Image: OPES Solutions
As widely reported in the press, an unprecedented high demand for electric vehicles and consumer electronics (among others caused by COVID-19) has resulted in manufacturers facing chronic shortages of electrical components, increased prices of raw materials, and shipping disruptions. It has created shortages and price increases that are hurting many industries, with even big car manufacturers having to pause production.
The off-grid solar industry is not escaping the pain. Significant disruptions caused in our supply chain present a big challenge for the entire industry, adding to existing difficulties.
GOGLA conducted a survey to understand how this disruption is likely to impact the off-grid solar industry. This blog presents results from 33 respondents, primarily SHS Kit manufacturers, surveyed in mid-June 2021, and messages from a GOGLA Technology Working Group call that followed. Download the detailed results here.
An array of disruptions
We learned that the shortage of electrical components (such as semiconductor chips and controllers) is the most disruptive issue for manufacturers. The increased costs and delays of shipping, and the increased cost of parts and materials have also been troublesome. Manufacturers are working extremely hard to identify available components and new suppliers whilst minimising the impact on quality, functionality, and cost.
73% of manufacturers expect product stock-outs
In terms of product stock-outs, Q3 and Q4 2021 are expected to be the trough in production, particularly for the multi-light systems and TVs, though problems will persist next year. Solar water pumps are forecast to have growing problems in the second half of 2022. The stock-outs do not necessarily impact a company’s entire product range, and companies will maintain certain products whilst pausing others. Likewise, there is flexibility to change parts in a product package, such as by offering a different TV size, based on availability or cost.
The respondents expect the disruption to continue for another 12 to 18 months. Global chip production is ramping up with massive investment, though market research forecasts the shortage to continue through 2022 and into 2023. There may be some easing of availability with a rebalancing of the supply chain and allocation practices of suppliers. One manufacturer in our membership informed us that they are hoping for preferential treatment with suppliers by presenting their social impact and contribution to SDG 7, something GOGLA or other partners may be able to lend their weight to.
The shortages may impact product performance, with implications for quality verification
45% of respondents reported that they will have to make changes that may impact on the product performance or functionality. One manufacturer wrote, ‘For one component we’ve been able to find an alternative that won’t make any visible impact from a consumer perspective, though may require us to do tests and validation. For another missing component, the available alternative will result in the light dimming feature being lost.’
This is likely to impact the Verasol testing and certification in a couple of ways. Firstly, if the shortage necessitates changes in the design, parts, or suppliers in a way that impacts consumer functionality, product performance, or product safety this could render the products non-compliant. Secondly, if a product needs to get a renewal tests (required two years after the initial quality test) to retain certification, this would be difficult without products for sampling or if there has been substantive product changes. This could cause problems for manufacturers who need to be listed on the Verasol website to qualify for investment (such as grants or RBF funds). Verasol are working on measures and will issue guidance in due course. We encourage you to contact Verasol if you have any urgent questions or concerns. Likewise, you can share them with GOGLA to liaise with Verasol on your behalf and in confidence.
87% of manufacturers expect increased prices for consumers