Recently Bloomberg.com posted an article titled, “Solar Panels Now So Cheap Manufacturers Probably Selling at Loss”. It referenced a quote from Jeffrey Osborne, an analyst at Cowen & Co. Suppliers who said, “Certainly it would be a challenge for anyone to make money at that price.” That statement made us ask ourselves, Does selling solar panels at a loss spell the end for the industry? Is this an indication that the solar panel manufacturing industry is dead or at least dying? Is there a silver lining in this seemingly dark cloud?
Depends On Your Point of View
There are a number of factors that can influence your answer. If you already think solar is a lost cause or at the very least a pipe-dream, then this is another nail in the coffin. The reason why manufacturers are selling them at a loss is because no one wants them. There is no demand. And with the uncertainties of the Environment Protection Agency (EPA) with the new administration, solar has breathed its last breath.
Here at SimpleSolar.info, we’re not as pessimistic. We do recognize concrete facts such as the basic economic concept that if you don’t make a profit you go out of business. But everything is not so black and white.
The U.S. Isn’t the Only Country Interested In Solar
If you look at the comments on SimpleSolar.info’s Facebook page, you’ll see that there is a HUGE interest in solar energy in India and Pakistan. Individuals and companies alike from these countries have contacted us in search of answers and opportunities for solar.
Germany also has a vested interest in solar. An article in Bloomberg reports that Germany “just got almost all of its power from renewable energy”. With countries like Germany setting the pace for others to follow, they prove that solar is not another pie-in-the-sky fantasy.
Another solar powerhouse is China. The website Public Finance International reports that “China is the largest investor in renewable energy”. The article states that China invested $103 billion or 36% of the world’s total which is almost 3x what the United States spent.
The message is clear: when viewed with the wide-angle lens of the world, solar is not a passing fad. Even if manufacturers are selling at a loss in the U.S., there are other markets that can compensate for the drop.
Selling At A Loss Could Lead to More Sales
It’s somewhat humorous to think that some see the jaws of death closing on the solar industry because manufacturers might be selling at a loss. It actually might be a good thing.
First, people like discounts. Every year during the holiday season, almost everything goes on sale. From Honda to Walmart, products that consumers considered buying but didn’t earlier in the year now become appealing. The same can happen with razor-thin solar panel margins. But there’s a more compelling reason to be optimistic. And that optimism comes from an unlikely industry.
Companies That Sold At A Loss That Are Powerhouses Today
This wouldn’t be the first time or first industry to see profits by selling at a loss. We’ll examine three companies that make this case.
Regarding Google making profits from an operating system it was giving away for free, then Microsoft CEO Steve Ballmer famously (in the tech world) said, “If I went to my shareholder meeting, my analyst meeting and said, hey, we’ve just launched a new product that has no revenue model!…I’m not sure that my investors would take that very well. But that’s kind of what Google’s telling their investors about Android.”
Fast-forward seven years later to 2017 and this same person said, in order for Windows Phones to survive, they need to “run Android apps”.
Clearly, the gloom and doom forecasted by a long-time industry insider was wrong in thinking that razor-thin (or in Android’s case no) margins spelled disaster.
When Dell computers began making a foothold in data centers, the king of the hill was a company called Compaq. Compaq Computers was “the” manufacturer of servers for anyone wanting their company to be profitable. Compaq was time-tested as well as being a staple in the most demanding data centers. If you needed servers, the only company to consider was Compaq.
Dell started out selling low-cost personal computers custom made to order. IBM was the target. Once they overcame that hurdle, they set their sights on Compaq and the data center. Dell didn’t have the name recognition Compaq enjoyed. They also didn’t have the polish and ease of management Compaq software employed.
So how did Dell go from the new kid on the block to the de facto server brand in data centers?
They slit their own throats. For our readers whose primary language is not English, the expression “slit their own throats” when it comes to business means they sold their product at thin margins and even for a loss. Dell knew they couldn’t compete on features. So they did it on price.
Solar manufacturers are in a similar position. Selling panels at cost or even a loss might be just what the public needs to take the leap. Just like Dell, it might be just the ingredient the solar industry is looking for to kick into high gear.
We saved the best for last.
When Amazon.com came on the scene, they only sold books. Brick-n-mortar bookstores had a lock on the publishing industry. Amazon favored growth over profit and it showed on its balance sheet. None of the established players in the industry thought Amazon would amount to anything because they weren’t making money.
Fast-forward 20+ years. Amazon is THE largest retailer in the WORLD! Amazon turns profits from sales of books to data center services. And those brick-n-mortar businesses that prophesied Amazon’s failure? They no longer exist.
Amazon’s example demonstrates that just because a business is running at thin margins doesn’t mean it’s doomed to failure. It’s true, at some point, it needs to turn a profit. But as our examples demonstrate, a shocking headline like the one Bloomberg wrote is far from being the harbinger of doom.
If solar panel manufacturers are selling their products at a loss, it doesn’t mean the end of the industry. There is a huge market when the world scene is factored in. There is also a great opportunity if this report is marketed effectively. Will there be some casualties? Certainly. There were casualties when the Dot.com bubble burst. But there were also great opportunities. E-commerce didn’t die as a result; it exploded.
If this is marketed (some might use the term “spun”) intelligently, we could be on the verge of the solar revolution predicted so long ago.