From pv magazine, December edition
The impressive cost reductions achieved at all levels of the PV value chain are undoubtedly a good thing, as the industry becomes ever more competitive and able to stand without relying heavily on government mandated support.
But the expectation of low, low prices may lead some on the selling side to sacrifice quality for the sake of a more attractive price point. And those on the buying side could be attracted by low costs, or simply lacking in knowledge of the issues surrounding module quality. This means they may proceed without asking the right questions or carrying out proper due diligence into what they are buying.
“In times of oversupply, you get compression at all stages in the supply chain,” explains Simon Price, CEO and Head of Research at market analyst Exawatt. “Gross margins of vendors are going down. In certain areas, if margins are compressed to cash cost, the only way is to squeeze costs, e.g. by sourcing cheaper materials.” And it is this sourcing of materials that can cause a problem further down the line. Even without an urgent need to reduce costs, manufacturers require some flexibility in their supply chain, to be able to take advantage of supply/demand dynamics and be sure to have sufficient material to meet all of their orders.
This means that in many cases, a module manufacturer will have several different components and combinations thereof, which are sold as the same model. “When you buy a module, you’re really buying a combination of materials,” explains Ian Gregory, Director of Marketing and Product Management at PI Berlin. “A single module type could be made with multiple combinations of different materials. One module type isn’t limited to one set of materials, and all could behave differently over 25 years or more in the field.”
Bill of materials
This is where the bill of materials (BOM) comes in. The BOM plays a vital role when it comes to accountability further down the line. But for some module buyers, particularly those with little experience in PV or in markets with severe pressure on costs, ensuring that the contract includes terms that specify the BOM for modules provided, and provisions for checking this, may not be top of the to do list.
“I think there is a general problem in the industry with awareness of how big a role the bill of materials of a module plays,” says Jan Napiorkowski, Global Head of Clean Energy at insurance provider Ariel Re, a Lloyds of London syndicate. “Often, the buyers of modules do not even have the bill of materials, which means they just buy a module type, and rely on what suppliers have in stock.”
But this can create problems further down the line. Insurance providers have confirmed to pv magazine that they provide cover for a specific BOM, and that policies will be invalid where modules in question differ from this.
Given the quickly changing, often unstable cost dynamics of PV manufacturing, and the common use of OEM contracts, where companies produce modules with an entirely different manufacturer’s label on them, it seems that even without the added burden of oversupply pushing manufacturers to cut costs, this little known problem could be a big one for the global PV industry.
“This happens more often than you think,” says Sebastian Petretschek, Head of Independent Engineering Asia at TÜV Rheinland, which provides testing and certification services for solar modules. “Manufacturers present us with a bill of materials. If it’s different from what we tested, then it’s not certified.”
This doesn’t necessarily imply any deception on the part of module manufacturers, and in some cases they also may not be aware of the potential damage that could be caused further down the line. TÜV Rheinland advises manufacturers to inform them, and their buyers, of any changes to a bill of materials. “From time to time we encounter modules that do not comply with the certification, and are not covered,” continues Petretschek. “Usually though we are informed, we check according to the retesting guideline IEC TS 62915 and can apply the test again, or simply make a note for components where a full retest is not required.”
Retesting requirements present another challenge to the whole industry, as it can take six months or even longer to retest and certify a different set of materials. This is also done on a self-reporting basis, so without careful checking, it’s possible a buyer would not even find out a component had been changed until it causes a problem after installation. PI Berlin’s Ian Gregory notes that the most reliable manufacturers are often those with the fewest BOMs on offer. “Diversity is needed,” he explains, “but if you’re trying to understand the reliability of 100 BOMs for 25 years, you’ll never understand it as well as you could.”
Industry players agree that most of the action needed to mitigate this issue must come from the buyer’s side. Gregory pronounces, “The fundamental question is: Do buyers in the industry know what they are buying in the first place, and what quality or risks it represents?”
Particularly vulnerable are inexperienced project developers, those in newer markets which have not had the chance to learn from older projects, and those operating in particularly price sensitive markets, who may jump at low prices without asking the right questions before signing a contract. “The bigger players know of the issue,” explains René Moerman, CEO at solar quality control company Xilia. “They will verify certificates, and be sure that they are buying certified modules, or possibly proceed in the knowledge that they are buying without.”
The key to avoiding BOM issues further down the line then, is good planning from the start, and ensuring contract clarity at all stages. For buyers, this means taking an active interest in knowing exactly what the set of materials being purchased consists of, where it is manufactured, and how it should perform. Ultimately, specific BOM requirements should be clearly laid out in the contract. Many smart investors will require a ‘chain of custody,’ tracking materials from testing through to production, and provisions for independent third-party verification.
Gaining a deep understanding of the materials in a module and the processes they go through may be time consuming for buyers who start off a long way from the module manufacturing industry, but it is necessary for those wanting to make investments of 25 years or more in PV projects. “If you don’t do a proper assessment, you don’t really know what you’re buying,” concludes Ian Gregory. “You have to be involved as a buyer, whether you like it or not. Even basic due diligence – ‘please show me the materials you plan to use’ – can make a difference.”
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