reply to post by Animal
I don't know as much as you do about "I feel sure you understand the difference between retail markets and wholesale/research markets?" But
this is besides the point.
OK, it looks like we are seeing this from two completely opposing viewpoints. Let me explain the difference between retail and wholesale/research
Retail is what you buy every day at the store. For purposes of our discussion, let's say we are thinking about buying a solar lighting system,
perhaps one of those low-voltage driveway lighting systems. Yes, the price has dropped and will continue to drop. As prices drop, more people can buy,
and there is incentive for companies to produce more of them.
The wholesale market is connected and works similarly, but it also works invisibly to most people. Let's say now in our scenario above, that the
manufacturer of those driveway lights increases production to keep up with demand. That typically means that they buy more solar cells, more light
bulbs, more batteries, and therefore they get a higher quantity discount. They also invest in larger production equipment which lowers their labor
costs. Now the price can drop again, leading to more demand, and the spiral continues until a stable relationship is reached. Typically, that
stability occurs when the materials cost is at maximum efficiency and production cost is at maximum efficiency as well.
The wholesale market is what determines the materials cost of producing that driveway light system. If it is costing your company $20 to buy all the
materials to build one system, and your production costs are $10 per system, you cannot sell the units for less than $30. Even at that price, you will
make no profit, so better figure an additional $5 for profit. Now the units are costing the producer $35.
They are then sold to a wholesaler who sells to individual stores. That's two markups, each of, say, another $7.50. Now the units appear in the store
for $50. For the price to drop, someone has to spend or make less money getting that product to the store. If the producer manages to increase their
volume, they may can cut their materials cost to $15 through volume discounts. Now that $5 savings can be passed on to the customer and the units are
$45. Now more people buy the units, and the producer can cut their costs again, resulting in lower prices to the consumer.
Since the manufacturer of solar cells is now doing the same thing as the light system manufacturer, the cost of solar cells will drop as well. This
opens a new window of opportunity for someone who wants to make a better lighting system. They can buy solar cells and begin manufacturing their own
system to compete with the original system. Their price will be higher at first due to their lack of purchasing power, but if their idea is good
enough, they will be able to compete on quality. Soon you have innumerable companies all making competing systems and this as well lowers consumer
cost by introducing competition into the marketplace.
This is not happening with solar technology.
While the price of completed systems sitting on your store shelves are dropping, the price of the
raw parts and materials is not, at least not to the entire wholesale marketplace. A product cannot be made and sold for less than it costs to make
I have a unique window into the wholesale market through my research. Under the present economic conditions, there is no way I could manufacture
anything concerning solar power without the final cost being astronomical compared to established manufacturers. I could easily begin producing
LED-based lighting solutions, which lend themselves very well to solar power, but the cost of solar cells is so prohibitively high that it is
impossible for me to accomplish. No one would pay $300 for a lighting system when they can get one a little less advanced for $50. Yet, that is what
it would cost for me to produce one. The solar cells alone would cost me much more than it would cost to buy the completed system and rip the cells
out of it. Something is wrong with this picture...
You know the little LED flashlights that are becoming popular? I can buy one for $5. I can build one for $4 and a lot of labor. Not very long ago,
when the lights were costing $20, I could have built one for maybe $25. As the shelf price in the retail market came down, so did the cost of the
white LEDs that are the heart of the units. Back then, when they were first available through Mouser, a white high-brightness T1 3/4 LED cost about
$5. Now I can get them all day long for under $1. When they first came out on the surplus market, about a year after appearing in Mouser, They were
about $4 if you bought a pack of 100. Now you can get 5 for $1 on occasion.
When solar cells came out in the surplus market, they ranged from $5 for a tiny one to $100 and up for larger cells. Now they range from $5 for a tiny
one to a little under $100 for a large one (if you want, I can look up the price per watt... it will bear out with the general prices I am quoting
here). There has been no substantial price decrease in the surplus market.
And remember that solar cell technology is much older than white LED
technology, and therefore the price should be dropping faster than white LEDs.
What I am being told by my suppliers (most of which I am on a first-name basis with) is that they are as surprised at the wholesale market as I am.
They would expect the prices to be a tenth of what they are now. Apparently somewhere the prices have dropped in the wholesale market, as there is no
way anyone could manufacture solar systems at the cell price I see, but why has that wholesale price decline not been passed on to the entire
I hope this sounds less like rambling... I do believe this is a concern, especially if you want solar prices to decline substantially. Competition is
always the answer to high pricing.