NPD Solarbuzz: leading module suppliers continue to move downstream

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In its latest Module Tracker Quarterly, NPD Solarbuzz has noted the continuing trend of project businesses becoming an important part of module supplier operations. While First Solar, SunPower and Canadian Solar were leaders in this, it is now near ubiquitous amongst the top producers.

In another trend revealed in the NPD Solarbuzz data, the top 20 producers are also extending their dominance of the market. The group of 20 leading companies supplied two thirds of global demand in Q3 2014, totaling 8 GW of modules.

“Having a strong presence in downstream project development also allows companies to benefit from favorable solar PV incentives available in domestic and international markets,” said Solarbuzz analyst Ray Lian. “Similar to dedicated project developers, this allows the option to hold projects, spin-off the assets into a yield company, or simply sell the projects upon completion to institutional investors.”

Downstream business unit are also being spun off from the module operations, Solarbuzz observes. SunEdison’s use of yieldcos is the most prominent manifestation of this trend, however Chines producers Jinko Solar and ET Solar are following suit, with Solarbuzz reporting that the companies are preparing downstream business units for IPO. Japanese companies Sharp Solar and Panasonic, on the back of the sustained boom in their domestic market are also becoming “energy solution providers,” according to Solarbuzz.

“Approximately 1.8 GW of modules are expected to be shipped this year for internal projects activities by just four companies: Trina Solar, Yingli Green Energy, Jinko Solar, and JA Solar. While this will result in delays in recognizing revenues for this portion of module shipments, expansion into downstream projects business is expected to offer added value and incremental revenue streams in the coming years.”

First Solar was arguably the leader in the trend towards project developing becoming an integral part of module producer operations. The thin film producer moved strongly into the business after Mike Ahearn re-assumed the leadership of the firm and restructured its manufacturing operations in 2012. The move was also a major part of First Solar moving away from supplying FIT-driven markets towards those that it describes as “sustainable”, or where solar can compete with other electricity sources.

First Solar’s latest move is into the O&M business, which it has identified as a growth market. Inverter supplier SMA is also moving into the O&M business, potentially drawing on the vast stores of data it has collected across the many GWs of installations it has supplied globally. IHS analyst Ash Sharma told pv magazine that such a move into downstream can deliver steady and stable revenues to global players.

"More and more we are going to see manufacturers, as we start to see growth slow in hardware sales and margins beginning to reduce even further it is only natural to look outside of that for opportunities and O&M is a great space for some of those players to go into," said Sharma. "There are very stable revenues, very predictable business, so it is very different to shipping modules."

Successful development of downstream operations including a project business does not come without its perils. NPD Solarbuzz notes: “revenue recognition from project activity using in-house modules provides an additional level of accounting conditions that need to be satisfied.”