pv magazine: Can you talk about Sungrow’s business in the United States, and how your presence in this market has changed over time?
Steven Chan: Historically, North America – including Canada and Mexico – we’ve had about 400 MW of installations. I think that just this year alone we are looking to be between 500 and 600 MW. This means that in 2017we have seen over 100% growth over our entire cumulative sales in North America so we are growing at a very rapid pace.
The biggest project that we have this year is a 205 MW project in the Central Valley close to Fresno, California, which is with a 1500 volt, 2 1/2 MW central inverter, and that’s still the largest project for that inverter. This year we’ve been on quite a lot of short lists for that product. Were it not for Section 201 we would have been awarded a lot more similar projects of that nature.
The other product that we launched this year is a 125 kW 1500-volt string inverter. We have started shipping for three different community solar projects in Minnesota. We probably have about 50 MW of that product going in this quarter and next quarter. Those will be community solar applications, which I think is an excellent application for this product.
Prior to when we launched this large 125 kW inverter this year, for community solar projects, our customers have ordered either the 60 kW, 1000-volt inverter or the 1 MW 1000-volt central inverter. When the block size for community solar is 1 MW, it’s not that great to have either 60 kW – you are probably using more units of inverters than you want, or to have a single 1 MW unit will reduce flexibility with site design. So it really makes a system design cheaper and more efficient with greater design options for unique site conditions to have the 125 kW string inverters.
For community solar applications, that’s where it has really started to take off. We’ve also seen with the Section 201 issues, community solar PPA rates are higher, because they are competing with behind-the-meter rates, there is still a fair amount of flow-through in terms of demand for that product and those types of projects.
pv magazine: What are your thoughts on the Section 201 case and its potential impact on your business?
Chan: In terms of how we see Section 201, we think it’s a negative for the industry, we think it is not the right thing, but this industry has weathered a lot on the last 10 or 20 years, and it’s very resilient. But Clearly the industry will be smaller if something like that were to go through.
If you take a step back, and look at Sungrow’s strengths, you sort of look at us as being well positioned to weather the cycles up or down. Why do we think we are strong? We are diversified across many countries, financially we are very strong, As a publicly listed company, our market capitalization is over3 billion dollars, we have strong revenue growth, the company has been around since 1997 and we’ve grown every year since inception. We ended last year with about $870 million in revenue, around $120 million in net income, we’ve been profitably every year since 1997, the company has been diversified in terms of its revenue.
We feel like financially we are positioned very well to weather Section 201 particularly as we are selling in a very globally diversified manner having shipped 50GW cumulatively. The company makes strong technically advanced products at a low cost, if you look at our 125 KW string inverter, as an example, the physical size of that next to our 60 kW which is also on display next to our 30 kW – the 125 kW inverter is actually similar in size and about 150 lbs. compared to the other two. This means that we packed 4x more energy conversion into the same footprint. That’s an example of the technological sophistication of Sungrow.
pv magazine: Can you talk about the trend for string inverters to become larger, and is there a limit?
Chan: One of the big advantages of string inverters is that you don’t need heavy equipment to get it around. This central inverter, it is many tons – 6 tons. You can’t even use a regular forklift – you have to use one of these forklifts that are three times as tall as us.
But the string inverter? If you can make it small, you can get two guys to lift it. It is very flexible. You can get it to more sites, you can install it in a more flexible manner, you can repair it and replace it easier.
In my opinion, the size is limited to what you can pack into something two guys can pick up. If you get beyond whatever that is – 160, 180 lbs. – then I think you are going to start to hit some challenges for what you want with a string inverter.
There is a trade-off, you don’t want it to get too big.
pv magazine: You mentioned that the products that you delivered to the project in the Central Valley are 1500 V compatible. Can you talk about your products for the 1500 V market? And has the industry completely moved over to 1500 V, or is there still demand for 1000 V?
Chan: For non-rooftop installations, the market standard has definitely moved over to 1500 V. But some ground mount projects have been historically designed around 1000 V, so there is a tail period for 1000 V products, in ground mount commercial and utility, but for the ones where EPC companies have switched project designs or they have been designed recently, it’s all 1500 V as far as we are seeing, both on the string and central side.
We have a 2 1/2 MW inverter that is in a 10-foot container, and then we have a 20-foot container that has that same inverter, in addition it has a transformer and switchgear. Basically, the idea is that a lot of times you need another company to help, a skid integration company. So you bring the inverter to the U.S., it goes to a skid integration company, and they put the inverter on a metal skid or a concrete and add the transformer and switchgear and they wire it all together, and it gets shipped to the project site.
That is an extra step, it is an extra cost that is not small both in terms of cost and additional time. So our product is all-in-one. It can ship as a 20-foot container right to the project site. And the size of our container is actually smaller than the size of the typical skid that is delivered. People like a smaller footprint as it helps with site design and logistics.
pv magazine: In terms of energy storage, obviously more and more projects, particularly in the C&I sector, are taking on energy storage. What are your thoughts on the future of the U.S. energy storage market? And is this a market segment that Sungrow is actively pursuing?
Chan: We have our core competency inverters. In China we have a joint venture with Samsung SDI, and their core competency is battery cells. We provide our inverters, they provide their battery cells, and that JV produces a solution geared towards the C&I market. Also, our storage inverters are compatible with all kind of batteries, and JV is a way to help Sungrow improve our knowledge about battery.
So we have a team there that is focused on driving sales of that solution. In addition we have taken our 2 1/2 MW central inverter, and we have a model of that which is a storage inverter. So we offer both the utility inverter as well as a C&I turnkey solution. We do feel like in both areas the market is extremely bright for this sort of option.
It’s like the early days of solar equipment. It’s all about cost. We talked to a guy recently where in 2012 they were paying $800 per kilowatt-hour, and now it’s down to less than half of that in the last five years.
The cost reduction is really important to see what the demand curve will be. A lot of that is about driving costs lower, and its also about each project – we try to get it as much of a template or a cookie-cutter as possible. You want to avoid a lot of local engineering, local customization. Still right now I think that in the C&I space there is more of that than you’d like.
So a scalable revenue growth business is going to take a little time to get going until you get it into a more standardized offering as well as at a lower cost. These are really great projects that we are bidding into today, that will help to set a foundation for us to be a leader tomorrow. And the on-the-ground work that we are doing now will make us a leader in the space when it is a bigger market.
We are seeing at the utility scale, PPAs and projects are coming up, many will have a storage component. Being an inverter company, it is a very complementary area to get into, for us to have an inverter that facilitates storage is part of our core competence. To work with Samsung, that makes a lot of sense to combine the expertise of our two companies who are global leaders in our core competence, Samsung in batteries and us in inverters.
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