LONDON — Does the solar PV market’s current turbulence reflect worrying structural challenges or just a combination of unrelated instances of failed technology, poor management and bad luck? In either case, what should manufacturers do to survive?
Reinhold Buttgereit, Secretary-General, European Photovoltaic Industry Association
For solar photovoltaic manufacturers weathering a period of consolidation and market maturation, the question of how to survive is indeed a big one. The industry is entering a new phase in which innovation, cost containment and cultivation of new markets will be more crucial than ever. But it is important to remember that even in this uncertain climate the business and financial communities still clearly see PV as a solid bet for the future.
EPIA’s recent Investors’ Day conference showed just how strong confidence in the sector continues to be. Industry CEOs and leaders of the financial and business communities revealed a level of optimism that should dispel any doubts about solar PV’s future.
John Odom, global business director of DuPont Photovoltaic Solutions, emphasised the commitment on the part of PV manufacturers to projecting a solid investment profile. “We have got to move beyond a place where people invest in this technology just because it is the right thing to do,” he said. “We’ve got to take PV to a place where people buy into it because it is a good long-term investment.”
Big businesses like Google also see PV as an industry worth investing in on the financial merits, not just for the feel-good factor. Benjamin Kott, Google’s clean energy advocacy manager, said: “Ultimately, we look for projects that generate strong financial returns with the potential for large-scale impact in developing and deploying renewable energy.”
Even though there is widespread agreement that the PV business has a bright future despite current challenges, this optimism is not unqualified. Investors will be looking for sound business models, technological innovation and continued cost reduction. And policymakers must provide the kind of regulatory stability that attracts investors and encourages business development.
It is also important to remember how far PV has come in a very short time. The current situation is part of the maturation process of an industry that has significantly outperformed all expectations. But the PV industry will emerge stronger than ever.
Sungsoo Lee, Chief Strategic Officer, Hanwha SolarOne
Feast or famine is becoming a fact of life for solar manufacturers. If prosperity drives every manufacturer along a single-lane highway of capacity-expansion to achieve economies of scale, adversity tests their survival capabilities as they negotiate the treacherous trails on the strategic roadmap.
But first, it is worthwhile for us to reflect for a moment on why we exist. We are here to commercialize solar energy by environmentally sustainable and socially responsible means. Any deviation from this goal will not only cause irreversible consequences for individual companies, but will also severely damage the image and the future of the entire solar industry.
In the long run, the growth rate of the solar energy industry still outpaces many other industries. Combating a short-term capacity glut requires a company to carefully plan and position itself. The most obvious priority is to demonstrate the company’s long-term commitment and viability via its financial performance, business scale and diversity, cost leadership and operating experience. These values are not always self-evident. It takes clear communications to make them known to the market while backing them up with solid evidence.
In addition, companies at every point in the value chain need to have a full self-assessment on their competitive advantages and look for complementary values from other companies. An accurate assessment becomes the foundation of successful strategic alliance — a potentially favourable outcome in the inevitable consolidation of the industry. The alliance can be vertical, where owners of market channels can partner with low-cost equipment or component manufacturers; or horizontal, where system integration can enhance the value and simplify the supply chain. Industrial alliances will reduce operating risks and increase the efficiency of limited capital.
Finally, companies can create niche plays by focusing on emerging, unsaturated markets, and customise the product lines to create higher barriers to entry for other players. This requires the companies to be extremely nimble, with in-depth local knowledge and strong local presence.
Geoffrey King, Market Manager, Renewable Energy, Saint-Gobain Solar
Despite the worldwide recession, the photovoltaic industry has demonstrated unprecedented growth over the past years, with increased demand for solar power attracting more and more players into the market. At the same time the cost of module production has plummeted, helping the move towards grid parity. This has made solar technology more competitive with traditional energy sources.
To ensure survival in the midst of all these changes, manufacturers must constantly evaluate their PV materials, manufacturing methods and processes to identify opportunities to streamline investments and create savings.
Source: Saint-Gobain Solar
On one hand, the costs of manufacturing solar modules have to decrease consistently to secure solar energy’s place in the energy market of the future. On the other, manufacturers have to maintain profitability by implementing new ways to drive costs out of their individual processes. However, with fluctuating material prices and increasing demand from customers to reduce costs, there is more pressure on solar module makers and it is getting more difficult to achieve significant savings.
The solution? The era of major technology breakthroughs is over — instead it is time to focus on the small elements in the production process, such as components that utilise economies of scale and rely on automation. Ongoing R& D efforts in these areas bring new smart materials and innovative solutions to the marketplace, helping module makers minimise costs. Innovative suppliers have made these solutions readily available to help manufacturers adopt a “one-step-ahead” approach for long-term success.
Alan Goodrich, Senior Analyst, Solar PV Manufacturing Technologies, NREL
The rapid ascent of China’s PV manufacturing industry and recent US solar company bankruptcies have led many observers to question the US’s ability to compete in this rapidly growing market. For some, these questions lead to a persistently negative outlook for US PV manufacturing; yet a very different picture emerges when considering the recently announced factory expansions led by new entrants, established global manufacturers, experienced global conglomerates, and even leading Chinese PV companies.
The reality of solar PV manufacturing is that labour does not provide a significant cost advantage because highly automated manufacturing processes are now common. Furthermore, glass — which is used in nearly all of China’s PV products — is expensive to ship. Intermediate products, like silicon cells, may be a more sustainable export opportunity for China than finished modules.
The rise of China’s silicon PV industry has had less to do with an inherent regional cost advantage than with Chinese policymakers’ commitment to establish a foothold in an industry that promises higher wages for manufacturing employees, and which complements the country’s push for increased innovation.
Chinese government investments to date have been intended to scale up the relatively mature silicon wafer-based PV technology, a strategy consistent with the country’s employment, wage, and economic development goals. The lack of technology diversification in the Chinese manufacturing industry makes these investments susceptible to competing efforts to supplant silicon with a disruptive technology approach.
The U.S. is a leading investor of private capital in emerging technologies that hold such promise. And unlike, say, Germany, the U.S. has world-class solar resources that offer the potential to drive not only a vast end market, but also a regional manufacturing industry.
Julian Hawkins, Senior Vice President, Sales & Marketing, Abound Solar
We are witnessing evolution that is occurring within the solar industry and solar companies who plan on surviving during these changing times must be able to adjust to new challenges. While there is no doubt that the industry is facing daunting challenges, it is important to note that they are probably a good thing in the long run. Below are three things that solar manufactures can do to stay competitive.
First, continue driving down costs — the future of the solar industry is tied to being competitive with all existing and future sources of power in the absence of subsidies. This threshold is near in states where electricity is expensive, such as California. There are several tactics for driving down the cost per watt, including through manufacturing; selecting the right materials and being able to cheaply and effectively build out production goes a long way in reducing the cost per watt.
Next, demonstrate returns — the more the industry can show steady, long-term returns for customers and project owners, the more solar will develop as its own investment asset class for investors, accelerating deployment in the US and around the globe.
Third, develop new markets — solar manufacturers also need to be aware of how dynamic the global market is and be able to penetrate new markets. The ability to gain a foothold in emerging markets and maintain competitiveness in mature markets requires constant vigilance over changes in the global landscape as well as products that can be effective in varying environments. Be it the hot climates of India or the cold and gray conditions of Northern Europe, manufacturers must be able to meet their customers’ exact needs.
Raymond Schonfeld, Managing Director, Single Market Ventures
Solyndra’s bankruptcy raises one critical issue: whether its public prominence will lead to changes in US state aid policies for PV. The global PV industry still relies on government-imposed financial incentives, and the potential impact on those incentives is more important than whether Solyndra’s bankruptcy throws into question the viability of solar energy: it doesn’t. In sectors bubbling with innovation, like solar, some failures are inevitable and can be absorbed.
Why may there be problems ahead? Current government PV incentives in the west have subsidised the growth not of western markets but of Asian production. A major portion of western subsidies of installations is transferred to Asian producers. Western buyers get their purchase money back from government-imposed incentives (or subsidies) within their own country. But they buy from Asia, where suppliers recover their capital investment costs through the revenue stream from western purchases equivalent to Asian government subsidies of production plants.