In an interview with REGlobal, Canadian Solar’s chief executive officer, Dr Shawn Qu gave insights into the unique and specialised position Canadian Solar is in as both a solar PV manufacturer and large-scale solar project developer. Read his interview to find out more about the company’s journey over the past two decades and his vision for the company and outlook for the sector.
Can you tell us a bit about what you have seen over Canadian Solar’s journey so far and what it took to reach the 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) programs 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 is 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 organizations like Bloomberg New Energy Finance, IHS Markit, PV Magazine and other which consistently rate Canadian Solar as one of the top 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 the 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 around the world since our business was founded in 2001.
Our other main line of business is our energy business – 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.
What have been the top PV technology trends of 2020? How do you foresee the PV landscape evolving over the next 2-3 years?
Certainly, 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 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 evolutions in cell technology to increase cell efficiency. In fact, we set a new world’s record for multi-crystalline cell efficiency three times in the last year. Looking forward, upcoming cell technologies such as hetero-junction technology can significantly increase the 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 levelized cost of electricity (LCOE). By increasing the efficiency and energy wattage of solar modules, we also reduce the amount of land and labor required, which makes solar energy ever 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 into solar PV projects. By storing the solar energy that is generated during the day and using it to power energy demand in the evening, the incorporation of energy storage systems 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.
In your opinion, what would be the long-term impact of Covid-19 crisis on the 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 effectively. I believe we have done a good job on that front, and impact to our operations has been minimal. In Q2 2020, we saw a softening of the residential and commercial market in some countries, and in the utility-scale markets there have been some financing delays that have pushed projects to the right, but only a quarter or two at most.
“The underlying economics for solar are as compelling as ever before so the demand for clean, solar energy is also increasing.”
Covid-19 has been a painful reminder about the human effects on Mother Nature, and that if we do not take bold action, our civilization will bear huge consequences. On the climate front, this means that the urgency of decarbonizing our economy has become greater than ever before. The underlying economics for solar are also as compelling as ever before so the demand for clean, solar energy is also increasing. Solar still only represents three 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 (power purchase agreement) price for commissioning in 2021 is USD 0.039 per kWh, which is over 20 per cent cheaper than the cheapest fossil-fuel competitor i.e. coal-fired plants (estimate cost in the range of USD 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 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.
When you look at situations like the trade war do you see these as major problems for solar manufacturers or just another road bump? How do you think these will be viewed in 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 policy come and go. Through it all, we have always found a way to grow inspite 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 favor. 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 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 biggest risks and challenges faced by the global solar industry? What should be the ideal strategy to minimise/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 they are about to because they cannot keep up with the pace of technological evolution. Supply consolidation is even 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 its 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 to stay on the leading edge of technology innovation for delivering 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 solidified its leadership position in the industry.
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 business. 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.
Accordingly, what are Canadian Solar’s global expansion plans, both in terms of capacity and regional diversification? What are the long-term targets?
As I have mentioned before, we are already a very globally diversified company, with 15 factories in 6 countries, and business presence in 23 countries, and sales to over 150 countries. There is hardly a place on the 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 as well as 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.
What role do you foresee for energy storage technologies in the global PV space? What will it take for energy storage technologies to be able 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 lifecycle management of energy storage.
“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 lifecycle 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, dispatchable, solar energy solutions. In this most recent quarter, we almost doubled our total 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.