COMMENT | Negotiating down prices and extracting tighter warranties will jeopardise developers’ solar projects in the long term, writes Garry Willett of Jinko Solar.

Australian and international developers have a keen eye for projects in our market and the ARENA funding round has spurred much activity here. I have been pleasantly surprised at the number of projects which are looking to be built post ARENA. If I recall, Powerlink in Queensland had 42 applications under review. One has to feel sorry for them as they try to work through their capacity to manage their supply infrastructure.

This is a good indication return on investment is at a point where projects can stand on their own two feet. From a supply point of view we are looking forward to a busy time during the next few years.

Shakedown

Right now, I would suggest there is some instability coming from top manufacturers. We have seen some fallout from the SunEdison collapse with at least two major manufacturers being impacted. Court cases from semiconductor manufacturer Hemlock have reduced two vibrant manufacturers to shadows of their former selves. Hemlock has also instigated proceedings against two top tier manufacturers. Even US manufacturers are affected, with one closing down its overseas production facility and another going back to the drawing board to develop new products with an intention to re-enter the market in 2018. Such is the state of play at present.

I would think as a result right now financial due diligence would be a high priority for developers and engineering, procurement and construction.

There is also some destabilisation around module supply. Firstly, we read of a glut in the market and prices in freefall. Well, from our perspective this is not the case and this constant press around dropping prices has in itself caused bidding rates to tumble. Prices are, I would suggest, at levels which are not sustainable. Our factories are at full capacity and will be so for the forthcoming period while we and others fill domestic demand in China.

Short cell

There is also good demand from other markets and we do not expect any easing until maybe the last quarter of 2017. Any module supplier worth their weight will be in the same position as Jinko. As the world’s largest supplier, this year we are a good barometer of module demand.

The other problem we all face is availability of mono PERC cells. We estimate the demand has outstripped supply. This will cause huge shortages, requiring many project developers to rethink their module selection or delay the build date until supplies rebalance. Not all suppliers are as honest as we are at Jinko. I have a sense some are so keen to win the business that they are either lowering costs to ridiculous levels or offering product that cannot be supplied. The tactic is to get the order and then negotiate up from there.

Quality control

Some will look to lessen costs by changing the build of materials. At Jinko we spend more in areas which result in a higher quality product. In part and as an example we have higher cell thickness than many competitors, we use quality back sheets and our aluminium frames are a higher quality than many others offer. Much of this is not apparent to the naked eye but it is there nevertheless. Quality comes at a cost. Not all oils are oils, as the old saying goes.

Personally, I prefer to be upfront so there are no surprises for anyone. The reality is that right now material costs are increasing, not declining. This is a reality and the press needs to take this point to heart. Developers also need to consider their purchase contributes to the financial viability of their supplier, who needs to be there to support the 25-year or 30-year performance warranty.

Negotiating down prices and trying to extract longer or tighter warranty conditions will result in a defocus in this market by manufacturers. Everyone is looking at cost reductions. The collective “we” just need to be mindful not to jeopardise quality in the process and in doing so expect manufacturers to carry all the responsibility.

 

Garry Willett is senior project manager Australia for Jinko Solar. His interest in solar began at community level and in 2009 he began working for a Queensland installation business, moving to its community engagement program. At Jinko, he started on wholesale engagement and is busy working with solar farm developers.