Covid-19 hit global solar supply chains for at least two quarters of this year, and in many markets the situation has not yet normalised. Meanwhile, trade wars between global economies and changing policy regimes are impacting solar power uptake in various countries. Canadian Solar is in a unique and specialised position being both a solar PV manufacturer and a large-scale solar project developer. In the company’s 20-year journey, it has witnessed the evolution of the solar power segment from a niche market to the fastest growing power market. One of the cheapest sources of power across the globe today, solar power deployment is expanding rapidly, supported by technological advancements and increasing cost efficiencies. In an interview with Renewable Watch, Canadian Solar’s chief executive officer, Dr Shawn Qu, talked about the company’s journey over the past two decades, his vision for the company and the outlook for the sector…
Could you tell us about Canadian Solar’s journey so far and what it took to reach its current position?
I founded Canadian Solar in 2001 in Ontario, Canada. Our first contract was to design and manufacture solar trickle chargers for Volkswagen to keep the car batteries charged during transport and storage. This early successful relationship with Volkswagen positioned the company as a trusted solar provider when the feed-in tariff (FiT) programmes in Germany and elsewhere in Europe began to stimulate large-scale growth in the on-grid solar PV market. One of our early lessons was that bankability and trust in the company are very important. In the early days, German solar developers trusted us because we were a Class A supplier to Volkswagen. Nowadays there are third-party bankability studies and reports from organisations such as Bloomberg New Energy Finance, IHS Markit, PV Magazine and others that consistently rate Canadian Solar as one of the most trusted and bankable companies in the solar industry. We have worked hard over these 19 years to continually earn our customers’ trust and loyalty. They know that we offer high quality products and solutions, and stand behind our commitments to quality and service.
What is the company’s current scale of operations and what is its business model?
Canadian Solar has two main lines of business. Our original line of business is the manufacture and sale of PV modules and other components. We have delivered over 46 GW of PV modules to over 150 countries since our business was founded in 2001. Our other main line of business is energy – the development, construction and sale of solar PV projects, working with both build-to-sell and build-to-hold business models. We have developed and constructed over 5.6 GW of solar power plants, and we have a pipeline of over 15 GW of projects in development around the world.
“The underlying economics for solar are as compelling as ever before, so the demand for clean, solar energy is also increasing.”
What have been the top PV technology trends of 2020? How do you foresee the PV landscape evolving over the next two to three years?
One of the major technology trends of 2020 has been the shift to larger wafer sizes and larger modules, which has been a major driver in the rapid growth of the top end of PV module watt ranges. Only two years ago, a 400 Watt module was a rarity; now manufacturers are announcing modules of up to 600 Watts. But I think we are at about the limit of wattage increase due to module size increase. We are continuing to see further evolution in cell technology to increase cell efficiency. In fact, we set new world records for multicrystalline cell efficiency three times in the Past year. Looking forward, upcoming cell technologies such as heterojunction technology can significantly increase cell efficiency. The trick is to do it cost-effectively and reliably at scale, which, of course, we are working on as well. Crucially, these technological advancements improve the competitiveness of solar energy by reducing its levellised cost of electricity (LCoE). By increasing the efficiency and energy wattage of solar modules, we also reduce the amount of land and labour required, which makes solar energy even more attractive from an economic standpoint, in addition to its environmental advantages.
A game changer for solar energy, I think, is the incorporation of storage systems into solar PV projects. Storing the solar energy generated during the day and using it to meet demand in the evening will significantly increase the addressable market for solar energy. We are actively building our technological capabilities in the solar plus energy storage space, to gear up for these new growth opportunities.
What would be the long-term impact of the Covid-19 crisis on global solar supply chains? What has been Canadian Solar’s strategy to deal with the impact?
Canadian Solar, like every other business in the world, has had to operate under strict health protocols to protect the health of our employees, customers and partners, while still keeping our factories, warehouses and sales operations running. I believe we have done a good job on that front and the impact on our operations has been minimal. In the second quarter of 2020, we saw a softening of the residential and commercial markets in some countries, and in the utility-scale markets there have been some financing delays that have pushed projects to the right, but only by a quarter or two at the most. Covid-19 has been a painful reminder of humanity’s effect on Mother Nature, and that if we do not take bold action, our civilisation will bear huge consequences. On the climate front, this means that the urgency of decarbonising our economy has become greater than ever before. The underlying economics for solar are also as compelling as ever, so the demand for clean, solar energy is also increasing. Solar still represents only 3 per cent of the overall energy production mix and analysts are estimating that it could reach 10-20 per cent over the next decade, so we still have a lot of growth ahead of us.
To illustrate the economics of solar: the global weighted-average solar PPA price for commissioning in 2021 is $0.039 per kWh, which is over 20 per cent cheaper than the cheapest fossil fuel competitor, that is, coal-fired plants (estimated cost $0.05-0.177 per kWh). On top of that, 800 GW of fossil fuel capacity is expected to retire over the next decade, and 2,700 GW over the next three decades. So the innate economics for solar energy is very strong, and when you look at it in terms of climate impact, it is the best solution to the economic, ecological and social parity problems we face – pandemic or not.
“We are actively building our technological capabilities in the solar plus energy storage space, to gear up for these new growth opportunities.”
When you look at situations like the trade war, do you see these as major problems for solar manufacturers or just mere roadbumps? How will these be viewed in terms of the bigger picture?
In my 19 years since founding Canadian Solar, and even my five years in the solar industry before I founded the company, I have seen a lot of conflict over renewable energy policies. Through it all, we have always found a way to grow in spite of the headwinds. So, although trade disputes may disrupt the market in certain countries for a certain period of time, we have two things going in our favour. One, we are very globally diversified, so if one market is disrupted, we have the flexibility to respond and adjust our operations quickly. And two, we are resilient enough to come up with creative solutions, such as new products or partnerships, to allow us to meet that underlying demand for clean, renewable energy, which is only growing as solar reaches grid parity in more and more parts of the world.
What are the other big risks and challenges faced by the global solar industry? What should be the ideal strategy to mitigate supply- and demand-side risks?
With every challenge there is an opportunity, and this is how we see our business well. For example, one major trend we are seeing is the acceleration of consolidation of the module supply market. A few years ago, we were competing against 40-50 players; today, only a few module suppliers really matter in this industry, because most others have gone out of business or are about to because they cannot keep up with the pace of technological evolution. Supply consolidation is more problematic for solar modules than for nearly any other purchase, because solar modules are routinely warranted for 25 or 30 years. So, what happens to that warranty if your supplier goes out of business? It is not worth the paper it is printed on. I always advise solar developers to buy from a supplier with a proven track record of meeting customer demands, disciplined capital management to weather the financial ups and downs of the industry, and demonstrated commitment to R&D so as to stay on the leading edge of technology innovation and deliver reliable and cost-effective solar power. We have our eyes laser-focused on these metrics. We are confident that 10 years down the line, Canadian Solar will still be one of the strongest brands in solar and will have reinforced its leadership position in the industry.
“Solar still represents only 3 per cent of the overall energy production mix and analysts are estimating that it could reach 10-20 per cent over the next decade, so we still have a lot of growth ahead of us.”
Which are the biggest markets for Canadian Solar in terms of sales/revenue? Which regions seem most promising in the next five years in terms of upcoming solar capacity?
Our markets are truly global, and at different times, different regions have taken the lead in terms of sales and revenue in each of our two business lines: modules and energy. Most recently, we have seen strong growth in the US, Latin America, Europe, Japan, Australia and China. Looking further afield, we see exciting growth opportunities in emerging markets such as Latin America – Brazil and Mexico in particular – and Africa and the Middle East, which are now starting to see large-scale solar deployments to offset fossil fuel-based generation.
What are Canadian Solar’s global expansion plans, in terms of both capacity and regional diversification? What are the company’s long-term targets?
As mentioned before, we are already a very globally diversified company, with 15 factories in six countries, business presence in 23 countries, and sales to over 150 countries. There is hardly a place on earth where our solar modules have not been deployed, except perhaps Antarctica.
What is your opinion on the solar price trajectory vis-à-vis other alternatives (in terms of LCoE)? What is your outlook on future solar power cost and efficiency levels?
The LCoE of solar power continues to be on a downward trajectory. Only part of this is due to cost reductions of PV modules. As global deployments increase, we see cost reductions in all solar equipment such as inverters, racking/trackers, and other balance of system equipment, and we also evolve more cost-effective ways of developing and installing solar power plants so that the total cost keeps coming down year over year, much more quickly than any new source of power.
“The innate economics for solar energy are very strong, and when you look at it in terms of climate impact, it is the best solution to the economic, ecological and social parity problems we face — pandemic or not”
What role do you foresee for energy storage technologies in the global PV space? What will it take for these technologies to reach their true potential?
Energy storage technology will be a critical enabler of the solar PV market going forward. We have already seen significant cost reductions in energy storage solutions, and we believe that there will be significant advances in this area in the coming years that will bring down the cost and improve the life cycle management of energy storage.
At Canadian Solar, we are building our expertise and ramping up quickly in the solar plus storage space. Our integrated business model, covering both modules and system solutions as well as our energy business, gives us a growth advantage to develop cost-effective, end-to-end, integrated, despatchable solar energy solutions. In this most recent quarter, we have almost doubled our pipeline and backlog of storage projects. We are also building our storage pipeline in other parts of the world, including Latin America, Europe and Australia.