Note: this article first appeared in Renewable Energy Focus July/August 2012. Click here for a free signup.

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Virtually vertical

Canadian Solar, meanwhile, has built its business using what the company's General Manager of US Operations, Alan King, calls “virtual, vertical integration”. He says: “We've been able to manage all aspects of our business so that while not benefiting from the current market, at least we've been harmed less than most.” It has done this, King says, by adopting “a better ‘just-in-time’ manufacturing” process which enables the company to contain supply chain costs.

Many companies opt to acquire upstream assets, such as silicon or wafers, or downstream assets such as EPC services. Canadian Solar has gone for both, but it has done so virtually. “This gives us significantly greater versatility in how we develop our overall corporate strategy,” King says. “For instance, we were not locked into long-term silicon supply contracts so when silicon prices began to drop, we could reap the benefits of low cost silicon ahead of many of our competitors.”

Canadian Solar manufactures about three quarters of the cells it uses in its modules. “That allows us to virtually, vertically integrate with other partners to take advantage of lower cost cells.

“In the case of what happened in the US with the countervailing duties, we already had relationships with manufacturers outside of China, so shifting a portion of our production to those third party cell manufacturers in order to manufacture in-China of non-Chinese cells was already in place. We've been ahead of the game in many areas and I think it is all due to our CEO's vision of virtual, vertical integration,” King explains.

Boosting module efficiency is also a priority, he adds. “We introduced our ELPS [module] which is a metal wrap-through back contact cell that will give us efficiencies of 19.5 per cent on mono cells and 18.5 per cent on poly cells. When you have a poly cell that's approaching 17 per cent efficiency that's a pretty significant jump,” King says.

“We are also growing our capacity for our second generation product which is a poly cell that is a combination of mono and poly seed that gives poly at almost the efficiencies of mono,” he continues. “We will also be introducing two ‘intelligrated’ product lines that will have power electronics integrated. Both the module and the inverter will be warranted by Canadian Solar for 25 years.”

Market focus

Taking the fully integrated (both upstream and downstream) approach is Germany's SolarWorld AG, one of the best-known leaders in offering brand-name crystalline solar power technology and itself not immune from financial problems (the company recently postponed the release of its 2012 financial report as talks with creditors over its debt continue, and according to Bloomberg the company has lost money in four of the past five quarters).

However...“Even in these hard times, we had a growth rate in 2011 that made us the largest manufacturer in the US and in Europe,” says Milan Nitzschke, the company's Vice President and corporate spokesperson. “We focused entirely on the US and Germany. We did have a short experiment with Korea in a joint venture, but we have the highest automisation rate in the solar business worldwide, so it made no sense. It made sense to stay in Germany and in the US where our major customers are.”

The firm partners with and buys the “best brands”, particularly from Germany, he says. “We buy all that is needed and we do the full assembly at Solar World so it is basically a one-step process when customers buy from us.”

Its focus is predominantly residential. “We believe very strongly that the best form of electricity production, in high density population areas, is to use individual rooftops,” Nitzschke explains. “Of course in regions with a lower population, it absolutely makes sense to use large scale solar installations and so we are working with the utility scale for those areas.”

Part 3 - click here.