Risks to quality as solar gets too cheap

There are strong signs that the next era for the solar industry has dawned. And while the expansion of rooftop solar to previously unimagined levels is worthy of celebration, there are new risks in this new, low-cost solar world.

It’s no surprise that module prices are at record lows. David Dixon, a senior analyst with Rystad Energy, said that the low prices represent “a huge win in terms of getting the cost of solar down.”

Dixon reports module prices in Australia as low as USD$0.12-13/W ($0.18-0.195/W), fully delivered. While these are likely for very large PV projects, or for companies that have considerable purchasing power, it is a remarkable price point – “half of what they were 12-18 months ago,” said Dixon.

However, as has been experienced in periods of rapid module price declines in the past, the dynamic places stress and risk across the supplier value chains. The good news, however, is that there is solid evidence that much of the 40% or so price decline in 2023 was achieved through genuine cost reductions – a large component being savings on polysilicon costs. 

Cost reduction limits

This year, however, things are different. In February, manufacturing analysts Exawatt hosted a webinar in partnership with quality assurance firm PV Evolution Labs (PVEL). The webinar carried a warning that at present there are limited opportunities for further manufacturing cost declines, at least in the near term, despite prices continuing to fall.

Exawatt analyses the cost of solar manufacturing, drawing on information from a range of leading producers and their suppliers. By taking a look at the “cost stack” at the start of 2024, the analysts conclude that there isn’t much fat remaining to be cut.

“Most of the cost of the module is in material. For a vertically integrated manufacturer in China, materials, and consumables account 80% of the cost of production,” said Alex Barrows, the head of PV at Exawatt. He noted that while there may be some room for small declines in polysilicon prices, there is very little room elsewhere.

“In some other areas there are headwinds for cost reduction. There have been price increases for aluminium, potentially pushing up frame prices, deflation of the US dollar from its very strong point at the moment, and we’ve seen some volatility in shipping prices.”

As a result of these challenges in achieving ongoing cost reductions, there is increased risk for buyers, said Barrows.

“Given the headwinds to cost reductions over the next few years, prices are unlikely to be met by cost reductions, except at the cost to quality,” Barrows said.

“If you’re a module buyer, one of the key things to look out for is that module suppliers will be at risk of exiting the market this year. And that they are under a lot of pressure to cut costs by reducing the quality of materials they are using – backsheets, encapsulants, junction boxes. Module makers may select low cost and potentially lower quality options.”

Mitigating risk

While this development paints a bit of a worrying picture, there are ways in which purchases can minimize module-quality risk. And here, said Tristan Erion-Lorico, the VP of sales and marketing at PVEL, size really does matter.

“BayWa r.e. can rely on their purchasing power – they have more purchasing power than the ‘two Chucks in a truck’, who are buying a container of modules once per quarter,” said Erion-Lorico. He said that given this purchasing power, companies of that size can require pre-shipment testing, access to production sites, and even third party sample testing of modules.

BayWa r.e. Solar Trade achieved a massive of volume of 10 GW of annual sales for the first time in 2023. The milestone was announced on March 8, and it includes modules, inverters, and batteries – alongside other devices like EV chargers.

The result of this volume is considerable purchasing power and global quality assurance capabilities – which is further enhanced by Baywa r.e.’s PV project development business. As a developer of solar farms in many markets around the world, Baywa can demand the best product from module suppliers and has the global network in place to ensure that quality is delivered.

Erion-Lorico summarizes the “high level” quality assurance measures as being: factory audits, extended reliability testing, and production oversight. The inclusion of pre-shipment inspection and some batch testing further enhances the regime.

“With some sort of global purchasing power, it can be used to do factory audits and ideally production oversight to see the modules they buy being made. Also, verifying that the modules that went for third party testing have the same BOM as the modules being produced that they are going to sell is important.”

The PVEL technicians have picked up on an increase in issues in its testing, but a full analysis of the data has not yet been completed.

“We’re starting to see a trend, but we haven’t crunched the numbers yet,” said Erion-Lorico, “Over the next month or two, in advance of the 2024 [PVEL PV Module Reliability] Scorecard, we’ll complete that analysis, but we are seeing more outliers than we have seen before.”

Switch to n-type

The wide range of cost cutting measures, as mentioned, may have an impact on quality, the PVEL expert explained. And they can go beyond cheaper encapsulants or glass, and include thinner frames, lower quality bypass diodes, or less robust sealants and junction box potting agents.

But there is another trend in full swing in 2024 that could have an impact on quality.

With module makers fighting tooth-and-nail to remain competitive, higher efficiency products can help. And with monocrystalline PERC technology having hit its limit as to what additional conversion efficiency it can deliver, the only way is n-type.

N-type, or negatively doped, PV cells have rapidly moved into the mainstream. They are used in either TOPCon or heterojunction (HJT) cells and they can reliably deliver efficiencies above 22%-23%.

While these technologies themselves aren’t entirely new, many manufacturers do not have long track records with the technology. This means that they have a lot to learn in terms of optimizing production processes and yields and ensuring that their n-type modules are both high performance and durable.

“The rushing from R&D into full production mode, and multi-GW scale production of TOPCon for example, can lead to failures in the field. The risk is that manufacturers might not have really proven out their TOPCon cell making abilities,” said PVEL’s Erion-Lorico. The same, he added, can also be true of HJT.

There is no doubt that low prices will open new opportunities. Last month, Green Energy Markets (GEM) published some modelling that showed that “rooftop solar will grow to dominate the electricity market” in Australia.

In presenting the analysis, GEM’s Tristan Edis said that between 66 GW and 98 GW of rooftop PV should be expected to be added to the National Electricity Market over the next 30 years.

“These are staggering levels of capacity,” wrote Edis – and he’s right! But they are predicated on the availability of affordable, efficient, and long-lived solar modules.

The challenge is, for buyers like Baywa r.e., ensuring that quality is maintained even when the race to high performance and low cost is at its most intense.