As a customer, its important to understand the process by which solar panels get from manufacturers to end users to ensure you’re getting a good deal. In general, most solar panel manufacturers are big companies who produce in very large quantities. This means they generally prefer to sell to only a few large distributors in high volumes rather than have lots of smaller customers. This makes their sales process easier since managing many customers is very small time-consuming and costly. The large distributors then sell to either smaller distributors or to installation companies. The distributors aim to provide all the necessary components for installers, allowing them to buy in small quantities and providing technical support.
Examples of well known solar distributors in the UK are Dulas, Segen, Solar Century and Waxman. Because the UK solar industry is so small and so new however, these UK wholesalers are very small compared to their European counterparts in Germany, Spain and France. One of the biggest solar distributors in Germany, IBC Solar, will sell 500MW of solar equipment this year. This compares to a total expected UK market size this year of 60MW! So IBC Solar sells nearly 10 times the total UK market, and is just one company!
Unsurprisingly, since the UK is now seen as an interesting emerging market in the solar industry, many of these large European distributors are moving over here. I spoke to one last week that is investing 200 thousand pounds this year to set up a warehouse and employ a 5 person team to address the UK market. This is good news for UK installers because they will now have access to pricing that was only previously available to their counterparts in mainland Europe. The UK wholesalers on the other hand may struggle to compete with such large competitors.
Competition is coming from all sides however, and there are now solar panel manufacturers who are moving downstream and becoming more like wholesalers. It is now possible for smaller installers to buy directly from a few of the European manufacturers, thereby bypassing the wholesalers and their margins. To withstand this competition the big European wholesalers are trying to gain advantage by developing an array of advanced support services for wholesalers to win them over. This includes things like credit lines, training and design software.
It is unclear whether these features will suffice since there is also competition from the big in-house installers. In the US there is a very large installation firm called SolarCity which is going head to head with the wholesalers for marketshare, but does all installations using its own in-house team. This has advantages in-terms of pricing and quality of service – there are no middlemen and they can guarantee the end to end service – the drawback is that growth is capital intensive and slow.
The market is evolving so rapidly it remains to be seen which business model will win out in the long run, what is clear is that there will be a lot of movement in the market – all of which is good for customers since it means prices will fall and customer service will improve. So when choosing a solar panel system, try to find out where the installer buys their solar panels from, not just who the manufacturer is. This will help you tell if you are getting a good deal or not.