WITH THE solar industry hitting a growth plateau and complaints being lodged against the alleged Chinese dumping of solar products in the U.S., no one would deny these are uncertain times for solar companies in the country.
But for many solar companies, life goes on as normal. The journey for Westinghouse Solar, for example, started out on the roof of a garage in 2001.
CEO Barry Cinnamon explains that he wanted to put solar on his house in California, and realised that “what the market in California needed at that time was more companies that really knew how to install solar power systems”.
Akeena, as the company was originally known, grew quickly, and soon was the first national footprint residential installer in the U.S., with offices in half a dozen states. It was as a result of its multiple installation activities, Cinnamon says, that is behind the company's claim to have come up with a better way of installing solar panels.
“It was obvious that to grow an installation business, we needed a PV system that would reduce the amount of field assembly” he explains. “Our engineers were [talking about] all the racking, grounding, wiring and brackets that needed to be assembled, and [asking] why we [didn't] build all of this into the solar panel itself. So we did.”
That was the genesis for the company's Andalay product, which was introduced to the solar industry in 2007. The Andalay solar panel was self contained, with all racking, grounding, and wiring built into an integrated, rackless, solar panel. According to Cinnamon, this solution reduced the number of components an installer needed to assemble on the roof by 80%, resulting in a 50% saving in labour costs.
Cinnamon says that while this new type of solar panel was readily accepted by commercial builders and installers, solar panel manufacturers were not so ready to accept the new concept: “In a very competitive market, they were all trying to reduce the cost of their solar panels [by as much] as possible. When we put a feature into the construction that added US$0.10 to the product - even though it may save US$0.30 cents on the installation - panel manufacturers said they didn't care about the installation costs. They were only interested in the base production cost of their panels. The Japanese [had been] the market leaders in 2001 and 2002 for solar panels, but by the middle of the last decade, many Chinese companies came into the market, and we were suddenly flooded with choices for making our solar panel designs.”
What Cinnamon had to do was find the manufacturer who would make the panels to his defined specifications. This meant custom runs of solar glass or laminate within the company's specialised frames: “That was a very hard thing to do, but we were able to negotiate with both Suntech Power and Kyocera to make these custom assemblies.”
And in 2009, the company went further still, integrating a micro-inverter into the panel, and brought to market the first plug-and-play AC solar panel, further reducing the time it took to install a solar power system.
After the release of its AC solar power system, Lowe's came to the then Akeena and asked to partner with the company to put these self-contained solar panels in its home improvement stores. This was followed by the Lennar Corporation, the second largest home builder in the U.S. committing to use the AC solar power system on some of its new home construction projects.
After this, other companies who weren't in the solar business started to contact Akeena. One of these was the Westinghouse Electric Corporation.
“Westinghouse asked if we would like to partner with them because they had been in the solar business 25 years ago and now wanted to get back into it,” says Cinnamon. “They really liked our product [but we wanted to make sure] that the Westinghouse name still meant a lot to our target market.”
Cinnamon says that market research validated Westinghouse as a highly trusted name, also much more widely known than many solar company names in the market. “Our deal with Westinghouse is not a buyout or a sale, but a brand licensing partnership. That's how many companies in other markets operate successful businesses. It's been a very good partnership for us going forward. It creates a lot of trust with the customers - being with a well known brand that's been a household word for 130 years.”
Branding is very important to all companies, including solar. Working with an existing brand name like Westinghouse is much more cost effective than continuing to put time and money into building the existing brand name. Shortly after the change from Akeena Solar to Westinghouse Solar, Lennox International, the second biggest HVAC company in the U.S., also became a partner: “Lennox is putting in new heat pumps for customers, and it's easy for their HVAC contractors to add solar. It works out well,” Cinnamon says.
Taking the pure OEM path
In 2012, Cinnamon says, Westinghouse Solar moved to a pure OEM business strategy: “We brought a manufacturing partner onboard, Lightway, which is strictly in the solar contract manufacturing area. They are not trying to build their own brand, they make panels in the background,” Cinnamon says.
Lightway is fully integrated; from ingots, to wafers, to cells, to modules. The company has facilities in China, where refined silicon, glass, aluminium and cardboard go in one end of the factory, and boxed solar panels come out the other end. “It's all one continuous line,” Cinnamon says. “All automated equipment and very well organised, [so] they have a very competitive cost structure,” Cinnamon says.
He believes that going forward this is the model of the future for all solar manufacturers who want to stay competitive – a scenario where all manufacturing from the start to the end of the process happens under one roof…whether a company does it themselves, or uses a contractor or partner.
“I see too many quality gaps where companies did it the old way: buy wafers this month from company A, then company B turns them into cells, and another company has a module factory. Then next month we'll see who can do any of these activities for less and use them instead. That brings in a lot of quality issues,” Cinnamon says.
While still in the transitional stage, Cinnamon says, this manufacturing model maintains high quality, while reducing the cost of Westinghouse's solar panels. He adds that current panels are now available at a price that's just about the equivalent of a full DC system, which still requires all the additional design, engineering and rooftop assembly.
Distribution is also evolving, says Cinnamon. As Westinghouse Solar pricing started going down, the products drew the interest of distributors and bigger installers, because of the reduced installation time involved.
“I see a big shift happening in the solar industry that is based on the technology in an AC module”, he continues. “A solar specialist used to be needed to install a system. Now all traditional contractors can do solar installations very effectively and they need no special training, [nor do they] need to hire specialists in solar to get the job done. Therefore, it is a profitable market for them.”
Westinghouse, under the Akeena brand, was the first company to have a retail product in the home improvement stores. The off-the-shelf concept didn't fly well initially, admits Cinnamon, but the products are now available through Lowes.
“People either use the store supplied contractors or hire their own people to put in three or four panels. By making solar easier to install, this is a market we see growing” he says. “And with the combination of falling price points and awareness for solar, the market will continue to improve,” Cinnamon believes.
Industry woes – making the business plans work
Westinghouse Solar does not produce a commodity solar panel. But Cinnamon believes that the success of the company is based on a very well developed business plan, and value-added partnering. A number of other companies, he adds, which have offered “non-commodity” type solar products have met with recent failures, and Cinnamon notes that all the failures are based on cost:
“There are hundreds of companies in the start up stages - or mid-stages of manufacturing solar panels, regardless of technology. Some will succeed and some will have bad business plans that simply will not work out. What we are seeing today is the evolution of an industry that is learning that it must be run like any other profit-oriented industry. It must have sound business plans from concept, through all stages of production, choosing the right partners, and an excellent marketing plan. You can build the best product in the world, but if you can't do that in a cost effective manner with a good profit margin and most of all have a good customer market base…what possible good is your excellent product?”
Perhaps the reason why recent company failures are so painful, he says, is that from 2004 to 2010 the whole industry was on a “gravy train of constantly increasing sales, high margins, and increasing demand,” something he likens to musical chairs: “When the music stopped and demand fell off, production kept going up. Suddenly cost has become a key factor, and the companies that didn't have the best cost structure simply had to go out of business,” he adds.
Subsidies are good to get companies started because they help to drive new inventions into production in a short timeframe but, Cinnamon continues, if what those companies have developed after roll out can't be produced cost effectively, or the company does not have a good, solid financial structure, it will fail. The value of subsidies is that you can get experiments going faster. The pain is that some will fail. What happened to recent solar company failures shouldn't be used to damn the Department of Energy (DOE) loan guarantee program. There are things that can be learned from specific company failures, but that does not mean that the whole program behind it is a failure.”
China: handshakes or hostility?
Some have blamed the recent fall in prices on the vast army of Chinese manufacturers sending their products out into the marketplace. What has particularly angered many outside of China is the support that Chinese companies have had from the Chinese Government, allowing them to effectively flood the market with cheaper products that U.S. and European companies can't compete with.
One of the companies that went bankrupt was Evergreen Solar, which blamed its demise on exactly this reason.
However, a fight back of sorts – however well- or ill-advised for Solar U.S. this turns out to be – is seemingly underway.
A recent blast against low cost Chinese solar panels flooding into the U.S. was filed to the ITC by CASM (Coalition for American Solar Manufacturing). This was presented by SolarWorld, and various other unnamed companies.
The action has got the industry hot under the collar, not to mention polarised viewpoints, from those who believe that China has a distinctly unfair (and illegal) advantage which is directly harming U.S. companies, to those that believe the organic difference between U.S. manufacturing and Chinese manufacturing is not all that big anyway, and certainly small enough that if customers wanted to buy from the U.S. it would not currently be much more expensive.
And then there is also the question of why the majority of major solar manufacturers are very conspicuously avoiding the controversy [CASE hadn't been formed at the time of writing - ed]. China, for its own part, has warned the U.S. of the danger of “protectionist” policies, especially given the perilous state of the global economy.
Cinnamon is adamant in stating that Westinghouse Solar is not a member of CASM, in fact he holds completely opposite views. “We benefit with lower prices to homeowners by purchasing most of our equipment from China, which, in our experience has been very high quality,” he says. “We feel very strongly that in the solar industry, trade restrictions would be a big job killer in the U.S.”
He says that he believes U.S. manufacturers must approach the global solar market as a fully “free-trade” agenda, and strive to make products highly competitive on a global scale, by streamlining their manufacturing processes to be competitive, or by partnering with contract manufacturing facilities - regardless of the country they are based in.
But he says he understands why some U.S. manufacturers have established the CASM to prevent Chinese solar panel imports, effectively giving them a mandate to lower the focus on cost reduction in their own products: “It would be great for them; they could raise their prices substantially,” he says. “Ironically, most of them are not U.S. headquartered companies. SolarWorld for instance, is a German company.”
From a U.S. jobs perspective, any significant tariff would be “very bad”, believes Cinnamon: “There are 100,000 solar jobs in the U.S., probably 90,000 of them on the installation side. If you double the price of Chinese panels, our industry would be set back five years, and most of those jobs would go away since solar would be expensive again.”
As for whether to single out China as “the” global competition, or find ways to meet them on common ground, in the long run Cinnamon believes strongly that tariff-based comparative-“equal costs” for solar panels would only be so because of artificial means: “In this internet-linked world, it would not take long for U.S. consumers to see that what they were paying double for was available to the rest of the world (with comparable quality) at a much lower cost. This would first freeze U.S. installations, then U.S. manufacturers would eventually look for other places to produce their products, such as the Philippines, Taiwan or Mexico to keep their manufacturing and labour costs down – again, taking jobs away from U.S. soil, which is exactly the opposite of what is needed”.
Cinnamon's mantra is to “do it the right way in the first place” i.e. keep the quality high; drive the cost out of the end product with better products; smarter partnering and cost effective methods of manufacturing. “Winning solar companies - of which there are many - use the best sources from all areas of the globe to increase sales of their products in all markets, not only the U.S.”, he concludes.
About the author: Joyce Laird has an extensive background writing about the electronics industry; semiconductor development, R&D, wafer/foundry/IP and device integration into high density circuit designs.