The module buying journey is anything but predictable.
In a volatile, supply-constrained environment, pricing and availability can change in an instant, sending buyers right back to the starting point. Ask a large energy buyer how to manage the solar procurement timeline, and the answer might go something like this: “Recently, if panels are available, we and our competitors are buying them within hours of hearing about the availability.”
The “buy first, ask questions later” strategy carries some risk. But so does almost every approach to solar procurement. Each step can take you closer to a supply agreement that in turn leads to project profitability or deal you a frustrating setback.
If you’re an experienced module buyer, you probably know the steps to take and the considerations to make. But even the most seasoned players can benefit from some best practices and guiding strategies to navigate the ever-changing procurement process.
We have found that there are three key areas that impact a buyer’s success: visibility into the supply chain, buying power, and module value analysis. In this post, we cover the most important questions you should be asking at each step along the way.
Visibility Into the Solar Energy Supply Chain
Data collection is the first step in the procurement process. Large-volume module buyers need to know which modules are available for purchase in line with their budgets and the timing for project development. You also need to answer key questions, such as:
- What are the electrical and mechanical characteristics of these modules?
- What are the purchasing terms and conditions?
You might have a procurement team responsible for data collection. Or you might delegate this work to someone who has various responsibilities. Either way, most buyers have to contend with limited access to supplier data and poor data quality once their information is no longer up to date.
With a valid set of module data in hand, you can begin step two — data analysis. Some of the analysis can be completed in-house. Verifying that equipment is compatible with the rest of the project components and overall system design, for example.
Other aspects of data analysis depend on third-party input.
- Has your combination of modules and racking been used in a previous project?
If not, the module manufacturer may need to show allowable mounting options.
- Has testing been done? Can you get a test report?
If not, this could mean sending module samples to the racking supplier or vice versa for analysis.
Wait times for responses from suppliers can vary. It depends on the supplier and your own relationship with the supplier.
Performance engineering, the third step in solar procurement, helps module buyers evaluate the impact that selected equipment will have on energy production. If a project is financed, as most are, the financier will want to see independent test results answering questions such as the following:
- How is the module affected by light-induced degradation that occurs in the first hours or days that a module is exposed to sunlight?
- How do the modules respond to variations in temperature and irradiance, as reflected in PAN files?
For each module, it can take days or weeks to get third-party reports if they exist. Then you need to vet the results until you have enough confidence to proceed with the project. This itself is a multi-step process.
Here are the steps to ensure you have an accurate performance model. Verify that the PAN file was produced based on test data from a third-party lab. Then review the results to ensure that the lab followed accepted testing standards and confirm that the PAN file parameters produce a good match to the test results. Finally, compare the PAN file to the module datasheet to make sure the parameters match.
Buying Power in Solar Module Procurement
The end of the procurement process is nearly in sight. But timeline management continues to be unpredictable and full of risk, which undercuts buying power for the module buyer.
The next step is vendor due diligence. In this fourth step, the questions to answer include:
- Are the financing parties involved in the deal satisfied with the bankability of the modules?
- Do the financing parties believe the quality of the vendor’s production process and its risk mitigation strategies, including the manufacturer’s warranty, are sufficient?
- Are the product reliability assessments convincing enough to win approval from financiers?
You also have to account for legal and regulatory compliance, such as the Uyghur Forced Labor Prevention Act, a law enacted in 2021 to keep goods produced in the Xinjiang Uyghur Autonomous Region, including raw materials used in solar modules, out of the U.S. market.
Contracting, step five, might be the riskiest step of all. You have invested so many resources to reach this point. And yet, a shift in module pricing or availability could send you back to the start.
Module buyers might have to wait several months before they have a negotiated and executed supply agreement. Once again, it depends on the supplier and your relationship with the supplier. All the while, none of the procurement terms can be guaranteed until you have signatures on a contract.
The inherent risk at this stage can put module buyers at a disadvantage when negotiating terms with the supplier. At this point, ask yourself:
- How long will it take to get signatures on a purchasing contract?
- Can I quantify the cost of shipping based on the manufacturer’s proposed terms in the supply agreement?
Synthesize & calculate module value
If you can synthesize data from each step in the procurement process, you can compare the value of different modules and use that comparison to optimize overall project value. The best way to do so is to determine each module’s net present value (NPV).
NPV calculates an asset’s costs and projected income and assigns a present-day value, accounting for the fact that money has greater value now than it will in the future, a concept known as the time value of money.
Consider the purchasing terms you learned about during data collection. Terms that reduce capital costs will generally improve NPV. The data analysis you performed in step two provides insight into labor and balance of system (BoS) impacts of a given module. Simple, streamlined installation processes also boost NPV.
Now let’s consider what you may have learned about module degradation during performance engineering. As a rule of thumb, NPV is higher when module degradation is lower. Degradation also affects project O&M. Higher degradation has the effect of driving down gross revenue.
Questions you can ask to evaluate overall module value include the following:
- How do low-price modules stack up in terms of long-term energy output and revenue?
- Are there modules that aren’t the lowest cost, in terms of $/W, but create the most project NPV?
- Which factors in module procurement (i.e. timing, brand, and module risk) are most important to the success of your project?
- Are you struggling to find availability to satisfy the requirements of your projects?
Procurement software to speed your climb
It might seem easy to take a do-it-yourself approach for some steps in the procurement process for a couple of module options. But doing a deep dive into all your module options can be time consuming.
What’s more, taking the time to eliminate production model ambiguity and deliver a trustworthy model that financiers are more likely to accept can slow the time you get to the finish line. Having a reliable procurement solution means you don’t have to risk starting the game over again if you miss checking some of the steps off your list, or if something goes wrong.
For developers, IPPs, and EPCs looking to find the best-value PV modules for their projects, there’s a new technology solution that provides you a long list of pre-vetted, optimized equipment ranked by the most net present value very quickly. In addition, because of Anza’s pre-negotiated terms and supply purchase agreements (SPAs) in place, you can lock in our attractive prices quickly, before pricing and availability changes.
With Anza you can review 20 options instead of just a handful and drastically speed up your procurement process.
The quickest way to get started with Anza is to sign up, log in and input details for your next project.
We look forward to helping you on your module procurement journey!
