Although the major global manufacturers of solar modules can still expect to continue to see incremental cost reductions and process improvements through changes in their manufacturing techniques, many firms have also begun to more heavily weigh the effects of manufacturing facilities' locations as they ponder their plans.
In particular, whether a manufacturer is considering opening additional plants or shifting existing operations to a new locale, in-market manufacturing (siting the facility within the end product's chief demand hub) is now an undeniably popular choice.
Module makers that have recently set up plants within their important markets are quick to point out the advantages of going local. First, in-market manufacturing, especially in the burgeoning U.S. solar market, encourages a public-private compact that benefits both the host city and the manufacturing firm, says Mac Moore, executive vice president of sales and marketing at SCHOTT Solar Inc.
‘The public sector is investing tremendous amounts of money and incentives to encourage solar production and deployment,’ he explains. ‘In addition, they are often providing a significant push on the R&D side. The expectation with that kind of contract and making those investments is that there will be a return of manufacturing investment and job creation.’
SCHOTT expects to benefit from this symbiosis at its new Albuquerque, N.M., facility, which will initially produce 70 MW of crystalline modules annually, along with concentrating solar power receiver tube equipment, when it comes online in April.
In addition, maintaining quality control promises to be an easier endeavor at this local, vertically integrated plant than if the firm were ‘outsourcing elements of that production to different lands and trying to keep track of quality in different parts of the world,’ notes Moore.
Steve Chadima, vice president of external affairs at Suntech America, agrees that the lure of in-market manufacturing will continue to strongly influence module-makers' location decisions, but he cites rising fuel prices and shipping costs, rather than quality-control issues, as the single most meaningful impetus.
‘We have a good handle on quality control in our operations in China, and I don't think there would be any difference if we moved in market,’ he states.
As overall module production costs continue to drop, however, shipping charges will constitute an increasingly large percentage of overall costs, driving manufacturers to minimize their modules' travel distances.
Suntech, which is currently exploring various locations in the U.S. for a future plant site, decided to go local chiefly in order to control costs and better implement a just-in-time delivery strategy through customer proximity, according to Chadima.
Shipping-related cost savings of in-market manufacturing extend to the solar equipment distributor side as well, notes Elmar Niewerth, CEO of ThinkSolar.
‘Right now, one of our major price points is shipping,’ he says. ‘It doesn't sound like a big number, but shipping is usually between two percent and three percent of total costs. When you're not [operating at] a high margin anyway, that cost is a big factor.’
Furthermore, for manufacturers and distributors alike, minimizing the transit involved between the point at which a module rolls off the manufacturing line and the point at which it reaches its end customer can reduce the risk of product breakage or loss incurred during shipping.
Shifting to a greater degree of in-market module production within the industry could also help mitigate gray-energy concerns.
Gray energy, explains Niewerth, refers to the time period for which a given installed solar module must be steadily producing power in order to recoup the energy that was used to manufacture and ship it. The average figure for a crystalline module currently ranges from about two to three years, which Niewerth calls a significant wait. ‘We should really try to lower this number,’ he says.
Shipping and other transit-related issues, however, must always be considered alongside the sizeable labor-related costs associated with solar module manufacturing, even in the age of automation.
Chadima says Suntech has positioned itself at the low end of the cost scale by locating its manufacturing in China. ‘We do a balance between automation and labor, simply because of the lower labor costs in China,’ he reports.
Countries with traditionally low costs of labor, such as China, will surely continue to attract manufacturers that intend to ship the bulk of their goods elsewhere. Thomas Maslin, solar analyst at Emerging Energy Research, observes that ‘more and more of the major manufacturers’ have indeed shown interest of late in establishing Asia-based manufacturing operations.
‘There are obviously benefits and drawbacks to both [approaches],’ he remarks. ‘If you're manufacturing in a low-cost environment, then you're going to have to transport the product further.’
Therefore, because in-market manufacturing may not be the most economically viable option for all companies, Maslin recommends examining the choices on a case-by-case basis, identifying the major market and then calculating the projected cost advantage that would be achieved by setting up the major production operation away from the demand center.