Solar power goes through the roof

In recent years, the cost of producing solar energy has fallen dramatically. More than commercially feasible, it already rivals local energy costs in some countries. Achieving ‘grid parity’ is already a reality, and Trina Solar is leading the way.

Solar energy companies are on a roll. Productions costs are falling and demand is rising. The race is on not just to make sales and expand market share but to enhance brand recognition and create a reputation built on quality. It’s a race that’s winnable for Trina Solar, says the company, who markets itself as providing the “Best $/kWh”.

For too long many Chinese companies failed to differentiate themselves as brand leaders. For some it was a question of cash. For other companies it was about confidence. But solar energy companies are in a very different place today. It’s not just their stellar growth rates that are making companies like Trina Solar better known. It’s about the quality behind the technology – as well as the sheer range of applications solar panel technology is now able to support. “Total system costs are continuing to fall,” says the company. “And now we’re seeing a step∞change in how our technology is used. This includes the emergence of a range of applications that are a world away, frankly, from mainstay projects driven primarily by investment returns.”

The solar module producer highlighted existence of many markets where highly unstable power grid networks exist, especially in growing economies. “If you manufacture goods or services, you can’t afford to keep having black-outs. So the value of a solar installation working alongside your traditional supply is starting to look exciting and attractive.”

Indeed. From factories to tourism, the demand drivers are increasing. In a country with unreliable power supply, solar can be installed at the point of need (unlike wind power) to allow one to refrigerate, cook, or assure medical services. Similarly, projects are now being considered which leverage solar’s flexibility to power extensive wireless telecom networks through tower installations.

It’s not just about supplying energy to the have’s and the have-nots; there’s a growing range of niche markets and applications that solar energy now supports. By supplanting the need for costly and polluting diesel-powered backup generators, traditional industrial sectors are also taking notice. Solar is becoming mainstream.

Trina Solar’s proven strengths
• Large-scale vertically integrated manufacturing
• Strong brand with a reputation for high quality products
• Industry-leading manufacturing cost structure
• Diversified sales across regions and market segments
• Strong research and development efforts and advanced technological capabilities

Surging growth
One of Trina Solar’s key strengths is its vertical platform. This means it is less reliant on other suppliers and companies for its primary value chain components, while it can continually improve its supply chain by leveraging its photovoltaic (PV) supplier park which is integrated alongside its manufacturing campus. This translates to significant cost savings, which are then passed onto the consumer, as well as being invested back into the business, especially R&D.

Yes, some other companies are also managing to reduce costs by integrating their processes. Many companies have little choice but to go the mergers and acquisitions route, but it can be a costly approach if your new acquisitions remain hundreds – or even thousands – of miles apart.

An example of these integrated savings is how Trina Solar manages its manufacturing process. Some companies only cast ingots and slice wafers to sell to others, who in turn run them through a series of high∞tech processes to produce a solar cell. Other companies purchase solar cells only to manufacture a module. But Trina Solar handles these four separate processes internally.

“It’s not just about costs and breaking them down,” says the company. “It’s all about logistic efficiencies, cycle times and leveraging advantages of these time and cost synergies. For new products and processes, it also allows management to rapidly address development issues and accelerate market delivery.”

Meanwhile the solar energy market is surging. According to Solarbuzz, an independent solar energy research and consulting firm, the global solar power market – measured by annual volume of modules delivered to installation sites – grew at a compound annual growth rate of 44.9 percent from approximately 1.5 Gigawatts (GW) in 2005 to approximately 6.4 GW in 2009. That’s a truly stupendous rise.

Is such growth sustainable in the future? According to Solarbuzz, yes it is – very much so. Annual solar power system installed capacity looks likely to increase to approximately 24.7 GW in 2014, and solar power industry revenue could increase from $33.9bn in 2009 to $77.9bn in 2014 it claims. “We believe market growth will be driven largely by increasing affordability and rising grid prices as well as government initiatives in newer markets such as the UK, Australia and Southeast Asia,” says Trina Solar.

The solar market has been hit by some anxiety recently after government subsidies were cut in Germany. However European solar markets are increasingly stable and attuned to developing better technologies. But the next really big market for solar is the US. The Obama government is increasingly backing solar power and as it does so the US market is emerging as one of the top growth areas for solar.

Surviving the recession stronger
For many industries, the global recession of 2008-2009 made for tough going. “But even when credit was tight, we were less impacted,” says Trina. “Yes, some of our customers had to jump through additional hoops to obtain credit, but since the second quarter of 2009, we’ve been operating at 100 percent capacity. You’ve got to remember that European economies on the whole now have deep commitments to meet their renewable targets, and that isn’t going to change.”

There were other upsides as well. Thanks to increasing global production, the price of polysilicon, a key raw material, fell from $400 to under $100 per kilogram in 2009. So as the effect of the global economic crisis subsided through 2009, the combination of increased availability of financing for downstream buyers and decreased average selling prices of solar power products contributed to a strong increase in demand for solar power products during the second half of 2009 compared to the first quarter of 2009.

Of course, periods of volatility can make some investors uneasy. But Trina Solar was able to reassure investors by delivering manufacturing cost reductions at a faster pace than declining prices, a scenario made possible by the changing cost structures that Asian companies benefited from compared with their European counterparts.

“If you go back three to four years and you look at the cost structures of our company compared to European manufacturers, the silicon and non-silicon cost structures were basically reversed. Western companies had lower cost long∞term contracts, but we were buying on the spot market – a substantial difference in the price of silicon. We remained confident that the price of silicon was going to come down, so the end game was won by championing our non-silicon costs.”

Changing demand patterns
Regional demand patterns are also shifting. For a long time Germany served as the default end∞market for solar panels, thanks to widespread acceptance of feed-in tariffs (FIT) earned and the ability to lock into these FIT rates for an extremely lengthy period, often up to 25 years. “But Italy is also very big for us now,” says the company. “Seasonality still exists due to weather conditions, but its impacts are diminishing. For example, Italy recently announced that their feed∞in tariffs will now change frequently and more gradually, to avoid the annual year∞end crush to install and commission new systems. The tariffs will remain attractive but the plan is to smooth out the demand curve, making roll-out less seasonal, which is a positive.”

Another area that’s changing is branding and the need for customer-based service and support in local markets – in fact, wherever Trina Solar’s products are sold. “We’re working very hard now to ensure there is not just pre-service support but also post-service support. Branding is a very personal thing for many people. It’s not about just saying your product is good for consumers. It’s about actually getting out there and proving it, and high∞quality locally accessible customer support is very much part of Trina’s strategy in this logistically sensitive industry.”

Trina’s sales network in brief
• Closer to market for product feedback
• Regional warehouses for short response times
• Local professional support staff
• Consistent global brand image

Coming to a roof near you
The surging mass of IPOs during 2006-2007 also started to seriously put solar power on the map as far as investors were concerned. Some of the weaker players were certainly shaken out during the very tough, and almost immediate, recession.
But here’s an interesting thing. While costs were falling – in some cases dramatically – solar panel brand quality was rising. Unlike, for example, the semi-conductor industry, solar power branding is increasingly about promoting individual brand awareness, and a vital differentiating tool in the industry.

Consumers now increasingly identify solar products by the company which produces them, much in the way consumers identify auto brands. “It’s a business involving products that take significant time to ship or redirect based on customer needs, giving you an opportunity to secure customer brand loyalties. That’s particularly true given our products are warranted for 25 years, which is the length of many feed∞in tariff programmes.”

Brand recognition is also reflected in quality surveys and audits. Last year Trina Solar was ranked number two out of 14 international solar brands in terms of whether their marketed power output claims actually met reality. They did.  

New, high profile tie∞ups with Formula 1 also help – a lot. Trina became a sponsor of the Renault Formula 1 team earlier this year with the company’s distinctive logo sitting on the nose of the car. Make no mistake, Trina Solar is taking branding seriously, and that is increasingly important as the company becomes better known in the West. There’s no denying that Chinese brands are not well known globally, but that’s changing fast.  

A focus on innovation and quality
In terms of research and development, Trina Solar focuses on augmenting its ingot, wafer, cell and module manufacturing capabilities, while reducing manufacturing costs and improving the performance of its products. “Our research and development team works closely with our manufacturing units and customers continually to improve our module and system designs,” the company tells us. “We now own approximately 150 patents for technical innovations. Our vertically integrated business model has helped us develop into a leader in the PV industry.”

Of course, producing their own ingots, wafers, cells and modules in∞house allows Trina Solar to ensure quality along the entire integrated value chain as well as to maintain one of the lowest cost structures in the industry.

In September 2009 it launched its “Trina Solar Center for Excellence”, which includes a broad range of quality-control tests and procedures including product certification processes, material reliability and evaluation tests, and research facilities. The Center is equipped with advanced testing equipment similar to that found in internationally recognised, independent certification facilities. All equipment and testing procedures are done in accordance with rigorous, internationally recognised standards (UL1703, IEC61215 and IEC61730, to be exact).

“At our Center for Excellence, we put our modules through extreme environmental test conditions to ensure their reliability and performance. The platform also allows us to evaluate the latest materials, enhancing product quality and saving money over the long term. This means we can confidently provide our customers with a 25-year output warranty,” says the company. Meanwhile, new partnerships are sprouting up all the time. The company recently signed a partnership with the Massachusetts Institute of Technology. The deal means that Trina Solar now joins MIT in its Industrial Liaison Program that focuses on promoting university/industry collaboration and technology transfer.  

“We are very excited to announce this collaboration with MIT, one of the world’s leading research institutes, which is expected to strengthen ties between Trina Solar’s State Key Lab of PV Science and Technology and MIT’s research teams,” said Mr. Jifan Gao, chairman and CEO of Trina Solar when he announced the partnership. “Trina Solar and MIT share the same commitment to developing high∞quality solar electricity solutions for businesses and households worldwide and the Industrial Liaison Program is a great way to bring together top minds in the industry to help drive innovation.”

Changing times
So just how will the PV industry changed in the next 5∞10 years? It’s a good question given the pace of change in the solar industry. Costs are almost certain to fall, while more specialized application products will appear. “Products like architecturally friendly black modules and extended high∞output modules have been around for some time now, but they have been premium priced products. We’re now leveraging our manufacturing efficiencies to bring these products to mainstream customers.”

Though speciality solar roofing materials already exist that can generate electricity, they produce at a much lower efficiency rate than solar panels. Though the company is following the development of such building-integrated technologies, its current focus is to extend high quality, high efficiency product advantages to maximise the investment return of the end-user.

“The priority for us is coming in at the right point with market driven products and solutions. For example, to address the larger utility scale projects, we are introducing larger and wider modules to lower overall system installation costs,” says Trina Solar. “We should also see an increase in specially sized modules for smaller, one∞off areas. For building owners it will increasingly be about squeezing every last watt from your roof area. So there will be a wider range of products to choose from to cater for those needs.

Energy prices
What about energy costs? Will they rise or fall? You would think it’s a question of crucial importance for a solar energy player. The company highlights an interesting point. Yes, they acknowledge, traditional energy prices should climb long-term. “But we’re not altogether dependent on prices rising. There already exist varying regional examples where current grid prices translate to compelling economics. For example, in California, peak commercial users increasingly pay far more for their energy use than ordinary residential users. And in places like the Philippines, the cost of energy is huge – far more in terms of most people’s earning power than in places like the US or China. So it’s hard to generalise. But there are certainly huge opportunities.” Don’t forget, too, that part of Trina Solar’s success is its ability to manufacture at huge scale. In that sense, many predict that Chinese companies like Trina Solar will come to dominate the global solar panel market in the way the Japanese dominated the consumer electronics market for the last 40 years. It’s widely estimated that China’s solar manufacturers, including Trina Solar, have taken 43 percent of the global photovoltaic-panel market since 2004. And their heft gives them huge economic advantages, often enabling companies like Trina Solar to pass cost savings of at least 20 percent compared to their Western rivals.

Not forgetting the environment
As a global community, improving standards of living always comes at a cost. And as people consume more electricity every day, the question of how we generate that electricity becomes critical. Inevitably if people continue to rely on fossil fuels and emit ever-greater amounts of greenhouse gases, the damage to our environment and ourselves may become irreversible.

Trina Solar has put huge resources behind ensuring that their own waste challenges are met responsibly. “We have devoted significant efforts to reduce to acceptable levels the waste and by∞products caused by our manufacturing processes. We have installed anti-pollution equipment to neutralise, treat, and where feasible, recycle the wastes generated in our manufacturing processes, which can also carry economic benefits and further reduce our costs.”

Climate change, the company notes, knows no boundaries. “Ultimately, we need electricity generation that is environmentally sustainable, economically feasible, and easily implemented on any scale, from our roofs to our power plants.”

It’s not just about acting responsibly. It’s also increasingly evident that government policy in China is getting behind solar energy to a degree that may rival western markets, as with wind energy. In a sense, China has little choice. Recently, China overtook the US as the world’s biggest energy user. It’s also the world’s biggest coal consumer. No wonder that it’s taking solar energy and running with it hard.

“The value of a solar installation working alongside your traditional supply is starting to look exciting and attractive.”

“We believe market growth will be driven largely by increasing affordability and rising grid prices.”

“The Obama government is increasingly backing solar power and as it does so the US market is emerging as one of the top growth areas.”

A little history
Trina Solar Limited was established in December of 1997 by Jifan Gao, now chairman, working with a small group of scientists during the infancy of the solar PV industry in China. Inspired by the growth of the solar PV industry abroad and particularly the Clinton administration’s ‘Million Solar Roofs’ initiative in the United States, Mr. Gao’s initial plan was to create a solar PV system installation company focused on providing solar energy to different regions in China. After much hard work and dedication, the team successfully launched China’s first solar PV house in August, 2000. Trina Solar then established itself as a leader in the field of solar PV. In cooperation with the Chinese government, Trina Solar helped to establish the first “China National Stand-alone PV System Technology Standard”. In order to promote this important milestone, Trina Solar hosted the First International Solar Power Technology and Marketing Forum in Changzhou in September, 2000. The rest, as they say, is history.

The names behind Trina Solar
Jifan Gao
Chairman and CEO
20+ years of management and entrepreneurial experience
Visionary founder of Trina Solar in 1997
Standing Vice Chairman of the New Energy Chamber of Commerce of the All-China Federation of Industry and Commerce

Terry Wang
Chief Financial Officer
20+ years of experience in finance and accounting
Former Executive VP of Finance at Spreadtrum (NASDAQ: SPRD)
Former [financial] controller at one of the world’s largest NASDAQ-listed semiconductor assembly and testing companies

Sean Tzou
Director and Chief Strategy Officer
23+ years of experience in supply chain management
Vice President of Solectron Asia-Pacific Services
Previously a Senior Executive of several global business units at Solectron

Further Information: www.trinasolar.com