Last month, Intersolar North America was buzzing with word that tier 1 module suppliers were completely booked through the end of the year for 300 Watt plus modules. Is there any truth to this?
There could be. Big solar deals abroad are eating panel supplies of tier 1 suppliers. Domestically, U.S. solar developers are rushing to complete deals by the end of 2016. But more likely, this panel shortage is similar to the same “shortage” we have seen – and written about – the second half of every year. The cyclical nature of solar financing (many investors are not aware of their yearly tax appetite until Q2) makes solar development, and thus equipment procurement, cyclical as well. As developers execute EPC agreements and rush to complete projects by investors’ end-of-year deadlines, this domino effect puts module manufacturers in the driver’s seat each calendar year.
That doesn’t make the shortage any less real for those who have yet to purchase modules, or for EPCs without a master supplier contract or close-knit manufacturer relationships. If panels become unavailable, swapping one tier 1 for another tier 1 is common. We have seen this happen with a couple deals so far this summer, and investors accept this swap without issue.
Still, deciding to make a switch should be done early, after consultation with the project’s investor. Purchase orders should be locked in as soon as possible to ensure you stick to your construction schedule and avoid damages. EPCs up against a quick timeline should assess the risk and purchase early, assuming their balance sheet can handle the purchase before milestone payments.
While exaggerated panic surrounds a module shortage each year, perhaps more pressing is a possible shortage of other electrical equipment. Medium voltage equipment or specialized interconnection facilities are crafted by a more meticulous process than modules which have a standardized manufacturing process that can be easily ramped up.
Solar development rewards those who are proactive rather than reactive. Plan ahead, and avoid any possible equipment shortages or future price gauges.
This is an excerpt from our August edition of SOURCE: the Sol Project Finance Journal, a monthly electronic newsletter analyzing the solar industry’s latest trends based on our unique position in the solar financing space. To view the full Journal or subscribe, please e-mail firstname.lastname@example.org.
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