Monday, September 29, 2014

Why Now Is A Good Time To Invest In Solar Manufacturing and Marketing In The U.S.

Contributor -- Ucilia Wang
7/17/2014
 
The growth of U.S. market and the ongoing government investigation of Chinese solar manufacturers are creating new opportunities that perhaps didn’t exist for the European and other Asian companies.
 
On Thursday we heard from Yaskawa Electric, a Japanese power electronics maker, and its plan to buy Massachusetts-based Solectria Renewables. The purchase gives Yaskawa a greater foothold in the U. S. market, where Solectria was the fifth largest seller of inverters in 2013, said IHS IHS, a market research firm.
 
Yaskawa has been growing its own inverter business in Japan and currently has about 6% of that market, IHS said. Japan has been a booming solar market thanks to generous government renewable energy subsidies that materialized after the Fukushima nuclear disaster in 2011. Japan is set to become the largest solar inverter market in 2014, with $2.2 billion in sales, followed by the U.S. with $1.3 billion, IHS said.
 
An inverter converts the direct current from solar panels into alternating current for use at a home or business, or for feeding into the grid.
 
 
Yaskawa’s move exemplifies the bullish outlook of the U.S. market, which is on its way to install 6.6 gigawatts of solar panels during 2014, a 39% jump from 2013, according to GTM Research. While Japan is a hot market now, its subsidies won’t always be around, and the country is small compared to other major markets such as the U.S. and China.
 
The pending investigation by the U.S. Department of Commerce over whether Chinese solar cell and panel makers have played fair seems to be creating opportunities for rivals. Last month, the commerce department issued preliminary tariffs of 19% to 35% on silicon solar panels and their components that are made in China.
 
The tariffs reflect the government’s belief that Chinese companies have gotten too much financial support from the Chinese government to compete fairly. China has come to dominate the world of solar manufacturing because of its companies’ ability to build many large factories and outbid their competitors in price.
 
Next Friday, the commerce department is scheduled to announce its preliminary decision on whether the Chinese manufacturers have been pricing their products at below fair market value. That decision could see another set of tariffs slapped on imported silicon solar cells and panels from China.
 
There is a strong likelihood that Chinese solar panels will become more expensive if the manufacturers have to pay hefty tariffs. That will make it harder for them to win business here. One way for the Chinese manufacturers to deal with a fall in sales is to devote more energy into selling their products in markets where they don’t face tariffs.  That’s happening already in emerging markets in Central and South America, said Arndt Lutz  senior vice president of sales and marketing at REC Group, a Norwegian solar panel maker, when I caught up with him at the Intersolar conference in San Francisco last week.
 
For installers, project developers and their investors in the U.S., the possibility that they will have to pay more for solar panels — or they may not have ample supply like they did in previous years — is quite worrisome. I previously wrote about SolarCity’s surprising move into manufacturing, a strategy the company said will help ensure it will have not only a plentiful supply of solar panels but also panels that won’t be subjected to government sanctions.
 
REC is trying to take advantage of the uncertainty over the Chinese solar panel supply by stepping up its marketing effort to tout its Singapore-made solar panels.
 
“Utilities, large developers and construction companies are actively reaching out (to REC). They are thinking long term and are afraid of insufficient supply in the U.S. market due to the trade case,” Lutz said.
 
Meanwhile, Solar Frontier, a Japanese solar panel maker that is owned by Showa Shell, is looking at building a factory in New York. Solar Frontier has benefited tremendously from its domestic market as well. Over 90% of its sales in 2013 took place in Japan, said Charles Pimentel, chief operating officer of Solar Frontier Americas, told me during Intersolar. The company became profitable last year, thought Pimentel declined to disclose the revenue and profit.
 
Solar Frontier is currently building its fourth, 150-megawatt factory in Japan. The design of that factory will be used to build factories in other parts of the world, Pimentel said.  The company is doing a feasibility study for its U.S. factory, which would have a minimum of 150 megawatts of annual production capacity as well.