Note: this article first appeared in Renewable Energy Focus July/August 2012. Click here for a free signup.
As any industry matures some companies will fail, some will succeed. This is to be expected, but the solar sector is maturing faster than many thought it would and module manufacturers have been negatively affected by the overproduction of solar panels.
As some firms fall by the wayside, the overall opinion from top solar manufacturers still going strong is that “It's just normal growing pains”. As they point out, many companies are making smart decisions and not just surviving, but thriving.
“We're at a critical time in this industry,” says Michael A. Ludgate, Senior Director of Sales at Sharp Solar Energy Solutions Group (SESG), the sales and marketing arm of Sharp Corporation's US solar operation and a company that has had its fair share of problems in recent times. “If you follow the trajectory of any industry, there is a period of expansion, followed by contraction when the winners separate from the losers. The companies that survive have to adapt to the changing landscape, they must be well capitalised and maintain a strong customer base.”
Justin Lee, Chief Commercial Officer, Hanwha SolarOne, agrees. “It's no secret that the key to survival has been remaining cost competitive,” he says. “Today, lower margins and tightening lines of capital will continue to drive less competitive companies out of business and lead to greater consolidation among the remaining players.” (In fact Hanwha were true to their word when they themselves bought struggling cell maker Q-Cells late last year - ed).
Upstream, Downstream, Diversification: Choose the Best Fit
Large, medium, small; established or new; silicon crystalline or thin film; all prospering companies have one thing in common – very savvy business practices. Different strategies work for different companies, and this spans all technologies and company sizes. There is no “one strategy fits all” solution.
“As a manufacturing company, we study and develop a large, diversified range of solar modules, from mono-crystalline, poly-crystalline and thin film,” says Sharp's Ludgate. “We are not just focused on providing solar modules. We're focused on helping our clients navigate all the complexity of a solar installation, and then supporting them throughout its operation.”
Consumers want the benefits of solar power but face many barriers to implementing a solution, he continues. “That's why we've introduced one of our latest products, SunSnap.” Designed to expand and simplify the mainstream adoption and use of solar energy for homeowners, “SunSnap makes flush roof mount installations a snap with Zep System II.” The system's structural connections are even auto grounding, “eliminating the need for expensive grounding hardware and simplifying the overall installation process”, Ludgate says.
Another company taking the full system approach is Kyocera, a US firm based in Scottsdale, Arizona. “While we are conservative with our accounting policies, we do invest in our technology and are constantly improving our solar cell and module efficiency,” says Cecilia Aguillon, the company's Director of Marketing & Government Affairs. “And we are investing in new technologies that complement our photovoltaic products. Our newest product in energy is a storage system for homes and businesses.”
Kyocera has been developing solar technology since 1975. “We have grid-tie projects that have been in operation since the early 1980s which have produced above 90% of the electricity it [originally] produced 25 years after installation, thus beating common warranties of 1% degradation per year. Only a handful of manufacturers have data on system performance that goes back that long,” notes Aguillon.
She believes that at the moment many manufacturers are acting in desperation to maintain or gain market share, continuing to discount module prices while they go deeper into the red. This is unsustainable and it creates false expectations in the market. “Companies need to think about the long term and all segments of the supply chain need to work very hard to create real cost reductions,” Aguillon says.
She adds: “Our highly diversified product and technology mix makes us less susceptible to market downturns than competitors whose only offering is solar modules.”
The same ‘safety in diversfication’ is true for Hanwha Solar. While a global provider of total solar energy solutions and a leading manufacturer of silicon ingots, wafers and photovoltaic cells and modules, as the flagship company of Korea's Hanwha Group, it offers value beyond its PV products. It also offers various value-added services such as joint-development, project funding and co-marketing.
“Our parent company, the Hanwha Group, brings not just financial strength, but manufacturing and supply chain expertise to the solar business,” says Lee. “This has led to many efficiency improvements, driving down cost. Greater power output of PV modules drives down project cost, as fewer panels are required to produce a desired amount of electricity.”
In addition to focusing on cost, “we are delivering on our promise to be a long-term, reliable partner, backing our PV modules with an industry-leading 12-year workmanship and materials warranty and 25-year linear power warranty”.
Lee acknowledges that some companies “need to successfully redesign their supply chain” in light of the recent US trade ruling. “However, the Hanwha Group has a strong financial standing and long legacy of international manufacturing, so we are confident in our ability to adjust our manufacturing strategy in a way that will allow us to remain a cost competitive, nimble and reliable partner in all markets.”
Integration
Controlling the entire supply chain helps to keep costs down. This has been the strategy for China's JinkoSolar, based in Shanghai. The company is one of the top 10 largest crystalline silicon manufacturer in the world. “We are completely vertically integrated,” says the company's IR Director Sebastian Liu. “We create wafers, ingots, cells and the solar panels.”
However the latest news is troubling, as China's PV companies continue to struggle, and at the time of this article appearing on the website, the value of JinkoSolar's shares were continuing to creep down (according to The Real Edge magazine).
However, we feel that the strategy that keeps JinkoSolar in the survivor's circle (just) is a combination of very tight cost control and a strong financial structure: “The industry has become highly commoditized so cost is one of the first things you need to get inline with if you want to be a leader in this industry,” Liu says.
As a global company, JinkoSolar has the economy of scale to allow it to run a very lean, vertically integrated, manufacturing facility, adds Isabelle Christensen, the company's Director of Marketing. “We are able to control our cost in order to compete with traditional energy sources.”
The company has launched its WING modules into the market, with improved ergonomic design and aesthetics. Thinner than any similar product on the market at only 30-40mm thick, the 0.5kg lightweight modules are optimised for ground mount systems, yet also suitable for rooftop applications.
These size and weight improvements increase packing density to allow for six solar modules rather than three per box, enabling a significant reduction in transportation costs. “WING modules also have rounded corners to make the installation process safer and more convenient and they also deliver a conversion efficiency of 16.05%,” Christensen adds.
Meantime, Lui says the company plans to extend its value chain to downstream projects and engineering, procurement, and construction (EPC). “We see that downstream has a better market and that allows much more control,” he says. “It gives us a better margin and we can use our own modules to control the volatility from the manufacturing side.” (And that volatility needs to be addressed currently - ed).
“The industry is reshuffling and when the dust settles, we will still be here because of good products, good manufacturing practices and excellent financial strategies from our top down.”
Part 2 out soon: Canadian Solar, SolarWorld AG.