Buying American: Green Solar on the Section 201 case

Editor’s note: This is the second interview in a series that pv magazine USA is conducting with companies involved in the Section 201 trade case, featuring voices both for and against strong trade action. The first interview with Strata Solar Senior VP Brian O’Hara can be read here.

 

pv magazine: As a supporter of the petitioners, what to you are the big issues at stake in the Section 201 case?

Edward Harner: To me, the biggest issue is that as far as solar adoption in the world, America is near the top of the countries that have the most PV systems installed. But the kind of panels being installed are not generally American-made panels. It doesn’t seem right that we are near the forefront of PV installation and adoption, but we don’t have enough of a share of the manufacturing of the panels that are being installed.

As far as why we felt we should support SolarWorld and Suniva, we can see that without this, that there might come a time where there are no American solar manufacturers left. During the testimony Suniva and SolarWorld presented slides that showed that there were 50 or so American solar manufacturers over the last ten years that have gone out of business, and we are only left with a couple.

The reason we decided to go and testify is that we want the American consumer to have a choice. And of course we feel that American panels are better than foreign panels – particularly the well-established brands like Suniva and SolarWorld. From a technological standpoint we feel better in terms of the verifiable quality control standards that they have, and the ease in which customers can exercise their warranties.

More than any of that, we don’t want to come to a point where our customers in Texas or in other states who really want to buy American don’t have the chance to buy American. We want to keep this option on the table because we want to be able to give our customers what they want.

And without this, we fear that we would have to tell them: “I’m sorry, there are no American solar panel manufacturers”.

 

pv magazine: Green Solar Technologies is a SolarWorld “Platinum Installer”, which implies a strong relationship. Why is it important for your company to use American-made PV modules?

Harner: You’re right – we are SolarWorld platinum installer, and I believe that we are one of 31 companies. We like to differentiate ourselves based on quality. And what we find is that a lot of times solar companies – including nationwide companies – don’t even reveal what kind of solar panels are going to be on the roof of these people’s houses, particularly with leases.

As far as what I know about these companies, a lot of companies wait until close to installation to determine what is the cheapest panel out there and slap those on the roofs of homeowners.

We aren’t interested in being the lowest cost, we are interested in being the highest quality. Particularly in the last three years, we’ve seen a lot of panel companies come in and try to sell us their panels, with brands that we’ve never heard of before making a push.

Solar is all about the warranty, and our name is all about service and the warranty, and their being able to trust a 25-year warranty. We give a 25-year workmanship warranty on our installations. We don’t want to get into a situation where 10 years from now somebody tries to exercise the warranty and goes to a panel company that is based in Vietnam that is no longer in existence. Who are they going to blame when they can’t get the warranty that the manufacturer gave? Basically: Us.

In the very rare occurrence when we’ve ever have had any issues with SolarWorld, or even Suniva when we’ve used to install Suniva, when customers have tried to exercise their warranty, we’ve seen panels arrive at the homeowner’s house in less than a week.

That’s what we feel comfortable aligning ourselves with them. There is also the degradation factors. SolarWorld has been around for 40 years. So all these things are tested. And have been tested.

If a panel manufacturer that started three years ago in Vietnam tells me that their PV degradation rate is whatever it is, how do we know? SolarWorld, when we have visited their facilities, they have a panel that is still working that was manufactured 40 years ago.

We feel more comfortable with something that’s been tested, that’s been around for a long time, that’s manufactured here, than any other panels.

 

pv magazine: Under the petitioner’s proposed remedies, prices on solar panels will increase, and opponents of trade action say that this will mean a smaller solar market, particularly for large solar projects. Is this something that you are concerned about?

Harner: Of course we always are sensitive to any kind of price fluctuations in materials. But I think what people and particularly what consumers might not understand, or people who are not in the industry might not understand is that if the panel prices were to increase, the actual increase in the price of the solar system to the consumers will be much smaller than people think.

I did some rough calculations. Let’s say panels go up by 30%. First of all, that would be at the levels where the panel prices were about two years ago, when solar was still a great investment. If the panels go up by that much, the end increase to the consumer is probably 5-10%. Depending on the size of the system, and of course the panels themselves.

Now 5-10% sounds like a lot, but a couple things have happened in the past two years that still make solar as good of an investment as it was two years ago. First of all, electricity rates continue to rise.

Right now the price of panels is artificially low. And because they are artificially low, a lot of small players have come into the installation industry. Small electricians, and all of these people who are not experienced solar installers, because the barrier to entry is artificially low.

So people are selling at prices way lower than is feasible, particularly if these companies are offering extended warranties, and they are making little-to-no profit.

I think that to the consumer, that initial savings might not be real. If they are buying it at, let’s say, $3.50 per watt, they are buying sub-par materials, and five years from now, because those companies probably won’t be around any longer, if there is some kind of issue they won’t be able to service the installations. They will have to reach out to companies like ours, who will be around, to be able to take care of any issues that they have. In the end I think that might cost more to the homeowner than a 5-10% increase in cost initially.

So what I think what will happen to the industry is that there will be a fair amount of consolidation. Why we are not too worried about it is because of our long-standing relationships with SolarWorld and Suniva. And because of that our prices won’t change very much, because the panel companies that are going to be most affected are going to be the Chinese panel manufacturers, or the manufacturers based out of Vietnam, or any of these other places.

If these other companies had already quoted customers, based on these artificially low prices, and the installations are not scheduled until after November, and they haven’t purchased the materials yet, then they definitely will be hit by that and thankfully we don’t have that issue.

We are still hiring. We see that solar is only going to grow, and as far as the industry, I think that a couple of things have happened in the past few years which might actually offset any increases to the cost of the panels themselves.

Number one – the cost for acquisition. Two years ago more and more of our customers had to be educated on solar and would require a lot more time to actually complete the sale. Now we are past the early adopter phase of solar. Almost everybody in America knows someone who has solar, understands how it works, and just really wants to see what the savings are going to be, what the initial cost will be, and what they are financing options are.

Because of that, the cost per acquisition has gone down significantly. I would even say that the cost per acquisition has gone down more than any increase in the panels. As an industry, solar is in a good place, it will continue to grow. Utility companies are going to continue to raise their prices, and we think that this is just kind of a natural sort of thing that happens when an industry matures.

 

pv magazine: So far it seems all these comments have all been about distributed solar and residential solar. Do you have any comment regarding the potential impacts to large-scale solar, the big solar farms, and that part of the industry?

Harner: I’ll tell you right away that I am not an expert in utility-scale projects. We don’t do utility-scale projects. But what I have understood about that part of the business, and what I’ve talked about with other companies who know a little bit more about this, it might slow down.

This is particularly because of Wall Street’s involvements in these projects. The margins on these large projects are extremely thin, and they talk a long time to happen. So Wall Street, or private equity, is putting a lot of money in these developments, and the margins were already thin, and they take a long time to come to fruition, and so most of the time they don’t have all the funding and haven’t secured all the 72-cell modules they need.

So I wouldn’t be surprised if a lot of these projects, after they update their assumptions on price of materials, that they will no longer be profitable. There needs to be some kind of reanalysis of the viability of these projects, and this will impact that.

At the same time, I think that we haven’t taken any outside investment, we are a privately owned company, and we don’t even have loans with banks. What I think might happen and will contribute to the consolidation of the industry is that a lot of the smaller businesses, solar companies that have loans with banks of any sort, a lot of them will go out of business or at least not be able to make scheduled payments, because of this increase in the cost of the panels, particularly when they are operating on such small margins.

As an asset class, these investment funds, these banks, will maybe put solar into a more risky category and won’t give loans as readily. That of course will make a lot of businesses not be able to operate. That’s also not going to kill the solar industry, because there will be customers who are not able to be served by these smaller companies, and companies like ours will be there too give the consumer what they want – which is high-quality solar installations with high-quality materials.

 

pv magazine: To get back to your customers – are they willing to pay more for American-made PV modules? And what sort of a premium is generally seen as acceptable?

Harner: Absolutely. Our customers are willing to pay more for American-made modules. We would always like to be able to offer American-made panels, and we do. We prefer the American-made panels, but some customers are more price sensitive.

Because of the – again – artificially low cost of these imported panels recently and because we are competing against companies which are selling those, we have had no choice but to offer a couple different panel options to our customers.

Now for our more price-sensitive customers who can’t get fully financed for the American package that we offer, we do offer the other package. Of course, for any panels that we use, import or otherwise, we always use the best panels. But when given the choice, basically we put a premium of maybe. Let’s say on average we are talking about a premium of about 3-7% on the total system.

 

pv magazine: What do you expect the final outcome of this trade case will be?

Harner: I think that you probably know better than I, but I think that $0.78 per watt is going to be minimum for imported panels.

 

pv magazine: That’s Suniva’s proposal. There is no guarantee that the ITC will make that proposal to the president, or of what the Trump Administration will do.

Harner: This isn’t something that is based on my experience in solar, but if one party asks for $0.78, then I’m sure that party can accept something under that. That’s all that I can really add to it. There’s probably a range. Knowing Trump, I don’t think that he would take the first offer, right?

I think that it might go a little lower than that, but I think we are probably in the ballpark. There was one slide presented where I believe that it was the initial case based on the dumping claim that went through four years ago. There was a time when American solar manufacturers were profitable. What happened after that is that Chinese companies and Taiwanese companies figured out pretty soon that they could move offshore to Vietnam and Thailand and Malaysia and these places to circumvent that, which took about a year or two for them to get their production set up.

During that window there was a floor set, American panel companies were profitable. That price, $0.78 per watt, is roughly in line with the price in that window when the dumping prices were set, and between that time and the time when these panels from these other companies began production.

 

pv magazine: Anything I haven’t asked that you think is important for our readers to know about this trade case and your position.

Harner: We as Green Solar Technologies took a bit of a risk to go against SEIA, and I believe every other installation company in America. And we did it because it was the right thing to do. We want to support U.S. solar manufacturing, and that is important to us, just like keeping the solar industry growing in America is important to us.

We made the determination that those things are not mutually exclusive. We can keep U.S. solar manufacturing in the U.S. and consumers will still benefit in a big way from solar. I think that in the short-to-long run, if this didn’t go through, there would be no American solar PV manufacturers left.

And when that happens, it is our thought that Chinese companies or any foreign companies, once there is no domestic competition, would inevitably raise their prices anyway. Probably to a level higher than what American panel companies would sell to begin wth. In the end the consumer would pay the same or more, it would just be that they wouldn’t have the option of buying American-made solar panels.

 

Edward Harner is Chief Operating Officer at Green Solar Technologies.