OCTOBER 4, 2021
Beyond Dollars per Watt: Optimizing Solar Module Procurement for Developers and IPPs
The solar module market has never been more volatile. The supply chain is stressed, as production and shipping delays have put increasing pressure on delivery schedules as well as project development and construction timelines. Module availability is tight, with many manufacturers sold out of most or all of their product lines well into next year. Module contracts are being broken, putting added pressure on both parties as well. For project developers and independent power producers (IPPs), making the right module procurement choices has become even more challenging.
Optimized Module Procurement Solution
There are dozens of Tier 1 module makers, so how does a developer or IPP choose which one will work best for each of their projects without deep, time-intensive dives into endless PVsyst PAN files and logistical wrangling? They don’t want to leave it all to the EPC and pay those hefty markups either. They also don’t want to keep changing designs to optimize the plant if they don’t need to. And if they make big annual module purchases, what if they end up with too much or too little inventory, or miss out on price and technology changes that could benefit the overall bankability or performance of their project?
Fortunately, there are solutions for optimizing module fulfillment that take many of the hassles off the project owner’s plate and can even generate project value in the process. Borrego has harnessed our close relationships with module manufacturers, comprehensive analytical capabilities, and effective internal procurement processes for our own development and EPC work to provide a service that helps developers and IPPs get the modules best suited for their projects, when they need them, without the headaches. Our offering includes:
- Real-time solar module pricing and product availability
- Project value-based module ranking with custom project inputs or general conditions
- Additional time-saving and risk management services
- Logistics management services and warehousing
Our proprietary analytical engine crunches financial, production, and construction data, and also includes a balance of systems (BOS) cost modeling tool. We factor in such inputs as volume (megawatts) of modules purchased to date, current purchase volume, the quarter the modules are needed, and the project type (fixed tilt, single-axis tracker, etc.). Those inputs are then filtered by net present value, actual module price per watt and effective price by quarter, and module efficiency parameters. The report can be updated as needed for any market or project inputs.
A Good Procurement Strategy is More than Dollars per Watt
One thing we’ve learned is that the “cheaper is better” module procurement approach does not always pencil out; in many cases, the dollars-per-watt cost metric may not be the deciding factor. A more expensive module may actually lower system capex and labor costs and increase plant size and energy yield.
Here’s an example. We worked with a developer that had procured 18 MW of 405-watt bifacial modules, both safe harbor and non-safe harbor, for two projects. The problem was, they could not take advantage of greatly improved module prices, wattage and module efficiencies from the early bulk purchase they had made. After we ran our model, we discovered that replacing the original 405-watt modules with 535-watt large-format modules for the non-safe harbor allotment increased the value of the project significantly. But nearly overnight the price went up on the 535-watt modules and we pivoted to 575-watt modules, and the customer felt no pain during that process. We were able to move fast and help our customers deal with rapidly changing market dynamics. As a result, the developer was able to:
- Increase the system size and specific yield
- Benefit from lower direct costs of goods solar (EPC or BOS costs)
- Receive $2.5 million in value creation, at $0.135/watt
While we were managing their module procurement, they could focus their resources on other high-value work as well as enjoy a lower procurement risk profile for their projects. We will be talking more about our module optimization and fulfillment solution in the coming months. If you are interested in finding out more, contact us at email@example.com.