Solar power investment has been more resilient during the Covid-19 crisis than most alternatives, but spending on rooftop solar installations by households and businesses has been strongly affected and final investment decisions in the first quarter of 2020 for new utility-scale projects fell back to the levels of three years ago. Equipment manufacturers are gearing up to address the short- and long-term impact while continuing to focus on technological improvements. In an exclusive interview with REGlobal, Steve O’Neil, Chief Executive Officer, REC Group shared his views on the current state of the solar power sector, impact of the crisis, REC’s journey so far and its future strategies, emerging PV technology trends and the way forward…
What have been the key highlights of REC’s journey so far?
We are an international, pioneering solar energy company with a Scandinavian heritage. Our focus is innovations and manufacturing of high-efficiency solar panels. We have a clear vision, to empower people through green solar energy and thereby contribute to realizing the global energy transition. REC Group has 24 years of experience in photovoltaics and has been a key player since the beginning of the solar industry. We are constantly setting the pace when it comes to high efficiency solar modules – this is crucial for us because we believe that only big innovations can successfully drive forward energy transitions. REC employs 2,000 people and has an annual solar panel production capacity of 1.8 GW. With over 10 GW installed worldwide by end of 2019, REC is empowering more than 16 million people with clean solar energy. REC Group has headquarters in Norway, operational headquarters in Singapore, and regional bases in North America, Europe, and the Asia-Pacific.
What are the emerging trends in the global solar power equipment market? What are the growth drivers?
There are several macro trends that drive energy transitions and the empowerment of consumers. I like to summarize them under the three Es: Electrification, Economics, Environment. Solar energy is ideally placed to meet the needs created by each of these trends. As electricity consumption is forecasted to grow by 60 per cent until 2040 replacing gradually conventional energy, demand for electricity from solar PV and wind is increasing. Simultaneously, these energy sources are set to become the most cost-efficient power generation sources as the levelized cost of electricity (LCOE) for PV has decreased by 80 per cent since 2010. Last but not the least, climate change is a growing driver for the deployment of solar energy, as it is an important source of low emissions energy. But to reach the 1.5-degree Celsius target we need to significantly accelerate the expansion of solar installations. Based on REC’s COP21 study, so far, we are on track for the 2-degree Celsius target but falling behind for the 1.5-degree Celsius goal.
In your opinion, what has been the impact of COVID-19 on global solar supply chain dynamics? Do you see a greater trend towards localised equipment manufacturing?
The COVID-19 pandemic has evolved from disruptions on the supply side in Q1 2020 to disruptions on the demand side. This is likely to affect the PV industry in 2020 and early 2021. Most PV markets worldwide are only now just emerging from full or partial lockdowns during which there was a significant reduction or even a complete freeze in solar PV installations.
“In Asia, we see that dominant supply chains for solar and storage are currently rebounding after contractions in February.”
With regards to supply chain dynamics, REC is actively exploring other sources and transportation channels along the full supply chain. Where potential disruptions along the supply chain for REC products are possible, REC stands ready to rapidly verify the standards of new suppliers to incorporate them quickly into the manufacturing process when required. In Asia, we see that dominant supply chains for solar and storage are currently rebounding after contractions in February.
How has REC’s experience and revenue changed post-COVID? What have been the key learnings for the industry so far?
The COVID-19 crisis has hit many economic sectors hard and the solar industry is no exception. However, we have learned that the reasons to go solar have not changed due to the crisis: solar energy has rapidly become more financially attractive and thereby helps relieve the extra financial strain in many households incurred through increasing energy bills. Solar is a flexible and affordable source of energy, that helps to foster greater power independence. In addition, PV can be deployed more quickly than fossil fuel or nuclear power plants and at any size. It is suitable for installation in disaster areas and remote places with no grid connection and provide power to mobile off-grid COVID-19 hospitals. We were also pleased to see that economic recovery packages rolled out in response to the crisis in many countries provided an additional incentive to set up or expand already cost-efficient solar installations. REC Group therefore remains optimistic that any disruption to the solar industry will be temporary and not impact the bright mid- and long-term outlook.
The current estimates on global demand for solar energy support our optimism. While REC analysts have revised the figures for 2020 to a more moderate trajectory of between 106 GW and 126 GW, global PV demand forecasts for 2021 are now between 124 GW and 140 GW. To put this in perspective, the total capacity of solar installations worldwide amounted to 115 GW in 2019.
What has been REC’s strategy to expand its manufacturing base globally? Accordingly, what are the emerging focus markets for REC?
Globally we can see that the decreasing LCOE for solar is making PV demand less policy driven. As previously mentioned, 10 GW of REC solar panels have been produced and installed worldwide, generating 13 TWh of clean energy. Rooftop PV is forecast to be the fastest growing segment, and we know that high-efficiency products are crucial to this segment due to the limited space available. To address this problem, we developed the powerful and award-winning REC Alpha Series. The 60-cell format reaches 380 Wp and the 72-cell format 450 Wp power, packing-in around 20 percent more power than conventional panels. This is possible thanks to their high-power density, or power output per square meter (217W/m2), producing more power in less space. As a result, it is the panel of choice for homeowners and businesses around the world.
Although the expansion of renewable energy in Asia faces hurdles in terms of significant fossil fuel subsidies and the necessary deregulation of the energy markets, accounting for almost half of all new capital spent on renewables globally, this is also the region where the most significant investments are currently being made.
For future manufacturing expansions, such as the potential facility in France to increase our actual production capacity of the heterojunction technology for Alpha of 600 MW, REC has been in detailed discussions with several technology partners who can meet our long-term requirements in terms of cost and performance.
What is your opinion on the falling cost of solar power vis-à-vis conventional power? Do you think that coal-based power can be phased out earlier than expected?
You can see that since mid-2019 solar panel costs continued to decrease. When looking at the past decade, solar module costs have decreased significantly, namely by 90 per cent compared to 2010 (utility scale and rooftop installations), while fossil power generation costs such as coal remain at similar levels. In the last decade, the LCOE of utility scale PV has declined by an impressive 80 per cent, reaching around 4 USD cents per kWh. In Chile, the UAE, Australia and China, where some of the cheapest PV projects have received financing in the recent years, generation costs of 2.3-2.9 USD cents per kWh are already possible. Current projections suggest that by 2030-35, generation costs for utility solar will reduce even further to 1 to 2 USD cents per kWh in sunny locations. This means that building new solar power plants will not only be cheaper than operating already-built coal plants, but cheaper than fossil fuel plants in general. The uptake of solar power will certainly accelerate the phasing out of coal and other fossil fuels.
Could you talk a little about your product development strategy?
The cornerstones of our product development strategy are our ambition to constantly set the pace of innovation and to empower our customers with their solar installation throughout its entire lifetime. Our engineers and scientists are constantly working on several very innovative ideas in our sector. At the same time, we are also constantly developing existing technologies and can thus achieve higher levels of performance that were previously not considered possible while maintaining unique reliability and quality. Our low warranty claim rates are a testament to our high product quality. For every 10,000 REC panels manufactured, only one returns from the field as a claim. This allows us to give out exceptional warranties such as the REC ProTrust Warranty, that we unveiled at the beginning of this year. It includes a 25-year product warranty, a 25-year performance warranty and an up to 25-year labor warranty by REC Certified Solar Professionals, under certain conditions. For this reason, REC has been named a Top Performer by DNV GL & PVEL in its PV Module Reliability Scorecard – for the 5th year in a row.
As far as we are concerned, innovation does not only mean increasing cell efficiencies. It also means keeping abreast of other disruptive trends in society such as digitization. We are actively seeking ways to improve our services for our customers and partners through digitization. Our SunSnap app for example helps REC Certified Solar Professional installers to register their REC installations, boost sales and obtain warranty benefits. Our newly launched REC ProPortal delivers a bounty of customized content to our installer partners and assists with identifying potential customers. What’s more our virtual booth and REC Leadership Panel, which took place in late June, allowed our customers and partners to get up close to our latest products and leadership team, keeping us connected to our valued supporters even in these unprecedented times.
What have been the new and emerging PV technologies worldwide? What is REC’s R&D strategy to develop new technologies and improve existing ones?
As previously mentioned, the overarching tenet in our R&D strategy is to constantly set the pace of innovation and achieve large technology leaps that are driving the global energy transition. We have developed several pioneering hi-tech products that are industry standard now and increased cell efficiencies thanks to technological innovations, for example our multicrystalline and monocrystalline products as well as the half-cut cell technology that we commercialized. We believe that the heterojunction technology (HJT) is going to emerge as the next big technology that transforms the solar industry in the years to come. This technology combines the benefits of crystalline silicon solar cells with those of thin film technologies for much higher efficiency and electricity yield. We are using this technology in our ground-breaking REC Alpha Series and are confident it will be a game changer in the solar industry. Furthermore, we see that customers are paying more and more attention to how environmentally friendly solar panels are manufactured. We are proud that our silicon production in Norway has the lowest carbon footprint and we were able to significantly reduce the laid content in our Alpha panels. We will continue to work on this asset.
“We believe that the heterojunction technology (HJT) is going to emerge as the next big technology that transforms the solar industry in the years to come.”
Where do you see REC on the world solar map in the next five years? What is the company’s long-term vision and target?
REC’s strategy for future growth is based on three pillars – Focusing our efforts on creating innovative solar modules, working with our partners to bring the latest, cutting edge technology to our customers, whilst always maintaining the highest quality standards, so that we uphold our reputation as “Solar’s Most Trusted.” We work with the leading players in the solar industry supply chain and draw on the latest research to ensure that we are constantly setting the pace when it comes to pioneering hi-tech solar modules. In addition to producing premium products, we are also guided by our commitment to contributing to the transition towards a low carbon economy. We understand the crucial role solar technology has to play in this transition and are certain that the future for solar is bright.