By Global Sources

Manufacturers of solar panels and power systems in China are headed for a challenging period characterized by slower growth and greater price competition. A consolidation of the industry is expected, leaving only about one-third of the current manufacturing pool intact by 2012.

Changes in the EU’s Feed-in Tariff (FiT) programs are among the market developments sparking concerns. In the past few months, Germany, Italy and several other members announced reductions in FiTs to large PV installations in favor of households and small community projects. Many suppliers fear these modifications will discourage investment in solar generating systems, dampening the bloc’s demand for panels and related technologies.

The EU is currently the largest overseas market for China-made PV cells and panels, accounting for nearly 80% of exports. In the six-month period ending April 2011, shipments to the area amounted to US$10.7 billion, with Italy, Germany and the Netherlands topping the list of single-country destinations.

Amid the projected slowdown in demand, worries about an impending price war are mounting. Competition for orders will become more intense as suppliers strive to utilize capacity, which many expanded in the past year.

Prices of solar panels are already down 5% from levels in 2010. In coming months, several companies expect quotes to fall another 5 to 10%, or more.

Makers will be taking advantage of lower silicon costs to offer better quotes. The material was procured at about US$50 per kilogram as of the end of October 2011, down over 40% from March rates.

Several suppliers are also looking at sacrificing margins to ensure price competitiveness in the months ahead.

To minimize the effect of this strategy on long-term viability, a number are exerting greater control over manufacturing outlay and product quality by moving upstream.

Diversifying Markets

Despite the challenges facing them, suppliers of solar panels and power systems are optimistic of sales remaining on the upswing in the months ahead. The pace of growth, however, will be far more moderate than last year’s.

The deceleration is already apparent in China’s customs statistics for the first four months of 2011, when exports of PV cells and modules rose 103% YoY to US$8.4 billion.

Although still considerable, the increase is a far cry from 2010, when the value of overseas deliveries surged 261% during the same period.

To boost their competitiveness and ensure survival in the coming years, suppliers are exploring various geographic markets and applications.

Armed with more affordable products, many are planning to explore opportunities in North America, the Asia-Pacific region, Africa and non-EU countries. A number also intend to expand their presence in the domestic market, where the government is stimulating demand via demonstration projects.

In terms of R&D, work on solar panels is geared toward enhancing efficiency, extending service life and widening the operating temperature range.

New crystalline silicon modules have conversion rates of 16% or higher. In the next five years, suppliers are looking at 16 to 20% efficiency for polycrystalline types and 19 to 21% for monocrystalline versions.

For amorphous silicon panels, makers are targeting a conversion ratio of 10%. Current efficiency ratings range from 6 to 8%.

As regards service life, most PV panels can now last 25 years. Previously, two decades was the common specification.

Meanwhile, responding to varying requirements, operating temperature range has been improved from an average of -30 to 60°C to -40 to 85°C.

A few enterprises are working on modules made from Copper Indium Gallium Selenide or CIGS, which are considered more cost-efficient than amorphous types. In addition, being thinner, these can be integrated in a wider range of devices.

At some makers, efforts are being made to enhance aesthetics. Such endeavors have yielded white- and black-framed models.

In solar power systems, efforts to diversify selections are producing miniature models that can support mobile devices such as smartphones, game consoles, MP3 players and notebooks. In this line, the panel, charge controller and other components are usually integrated in one unit. These can also be built into compact flashlights, lanterns and radios.

Several suppliers focusing on power kits for emergency situations and outdoor activities are releasing scaled-down systems, which are more portable and easier to store. A set usually includes at least one panel, a charge controller, battery and inverter.

Most models have USB ports for electronic gadgets. In addition, these can support small appliances such as TVs, radios, DVD players and fans.

For greater user convenience, some suppliers are offering sets with foldable or flexible solar arrays. A number are following manufacturers of miniature power packs and integrating the balance of systems in a single device.

Aside from upgrading selections, suppliers in China are increasing visibility in exhibitions and special events to attract more buyers. A number are also hiring foreign marketing agencies to promote models abroad.

Solar Panels

Most PV modules from China are of the crystalline silicon variety, with only about 10 companies offering thin-film types.

In terms of construction, designs with rigid frames are still the mainstream. Flexible models, however, are on the rise as part of suppliers’ efforts to target more applications.

Crystalline Silicon Panels

The category consists of mono- and multicrystalline types, which usually employ 125 x 125 or 156 x 156 mm cells with a working voltage of roughly 0.5V.

The cells are laminated onto a polymer substrate and encased in an aluminum frame with a 10 μm-thick oxide layer. This assembly is then covered by tempered glass, which is about 3.2 mm thick and has a transmission rate of more than 90% for 320 to 1,100 nm wavelengths.

Designs typically have a rated output of at least 75 W. Variants capable of generating 300 W or more are also available.

Depending on the purity of the silicon crystal, conversion efficiency ranges from 15 to 18%. Models rated 16%, however, are the most common.

Specifications for polycrystalline versions are between 14 and 17%. Best-selling designs boast an efficiency of 15%.

Prices for crystalline models range from US$1.40 to US$1.60 per watt. Quotes depend mainly on the type and specifications of the solar cell, which accounts for about 40% of unit cost.

Amorphous Silicon Panels

Most thin-film modules from China are of the a-Si kind. These are roughly half the weight of crystalline types.

At present, single-junction variants currently make up the bulk of output. Double-junction structures, however, are growing in number, in line with suppliers’ efforts to release more efficient designs.

The selection comprises transparent and opaque modules. Meant typically for wall installation, the former comes with a conversion efficiency of 6 to 7%. Opaque versions boast ratings of 7 to 8% and are meant for roof mounting.

Amorphous silicon panels go for US$1 to US$1.10 per watt.

Solar Power Systems

China offers fixed and portable solar power systems, with the former accounting for the bulk of output.

Models designed to be installed on rooftops, building walls and the ground usually come with crystalline silicon panels. The conversion efficiency of monocrystalline modules adopted range from 16 to 18%, while polycrystalline types have 14 to 17% ratings.

Output power depends on the number and dimensions of the panels, which can exceed 1,000 mm in length and 800 mm in width. Backup systems for residences can provide 500 to 2,000 W, but models with higher ratings are available. Designs have service lives ranging from 20 to 25 years.

In the portable line, approximately 70% of models are fitted with monocrystalline silicon panels, while 30% use polycrystalline versions. Power specifications reach 200 W.

PV modules for sets last between 20 and 25 years. Panels for designs with built-in batteries and inverters have service lives of five to 20 years.

For batteries, the selection includes lead-acid, NiMH and Li-ion variants.

The first type is common in kits, while the last two formulations are popular in integrated packs.

Power systems for mobile devices go for US$5 to US$20. Portable sets for larger appliances start at US$30 but can exceed US$200, depending on the capability of the balance of systems.

Between US$30 and US$200, the selection includes sets with polycrystalline panels having efficiency ratings of 14 to 16%. The service life of the modules does not exceed 20 years.

More expensive kits come with monocrystalline panels. The modules are 15 to 17% efficient and last 25 years.

Industry Demographics

Mainland China hosts about 400 manufacturers of PV panels. Small and midsize operations account for the majority of the supplier base, but the bulk of output comes from about 10 large companies.

Suppliers with annual capacity below 1 MW usually source cells from local providers, Taiwan or farther overseas. Many have been in the industry for less than two years.

In contrast, large companies are vertically integrated businesses that produce at least the wafers and cells in-house. This group includes publicly listed enterprises, foreign-invested entities and joint ventures.

Jiangsu and Zhejiang provinces are the key manufacturing centers for solar cells and panels. Both are also leading exporters of the categories, together accounting for 30% of China’s overseas sales between November 2010 and April 2011.

Shanghai, meanwhile, is a notable trading center. Suppliers in Jiangsu and Zhejiang often ship from the municipality, contributing to the area’s ranking as a top exporter of the categories.

In the six-month period ending April 2011, deliveries from the city amounted to US$7.3 billion, accounting for 55% of the national aggregate.

For solar power systems, there are more than 500 suppliers in China, most of them also supplying PV panels.

About 300 enterprises offer ground-mounted or building-integrated products, while portable types are available from at least 200 companies.

In the first sector, fewer than 50 suppliers are capable of manufacturing cells in-house. Most of these are large companies with annual capacity exceeding 50 MW. Their revenue reaches US$20 million each year.

Small and midsize operations, meanwhile, account for the bulk of those offering portable types. These companies generate sales amounting to less than US$15 million annually.

This is an excerpt from China Sourcing Report: Solar Panels & Power Systems published by Global Sources, a leading business-to-business media company, providing essential sourcing information to volume buyers through e-magazines, trade shows and industry research. (http://www.chinasourcingreports.com/csr/solar-panels-power-systems?dmsource=DM102APD)