3. Retail Pricing Movements

3.1 Overview of pricing movements

The early months of 2002 maintained the firm price conditions that existed during most of 2001. As we indicated earlier this year in our Marketbuzz 2002 report, the overhang of demand from (grid-tied) subsidy programs in California and Germany was likely to support maintenance of the firm trend during the first half of this year. However, our analysis suggested that we saw little evidence to support a repeat of the price rises during the early part of 2001.

After nearly eight months of tight pricing in the United States, the current survey in May 2002 saw evidence of some price weakening at the retail level for the first time for 18 months. However, it was mainly limited to what could now be considered the mid-power range modules and below, namely in the 100 Watt modules and below category.

Our market intelligence suggests that a small proportion of the cell manufacturers have started to reverse the price rises that were seen in 2002. While short-term future price prediction remains a risky occupation, our judgment is that some of the recent price moves (downwards) at the manufacturer level have yet to be fully reflected at the dealer level.

However, it should also be noted that we have yet to see evidence of any price weakening (at the retail level) in Europe. The 75-120 Watt range used to be the power band that dominated the market for solar modules (in Megawatt terms) in the late 1990s. However, as larger (dimension) modules have been introduced and manufacturers are now marketing 150-170 Watt panels, it is this power segment that is now starting to capture a larger share of the overall market, particularly in grid-connected applications.

Over the short term, this move to larger modules has enabled companies to improve margin performance by marketing a module with the lowest unit costs (per Watt) while at the same time achieving high $/Watt prices when benchmarked against 70-120 Watt modules. The higher price is achievable while manufacturers are building capacity for the larger modules during a period where customer demand exceeds supply in this power segment.

After many years of unfulfilled high profile promises about thin film introduction, thin films are coming into the market this year but are doing so "under the radar screen". Manufacturers are taking the opportunity to test these products with a very limited number of "friendly" customers. Hence, they have yet to make a real impact through the "conventional" distributor/dealer chain. In addition to modules, we also track retail prices for PV systems in the United States. The sample size is considerably smaller than that that of PV components. Indeed, it is not large enough to be considered truly statistically significant.

However, we should report though that most prices have remained unchanged over the quarter, but in the present (May) survey, it should be noted that where there were moves, they were down. It is relevant that there has been a recent weakening in the dollar against most other major currencies. In a highly global industry, the location (or currency denomination) of a company's raw materials (wafers and cell production) relative to the markets in which it sells will differentially affect their individual financial performance. This will also clearly impact the appetite for price moves among different manufacturers. While the key Japanese market sees very little imports from other cell and module manufacturing locations, this is not the case with Europe and the United States.

The recently announced entry of Sharp in to the United States, together with active positioning by Mitsubishi, Sanyo (in the United States) and Kaneka (in Europe), is sure to create more vibrant competitive environment.

3.2 Average Retail Prices for Solar Modules by Power Band

In Qbuzz, we follow monthly Retail price moves by power band. This is based upon our monthly survey of over 2000 prices displayed on internet sites of (mainly) photovoltaic product Retailers (known as "dealers" in the industry). The most transparent market is in the United States, which represents about 75% of the price points captured each month. The European market also displays retail prices over the internet, but this price index can sometimes be subject to greater volatility simply by virtue of the smaller sample size.

We recommend the greatest value of this data can be realized firstly by following the long-term trends and secondly by noting the relative prices between module categories (in this case between different module power ranges).

The prices captured have been based upon the purchase of a single unit (module), in order to maximize the sample size for consistent prices. Red numbers indicate upward movement, green a downward movement and black unchanged.

Prices Extracted in On Line Sample Report.