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How to Join the Solar Revolution: The Suntech Perspective

An interview with Robert Efird, the President of Suntech America about the prospects for solar in the U.S. and the opportunities for solar entrepreneurs.

There is a debate quietly raging about the future of the solar power industry in the months and years ahead. While some feel the current economic situation will impede the growth of solar, many believe that the eight year extension of investment tax credits for solar will create the incentives needed for solar energy to grow across the U.S., even in states where the industry has not been very active. Another big plus is the commitment of President-Elect Barack Obama to renewable energy. Obama wants 25% of U.S. energy to be from renewable energy by 2025 and he plans to invest $150 billion in renewable energy over 10 years to create 5 million new green jobs. Even in scenarios where some priorities are pushed off to a later date to deal with the economy first, tackling clean energy would stimulate the economy now as well as providing a lasting benefit for the future.

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The solar boom is not just for big businesses. All of this also creates the opportunity for the creation of small entrepreneurial businesses that install solar systems or participate in the solar boom in other ways.

Solar photovoltaic panels will provide one component of the solar future, with companies like Suntech helping to make it happen. Suntech is one of the world’s largest solar companies, with production capacity steadily growing. As part of Suntech’s move into the U.S. market, industry veteran Roger Efird joined Suntech in 2006 as the President of Suntech America. Suntech has also opened a joint venture called Gemini Solar Development Company to focus on utility scale projects in the U.S., and is moving to greatly expand its share in the U.S. market for photovoltaic (PV) solar. I had the opportunity to speak with Roger Efird at the Solar Power International 2008 conference where we talked about the prospects for solar in the U.S. and the opportunities for solar entrepreneurs:

Glenn Croston (GC): How is Suntech doing?

Roger Efird (RE): We have pretty much been doubling our revenues and manufacturing capacity annually since being founded and as of about a year ago we became the world’s largest manufacturer of solar modules. They came to the U.S. and opened their first operations about 3 years ago and have both crystalline and thin film technologies, so they’re very active players in both traditional technologies and in what might be considered future trends of solar. I don’t think there’s a company better positioned to take advantage of the expected boom in solar energy.

GC: What kind of growth do you see ahead for solar?

RE: Solar in the U.S. has been growing at 30-35% a year, and with the investment tax credit passed, the optimistic view is for 60% growth. Navigant consulting is projecting 60% growth in 2009. There are a few things in this package that just passed that are going to spur the growth.

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One is that the extension of the tax credits for eight years, long enough for companies like Suntech to invest in our infrastructure. One or two years is not long enough to make a heavy investment, but eight years is.

The second thing driving growth is that for the residential market, the cap on the credit at $2000 has been removed. For the average American home this makes the tax credit go from $2000 to $10000. That’s a big increase in the tax credit for residential and we have to believe the residential market will grow dramatically as a result of that.

GC: In the past the solar market was mostly concentrated in California. Will this now expand now across U.S.?

RE: There are a number of states that have an incentive program at the state level that was not large enough to stimulate solar growth, but with the new credit they will. North Carolina, Maryland, Pennsylvania, and maybe a dozen states will now have viable residential solar industries. The Mid-Atlantic region and the Northeast will see a big boost because most of those states have a solar program that has been up and running for a while, and this will boost those state programs to viability.

Even in states with practically no solar, where the word ‘solar’ has never been used in their legislature, the 30% tax credit will spur the early adopters who love high tech, have high income, want to make a statement, and want to go green.

The rule of thumb has been that if a system will not pay for itself in 10 years then you will not have the ability to build a viable market. For commercial systems the rule of thumb is a system needs to pay for itself in 7 years to be viable. Now a lot of states move inside that 10 year window.

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Another action taken in this U.S. move was with the utilities. Since 1978 utilities have not been able to take a tax credit of any kind for the installation of photovoltaic systems, but now that has been changed. At the far end of the spectrum are the huge solar farms, the big multi-megawatt utility owned generating plant. This big solar farm business has been very slowly emerging. Now with this change in the law it will emerge rapidly.

GC: Is power from solar thermal, concentrated solar power, cheaper than from photovoltaic systems?

RE: Several people have asked me if I see us competing with CSP (Concentrated Solar Power) systems. And the answer is no. CSP takes some pretty large economies of scale. They are viable at a certain size, in terms of megawatts. We’re not going to compete — there’s going to be a rule of thumb. Up to a certain size, photovoltaic will be the best alternative, but for larger systems, CSP will be. It’s going to be a matter of what the customer wants. If he wants more than 20 megawatts, maybe CSP, while smaller sites would be PV.

GC: And for distributed power?

RE: That’s where PV has no competition. You can’t put concentrated solar on someone’s roof. PV has no competition in distributed generation, comparing PV to the retail rate in this market. The only viable route on rooftops is PV. In terms of what technology has the most secure future, I think its PV. If the market goes to large solar farms, we’re in, and with residential systems we’re in.

GC: How will the credit crunch affect the solar market?

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RE: The residential market for PV systems will probably not be affected. Early adopters are upper middle class who do not borrow, do not need home equity for the system. They have disposable income and spend it on solar

On the other side of the fence, for the large utility scale installations, there’s is a debate going on, because it will be harder getting money and getting financing. On one hand that’s true and on the other hand it’s not. There are two theories and one says we’ll be hurt and the other says we won’t. If you’re going to large financial institutions for money it’s going to be hard right now. A lot of the funding for these projects is from private financing though.

If you’re a private investor suddenly solar is going to look better than ever. Where before the returns on solar investments maybe did not look so great compared to other investments, suddenly we’re looking a whole lot better than everybody else. And the risk for investment in these projects is incredibly low. The jury is still out though.

GC: Even if you’re hurt, if you’re coming down from 60% annual growth to maybe 30-40% growth, it’s still pretty good.

RE: How many industries consider 25% growth a bad year? I’ve been in solar for 25 years, and I know historically it’s been somewhat economy proof, all over the world. Even if the economy is down, the solar business seems to be okay. Maybe it will see 15% growth instead of 30%.

GC: What is the long term impact of government incentives on the growth of the solar market?

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RE: We need stable incentives. Germany has a solar market 8 times the size of the U.S. market, because they have a long term incentive program and stability, and that market has grown and grown. The U.S. has been different, with incentives going up and down and up and down.

We have something similar now, like Germany. The U.S. is by far the largest consumer of energy. Today about 10% of the solar business in the U.S., but we are going to be the biggest market for solar and the general feeling of the industry is that this rapid growth for solar begins immediately.

GC: What is the opportunity for entrepreneurs who want to get into the solar market?

RE: I think the residential business is going to explode fasting than the rest of the market. If I was going to start something, that’s where I would start it.

In my vision of the solar dealer I think of the guy who lives within a few miles of where you are, and he’s the Carrier air conditioning guy. He lives in your community and has as customer base of a few thousand people he has sold systems to and services them. He’s got experience with electrical work, and experience with mechanical engineering. He’s accustomed to getting up on a roof and he has a warehouse, tools, trucks, front office, secretary, and a database of customers who are happy with his work. And he has a son that is getting out of college and has a degree in environmental engineering.

That is the profile of someone who could be a dealer for solar systems, where it fits in with what he does now, covering thousands of homes. If I’m a homeowner and looking for a solar system, I want somebody I know, who will be around in the future, 5-10 years down the road. I would imagine just like that HVAC guy who sells you an annual maintenance agreement, he can do the same for solar. You can say the same thing about a small electrical contractor and maybe a roofing contractor if he brushes up electrical work.

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Another thing about the solar industry is that it has so much potential in terms of job creation. It is estimated that just PV solar will create 450,000 jobs, and this does not even consider the removal of the cap on the tax credit. When Obama’s on the TV talking about the economy being driven by green jobs and businesses, I believe that’s absolutely true.

About the author

Glenn Croston is the author of "75 Green Businesses" and "Starting Green", and the founder of Starting Up Green, helping green businesses to get started and grow.

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