall growth diminish has some options, and it all circles around how they can differentiate themselves from the competition. It is no longer a question of who can drive the best deal, but rather who can carve their own niche in a competitive marketplace.
The first-place companies should look to differentiate themselves from their competition is through a higher efficiency effort. Look to lower land, labor and other costs, while maintaining the costs associated with utilising top-notch panels to keep your future customers happy. Another way companies can differentiate themselves is by using smart energy solutions. Homeowners are always looking for new options, and whether you can combine solar with energy storage and smart homes, or providing multiple sources of value to the grid, a company that can find the right energy solution will carve their niche with ease.
Working in the solar industry can frustrate even the best business minds, the industry is booming, but companies are struggling. There are no easy ways out, but whether you are a producer or a developer, the solution is to differentiate yourself from the competition. Whether this is through drawing other controllable costs down, or through intelligent energy solutions, your company will need to innovate and differentiate to help correct and stabilize your growth within the ever-evolving solar industry.