The return of global photovoltaic production – pv magazine International
From pv magazine 07/2022
Since the demise of former PV manufacturing heavyweights in Europe such as Q-Cells and SolarWorld – as well as Bosch’s abandonment of its 2 billion euro ($2.06 billion) investment in manufacturing of PV in Germany – institutional investors avoided the risk of business plans that involved large-scale PV manufacturing in Europe.
Yet in 2022, times have changed. The ongoing sense of urgency to act on accelerating climate change is not entirely new, but what is new is the desire to no longer ignore which types of government benefit most from the export of fossil fuels.
Russia’s war on Ukraine since late February this year has propelled the question of reducing Europe’s dependence on oil and gas imports from Russia as quickly as possible. at the forefront of all political debates. While this agenda acts as a booster to already solid growth plans in the renewable energy sector, it also highlights another inconvenient truth: Europe cannot afford the components needed for an accelerated energy transition.
Fifteen years ago, Europe was home to the major manufacturers in the photovoltaic industry. It still sports the highest per capita investments in R&D activities in renewable technologies developed and advanced by state-funded research institutes.
A sober assessment of the global industry supply of components for photovoltaic and wind power installations draws the conclusion that over the last decade the world has become completely dependent on Chinese manufacturers for the key components needed to implement implementation of the global energy transition.
China’s large integrated PV manufacturers now control over 90% of the global market with their wafer, cell and module production facilities, as well as much of the solar inverter market. Production facilities are based in China and neighboring Southeast Asian countries, such as Vietnam and Malaysia. There are only a very limited number of European module and inverter manufacturers left after the industry has been badly affected by the inconsistency of renewable energy policies implemented at national level in Europe.
In effect, the world is trading its dependence on fossil fuel exporting countries such as Russia, the Gulf region, Venezuela and Brazil to meet its energy needs for a dependence on Chinese manufacturers. key components of renewable power plants. This prospect cannot be reassuring.
In March 2022, EU Energy Commissioner Kadri Simson pledged to do “whatever it takes” to ensure solar manufacturing returns to the region. It is understood that new players hoping to emerge will need to operate at annual generation capacities of several gigawatts to impact the market, as well as to give new players a chance to become cost competitive with their Asian rivals. .
The Turkey Bridge
Two companies based in Turkey, just on the border of Europe, are establishing cell and module production capacities in the range of 2 GW to 2.5 GW, and each without direct subsidies from the EU. ‘State. One is Smart Solar Technology, which started as an independent power generation company (IPP) founded in 2009 in Bulgaria. In 13 years, Smart Solar Technology grew from a regional IPP player in Eastern Europe to adding EPC services for third parties in this region in 2013-14, before finally making the leap into module manufacturing in 2016-17.
The initial annual production capacity of the module factory in eastern Istanbul was around 400 MW. Since then, the plant has undergone two capacity upgrades and is now operating at over 1 GW per year of peak module production.
With the decision to lead three divisions (IPP, EPC and manufacturing) in 2015, founder Halil Demirdağ convinced his university colleague, Hakan Akkoç, to join the board of directors of Smart Solar as COO and CTO, Purchasing and Manufacturing Manager. While the two had considered whether to further integrate upstream operations and venture into cell manufacturing as early as 2019, it was at the height of the Covid-19 crisis in February 2021 that the two agreed that it was inevitable that Smart Solar would maintain growth prospects.
The manufacturing shutdowns that have occurred due to the Covid-19 outbreaks around the world, as well as hiccups and growing delays in international shipments, have led the two leaders to the conclusion that the time has come to invest in the cell manufacturing. For this strategic decision to yield the expected benefits, there was no doubt that the cell and module manufacturing capabilities had to match from the start. The funding required for such a commitment by Smart Solar Technology meant that the company needed outside investors.
At a time when most companies were contemplating (at least temporary) layoffs and postponing investment plans, Smart Solar made the bold decision to go public and move forward with its manufacturing ambitions. of cells. An important ingredient of the Smart Solar manufacturing plan was to keep up with technological developments in the module space, including half-cut cells and bifacial modules.
With its own photovoltaic projects installed in the years 2011 to 2013, Smart Solar evaluated offers from module manufacturers around the world. Like any other project developer, the company researched the most profitable modules to install in its photovoltaic power plants. Discussing the objectives of his IPP business with Chinese solar manufacturer Phono Solar, a subsidiary of the Sumec Group, Halil Demirdağ concluded that Phono Solar was able to provide him with the type of modules he was looking for: a module optimized for stability and energy efficiency. In terms of price per Wp, Phono Solar’s modules were certainly not the cheapest on the market, but as an IPP, Smart Solar focused on the lowest lifetime cost per kWh of electricity produced , rather than the lowest investment cost. Phono Solar’s modules fit this purpose much better than most competitors’ offerings.
An external event then led to Smart Solar’s decision to establish module production in Turkey. The country announced that it would grant higher feed-in tariffs to photovoltaic installations that met certain national content requirements. These requirements could only be met if at least the modules were manufactured locally. By entering into a partnership with the Sumec group for its production plans, Smart Solar has been able to benefit from all the expertise acquired by Phono Solar over the years.
With the help of Phono Solar, Smart Solar was able to establish its module manufacturing capability in less than four months, while benefiting from using the same components that went into their Chinese partner’s already certified modules, to ensure the new module certification process. was quick.
For Sumec Group, the cooperation with Smart Solar Technology had clear advantages: a module production facility not impacted by EU tariffs and a product that could easily recoup its price premium in the Turkish market, as electricity generated with these modules was remunerated at a higher rate in Turkey.
This domestic price premium explains Smart Solar’s international sales, which represent only 10% of its total turnover. After all, why sell your modules overseas if they can fetch a higher price in your home market? Despite this clear preference for domestic sales, Smart Solar has maintained operations in multiple regions, supplying modules to more than eight countries in Asia and Europe.
The medium-term project pipeline of the IPP arm of Smart Solar, which is not part of the publicly traded entity, includes the addition of multi-MW power plants in countries including Italy, Spain and United States. A new cell factory will begin production in early 2023, manufacturing p-type PERC cells, with a claimed efficiency of over 22%, with the factory able to upgrade to n-type shortly thereafter.
IPO – how so?
Although a relatively small stock market transaction generating $36 million, Smart Solar’s IPO stands out. In the first half of 2022, it closed one of the worst six-month periods in the last 20 years in terms of global stock price movements. But Smart Solar’s IPO remained above its listing price, giving the company a post-IPO valuation of nearly $150 million. Indeed, the share price has appreciated since its first day of listing by more than 50%. To our knowledge, the Smart Solar Technology IPO was the first IPO by a crystalline PV panel maker in the Western Hemisphere in at least the last five years, if not the last decade.
Most of the proceeds from the IPO are earmarked for the construction of a 2 GW cell factory and a 1 GW module assembly facility near Izmir on the Mediterranean coast. Expanding vertical integration while increasing overall production capacity was the main selling point of the equity story.
In a future edition of photo magazine, we will further analyze an even bolder move into the photovoltaic manufacturing space by a Turkish company, Kalyon PV. It has established a new integrated plant producing 1 GW wafers, cells and modules at a site about 50 km southwest of the Turkish capital, Ankara.
By Gotz Fischbeck
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