Chinese company making strong play for Calif. market
Posted on February 11th, 2008By Colin Sullivan
Greenwire: SAN FRANCISCO — For the president of Suntech Power North America, it’s been quite a ride from his home office in suburban Washington, D.C., to a new downtown headquarters here within a walk of the Bay Bridge.
In June 2006, solar-industry veteran Roger Efird launched the first U.S. sales effort by the largest Chinese manufacturer of solar panels from his basement in Maryland. Suntech had just three U.S. sales representatives at the time and no market penetration.
But less than two years later, Suntech (NYSE: STP) has come from nowhere to become the third-ranked U.S. supplier in a forthcoming analysis of how the domestic sector fared in 2007, Efird said in an interview. That would put the Chinese outfit just behind Silicon Valley upstart SunPower Corp. (NASDAQ: SPWR) and Japanese stalwart Sharp Electronics.
“We were the first Chinese manufacturer to start selling in the United States,” said Efird, who is in the process of moving to the Bay area. “And we’ve achieved our two primary goals in the first 12 months of operations.”
Those goals were to establish a U.S. presence and overcome the “Made in China” stigma afflicting many cheap products exported by Asia’s new economic powerhouse. Suntech dealt with some of the same questions in Europe and has overcome some early misperceptions about the quality of its solar panels there, Efird said.
“We all understood we were going to have some issues with the ‘Made in China’ thing,” he said. “We’ve dealt with that problem before.”
Numbers compiled for the third quarter by London-based research firm, New Energy Finance, appear to support his company’s bullish outlook on the fledgling U.S. market. Its data show Suntech reaching the No. 4 spot among suppliers dealing in the United States in the third quarter that ended last Oct. 31, and looked to be on the way up by year’s end.
“It does seem like they were getting pretty decent traction in California last year,” said Ethan Zindler, the head of North American research at New Energy Finance, adding that fourth quarter statistics and year-end data have not been compiled yet.
So as of October, Zindler’s numbers had Suntech ranked just behind Sharp, SunPower and German manufacturer SolarWorld. The headway, to include a 450-kilowatt system atop the San Francisco Airport, has seen the Chinese company moving early this year to capitalize on its position with a sales office here and a new warehouse in Southern California to move imported solar panels through the port at Long Beach.
All of which has the former BP Solar employee Efird packing up his office and headed to the West Coast, where he intends to surpass the big three and “do whatever it takes” to move into the top position.
“It’s time to take the next step,” he said.
Gunning for SunPower
Make no mistake, Suntech sees most of its opportunity in the California market, where most of the U.S. solar sector is operating under state and federal policies meant to encourage exponential growth.
Efird said he expects California to lead a renaissance of solar power that could eclipse global leaders Germany and Japan. But moving into California also means stepping into territory SunPower intends to dominate in the years ahead.
At a recent energy summit attended by SunPower and other Silicon Valley technology firms, San Francisco Mayor Gavin Newsom (D) went public with Suntech’s decision to establish its North American headquarters here and credited the company with creating jobs in the state’s new green economy.
But the buzz created by the Newsom’s keynote did not deter a senior official at SunPower from speaking calmly of her company’s recent success at the same event. The official cited a tripling of SunPower’s stock price and more than $1 billion in revenue in 2007.
“We are a true Silicon Valley technology company,” said Julie Blunden, SunPower vice president of external affairs, after Newsom’s speech. “We’re talking about the entire value chain — from manufacturing, to distribution, to construction — we have the entire value chain to grow.”
Unlike Suntech, which focuses on manufacturing, SunPower sees its future more broadly in products and services. This flexibility across the industry should cement SunPower’s position in the state, Blunden said.
In a subsequent interview, Blunden welcomed the competition but insisted her company would defend its turf.
“I have no doubt Suntech is rapidly rising. They’ve been doing a nice job,” she said. “But it’s great to be in a position where we lead in our own backyard.”
Why so confident? Blunden says SunPower, whose stock price has dropped significantly this year, is positioned to install 500 megawatts of installed photovoltaics in California and will soon claim 10 gigawatts of solar power installed worldwide. By 2012, SunPower intends to reduce the cost of installed solar by half compared to 2006 and increase actual load “to put us in play with the scale of the wind industry,” she said.
“We are focused on extending our lead,” she added.
But Zindler points to an advantage Suntech intends to exploit: lower prices. “They’ve been the lowest cost supplier,” he said. “Chinese companies can sell and manufacture a bit cheaper.”
For his part, Efird wants to move into the top U.S. position, but he also sees room for more than one manufacturer.
“I think both Suntech and SunPower have come on strong in 2007,” he said.
Moving to thin film
Some adventurists, including Suntech, are betting on the market shifting from energy-intensive crystalline silicon photovoltaics to thin-film nanosolar panels in years ahead. But the company is just as focused in the short term on integrating their current products into building materials.
The most recent proof is a licensing agreement Suntech signed with Los Gatos, Calif.-based Akeena Solar (NASDAQ: AKNS) in December to expand its use of “building integrated photovoltaics,” which are solar panels built into windows and other construction materials.
The idea is a rooftop solar panel that already includes built-in wiring and grounding to lower installation costs. An installed BIPV system “uses 70 percent fewer parts and requires 25 percent fewer attachment points than traditional solar systems, meaning better long-term performance,” said Akeena CEO Barry Cinnamon.
Suntech is also in the process of constructing a thin-film factory in Shanghai that could deliver amorphous silicon products by the fourth quarter of 2008. Efird said the company intends to sell these panels and its BIPV products through separate marketing channels, to architects and structural engineers.
Other technology companies are working just as hard to develop thin-film panels with commercial viability — including Phoenix, Ariz.-based First Solar (NASDAQ: FSLR) and San Jose, Calif.-based Nanosolar — but Blunden said SunPower is staying put for now and focusing on its core business.
“It’s a business model question,” Blunden said. “We see no reason to distract from our service.”
When and if a new technology emerges that is cheaper than silicon panels, Blunden said SunPower will move quickly to buy the development company or its technology.
Reached by e-mail, Nanosolar CEO Martin Roscheisen expressed confidence that his firm will soon produce a much cheaper solar panel than current models. He also downplayed some critics who think nanosolar panels are years if not decades away from mass-market penetration.
“Prices will come down fast,” Roscheisen said. “We don’t care if anyone believes otherwise.”
The wild card for the sector, and the California market specifically, is whether Congress will extend renewable energy project tax credits before they expire at the end of the year. An effort to include the credits in a Senate bill aimed at stimulating the economy were defeated last week, but Blunden and Efird alike said they expect Congress to act by year’s end.
