Suniva and Shunfeng betting big on US solar
With its base in the renewables-averse US South and its focus on high-efficiency monocrystalline PV cells and modules, Suniva was always something of an anomaly in solar manufacturing.
And that was true even before its acquisition last year by China’s Shunfeng, one of the more unusual companies in the global renewables business.
Now, thanks to Shunfeng, Suniva is nearing the end of a $100m expansion of its cell factory near Atlanta, Georgia, tripling its capacity to 430MW by next month before expanding again to 700MW by mid-2017.
In doing so, Suniva is cementing its position as one of the largest cell makers outside Asia.
The expansion is the boldest gamble yet for Suniva, whose investors include Goldman Sachs.
And it comes with substantial risk: Suniva is losing money today, and the global module market appears to be sliding into a down cycle.
But Suniva and Shunfeng are confident that the bet will pay off, executives at both companies tell Recharge.
If they’re right, they will help shatter two widely held assumptions about the solar industry.
The first is that most solar customers, whether homeowners or project developers, simply want to buy the cheapest modules they can.
Module suppliers have tended to compete largely on the basis of price, or, in rarer circumstances, the very high conversion efficiencies of their panels. Suniva offers a rather different proposition: relatively efficient modules at relatively good prices.
If that sounds a bit mundane, remember that getting that balance right has been the key to success in countless mass markets over the decades, from cars to computers.
In mature markets, the vast majority of customers buy neither the cheapest nor the fanciest products available. The same will increasingly be true of solar, says Matt Card, Suniva’s executive vice-president of commercial operations.
Suniva’s proprietary monocrystalline technology and manufacturing processes allow it to make what it touts as “high-efficiency, cost-competitive” cells and modules — still an oxymoron for much of the solar industry.
Suniva’s best 60-cell Optimus modules clock an average efficiency of around 17.6% — lower than the highest-end mono panels available but substantially more powerful than the multicrystalline product that dominates the market.
“If you look at the solar market today, it’s characterised by a huge amount of commoditised product coming out of Asia, particularly around multicrystalline,” says Card.
“Then at the other end you have ultra-high-end products, which have a very expensive price point.
“Mass markets eventually gravitate towards an equilibrium point, a value intersection. That’s where we live in the market.”
Several factors could accelerate the expansion of monocrystalline within the US solar market, Card says. To start with, there’s a broad shift in the mentality of many US solar customers from “build to flip” to “build to own”.
In the rooftop market — traditionally Suniva’s biggest earner — more and more homeowners prefer to buy their PV systems outright rather than leasing them from the likes of SolarCity.
The result is an increasingly sophisticated customer base that cares more than ever about the quality and provenance of modules.
Suniva also sees a growing role for mono in the utility-scale market, where developers are increasingly willing to invest more money upfront on things such as tracker systems and high-efficiency panels to boost the long-term output of their projects.
Playing into that trend is the reality of a diminishing amount of land for the kinds of massive ground-mounted solar arrays that have defined the US utility-scale market in recent years. More than ever, every panel counts.
“Micro-utility” projects — of a dozen or so megawatts — have become “a rapidly growing piece of business” for Suniva, Card says. “Community solar’s going to be a big play for us, too.”
The second — and even more significant — assumption Suniva is putting to the test is the notion that the future of cell manufacturing lies in Asia, or at least in low-cost countries.
Suniva was founded as a cell technology company and small manufacturer in 2007, spun out of research done at the Georgia Institute of Technology under Ajeet Rohatgi, now the company’s chief technical officer.
At the time Suniva began producing cells in Georgia, there were dozens of PV manufacturing start-ups operating across the US and Europe, many with big dreams to scale up quickly.
Most of those companies, from Solyndra to HelioVolt, disappeared or were acquired for a song amid the rise of China’s solar manufacturing sector. And not just the small ones: Germany’s Q-Cells, once the world’s largest cell maker, went bust in 2012 and was acquired out of bankruptcy by South Korea’s Hanwha group.
Yet through it all Suniva survived, a fact Card attributes in large part to the decision not to expand production too soon.
Suniva has always produced its cells in-house, and done so entirely within the US. But when it decided to branch into self-branded panels, it turned to contract manufacturers for the module-assembly work, first in China and later in the US, after Washington imposed trade duties on Chinese-made PV components.
Only in 2014 did Suniva open its own module-assembly plant in Saginaw, Michigan. “Had we turned around and built a 750MW plant in the US four years ago, we very likely would have suffered the same fate as many others,” Card says.
Needing capital to expand its production capacity, Suniva in September 2015 announced the most surprising twist in its story to date: Shunfeng International Clean Energy, the Hong Kong-listed renewables polymath, would acquire a 63% equity stake for $58m and help bankroll a major capacity expansion in the US.
Shunfeng had been on an acquisition spree, buying a number of clean-tech companies around the globe — many of them bankrupt or in trouble — including China’s Suntech, the world’s largest PV manufacturer until defaulting on its bonds, and German system integrator SAG Solarstrom. Notably, Shunfeng appears to be the first major Chinese player to invest directly in US PV manufacturing.
“Suniva has a good history in terms of innovation, its technology strength and its co-operation with Georgia Tech,” says Alex Zhu, president of Shunfeng America, who proposed the acquisition within Shunfeng and oversaw the due diligence.
“But they’ve been constrained by their small size,” he says. “They’ve had no way to compete with other companies in terms of their cost-reduction roadmap.”
Shunfeng’s investment has been a breakthrough for Suniva, allowing it to scale up for the industry’s next growth phase. In addition to expanding its Georgia factory, Suniva is upgrading its lines to incorporate passivated emitter rear contact (PERC) technology, giving its cells an extra output kick.
Later this year Suniva will begin selling its first PERC product — a 60-cell black module rated at 300W, up from 275-290W for the pre-PERC version.
While Suniva has only publicly announced plans to expand its cell capacity to 430MW, Zhu reveals to Recharge that the Georgia factory will be expanded further to 700MW by the second or third quarter of 2017.
Suniva may have escaped the grim fate that befell many solar start-ups in recent years, but even under the aegis of Shunfeng it faces challenges.
According to paperwork filed last year by Shunfeng, Suniva was still losing money in 2014 — by which time most major PV manufacturers had returned to profitability. In the first half of 2016, Shunfeng’s 63% stake in Suniva resulted in 44m yuan ($6.6m) worth of losses for the company, a recent filing revealed.
Meanwhile, PV manufacturers face a growing glut of modules in the global market today caused by a slowdown in China’s domestic solar market.
But Suniva and Shunfeng are confident that having a US manufacturing presence will pay off in the long run.
Suniva’s quality and “Made in the USA” bona fides means it can currently sell its panels in the US market for above $0.60/W, compared to about $0.50/W for tier-one Chinese players, Zhu says. “There’s a huge premium we can extract.”
And there is ample scope for synergies between Suntech and Suniva, from buying components to paying for testing, which will make Suniva more cost-competitive, Zhu says.
Shunfeng believes in the importance of local manufacturing for a variety of reasons, one of which is that it works as a hedge against anti-dumping tariffs.
Shunfeng-owned Suntech must pay such duties to sell its China-made PV kit in the US, albeit at a reduced level compared to a few years ago.
“We could build 2GW of new capacity in Malaysia or Vietnam, but who knows, next year SolarWorld might bring an anti-dumping case against those countries,” he says. With Suniva, “we remove all those risks and can focus on a market where we’re seeing success”.
So will the US play a major role in the global solar manufacturing sector? Card insists the answer is yes, for Suniva and others.
“Certainly SolarCity [which is building a 1GW factory in upstate New York] believes there’s room to support US manufacturing,” he says. “SolarWorld’s invested here; First Solar’s invested very heavily in the US.
“A healthy, mature solar ecosystem has a place for manufacturing in China and the US.”