GreenTechMedia reports this morning that Chinese solar panel prices may increase by 20% this year. How does the this impact the solar industry?
The answer is that the impact is going to be felt differently across panel suppliers, project developers, and consumers.
Panel Suppliers / Project Developers:
SunPower Corp (NASDAQ:SPWR) is likely the biggest beneficiary as it competes directly with Chinese panels in the US market. Look for SPWR to increase panel and project sales and expand margins this year.
First Solar Inc (NASDAQ:FSLR): FSLR mainly competes in the large scale utility segment where Chinese panels are not as much of a threat as in residential and commercial market. However, this cost dynamic will let FSLR better compete with developers using Chinese panels and help close more project deals with better margins.
SolarCity Corp (NASDAQ:SCTY): SCTY likely gets a significant part of its panel needs under contracts and may not immediately see the upsurge in prices. But to the extent that costs increase, it is not good news for SCTY. Increased panel costs will make SCTY solutions less competitive with SPWR. Given the competitive landscape SCTY may not be able to pass the increased panel costs to end users. This will mean reduced margins or reduced retained value.
SunEdison Inc (SUNE): SUNE has developed its supply chain links outside of China and has plans to reduce its dependence on Chinese vendors. So, SUNE may see less of an impact of these price hikes. But, some margin pressure should be expected.
The companies that get hit the hardest will be project developers who forward priced 2014 projects based on past price trends. Marginal projects may be sold to larger developers like FSLR or they may be abandoned.
Consumers may see a slight uptick in systems prices. However, given the competitive dynamics between project developers and contractors, the price impact is unlikely to be more than 5%.
Disclosure: I am long FSLR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: news based article - time sensitive