Shoals, solar balance-of-system player, had a strong 2020 and sees an even stronger 2021

From pv magazine 09/2020

pv magazine: This has been a tumultuous year for economies right around the world, and the United States has been no exception. How would you describe the year for large-scale solar?

Dean Solon, founder and CEO (DS): The short version is that it’s been a damned good year.

Why do you say that?

DS: Last year was great for solar in the United States and we thought, ‘that’s going to be a hard one to top off.’ And now 2020 is topping 2019, and we know that 2021 is going to go even further.

Jason Whitaker (JW): From our standpoint as an electronic balance of system (eBoS) supplier, through our communications with our clients and customers, we understand that our indirect customers [asset owners] are really putting a lot of pressure on our direct customers [EPCs] to ensure continuity of supply and even accelerated delivery to sites.

And why do you think there is this acceleration?

DS: A lot of people thought that the 100 MW fields were all dead, but those suckers are coming back with a vengeance. We are seeing lots of 220 MW, 250 MW, 500 MW, 750 MW projects – we are even seeing two 1 GW-plus sites taking shape.

What is driving the increase in project size?

DS: I think what is happening is that many states are seeing coal assets reach end-of-life and powering down, and they are just replacing them with solar. The second part is that solar has gotten very cheap to install. The modules have come down, the eBoS, trackers have sunk like a rock, inverters are dead cheap – it just makes sense to install more PV.

JW: It’s not just the size though, the geographic spread [of PV projects] is also growing: These projects aren’t only in California anymore.

Moving onto PV power plant design trends – one notable feature of some projects, as an outside observer of the U.S. marketplace, has been some of the high AC/DC ratios in certain parts of the country. Where do you see that heading?

JW: The AC/DC ratios have been quite high, but that’s only been the case for the last couple of years. It really depends on what that client is trying to optimize. There are a lot of things that come into play, including the financial model. All the things really play into the various “secret sauces” that the developer has in their recipe. I don’t know how far it will go, but it is something that is more driven by other components and standards. It’s been fairly steady over the last 18 to 24 months.

DS: One thing that we’ve seen is that a couple of our clients are incorporating a 42-year cycle into their financial modeling – which is kind of bizarre, but if it works it works.

You mean they are assuming a 42-year lifetime of the plant? As a supplier of electrical components that will be out in sun, rain, snow, hail and wind for 42 years, what do you make of that?

DS: If they choose Shoals’ products they might be OK.

I suppose you would say that. We’ve recently seen the rapid rise of bifacial modules on single-axis tracking systems. This also means that two-in-portrait (2P) configurations have also become more commonplace. Where do you see that discussion regarding these tracker configurations and wind events?

JW: This really applies the same way, regardless of the component you are talking about. I think the key thing is to pick a reputable tier-1 vendor that understands all the different aspects that come into play when you are talking about a bifacial product and 2P configuration – which is a lot more surface area and a lot more weight than what has been in the market previously. It is making sure you partner with a reputable player.

DS: And don’t go cheap.

JW: Exactly. Otherwise you will end up choosing a supplier that has a better price point, but is a newcomer to the tracker market or a newcomer to this type of configuration. Ultimately you will still pay the price – it might not be day one, it could be day 50, or year five.

DS: What happens with trackers is that you have steel. And steel costs six pennies per pound. For some new startup tracker companies, the only way they can compete with the established companies like Array Technologies or Nextracker, is to reduce the cross sectional area or size, and then sell it cheaper. And what we are seeing, especially down in Florida, is a lot of cheaper trackers that are rusting – even within one year. They are also bowing like Christmas lights hanging across your gutters. So now you are asking the module to act as a structural feature to compensate for the beams that are under-designed. You may save half a penny or a penny off the price with the startup [tracker] guy but within five years you are going to pay triple that cost when your modules are lying across the field in a wind event.

Everyone says that they’ve done the modeling and stuck one [tracker] table in a wind test, but put it in Florida, have a hurricane come by and see how it goes. That’s a realworld wind event, not spending $50,000 for 30 minutes in a wind tunnel test. The O&M costs down the road for these trackers are going to be phenomenal.

Well let’s talk O&M. We are seeing quite a few transactions with some exiting the O&M business while others acquire portfolios. How do you see this space evolving?

DS: From a pennies-per-watt standpoint everyone is beating themselves up to do it cheaper and cheaper – that’s why First Solar got out of it. The O&M cost is dropping just like it has done for the module, inverter and eBoS – it’s cost down. O&M kind of got a free ride in not being on the radar for cost down, but in the last three years that process has really tightened up.

For us, with our Big Lead Assembly where we’ve removed combiner boxes, the fuses are external and the wiring, once installed, is never messed with again. That means O&M costs on the BLA are approaching zero. The EPCs that make their money off O&M don’t like us so much – their model was to sell cheap and then make up that margin on the O&M services.

JW: It really has come full circle, a lot of the clients are starting to understand the true cost of eBoS and are starting to head down the straight-and-narrow path – a lot of this is due to lessons learned in the past. Last year, 2019, we repowered about 850 MW of our competitors’ products. Keep in mind that this was multiple sites and multiple different competitors. Although the BLA takes O&M down to near zero, there is still a lot of cleanup with cheap competitors projects that will have to go through a repowering cycle.

DS: That number Jason is talking about, the 850 MW, were fields that never made it to 36 month lifespan before the eBoS failed.

That’s a bit shy of 42 years.

DS: It didn’t even make 42 months!

We are seeing from China the race to make the biggest, most powerful module. What do you make of that trend?

JW: I think it’s a hell of a marketing trend. We’re obviously not panel experts, but the trend did make me wonder whether modules have reached a point of stagnation from a technology perspective, and manufacturers just focused their efforts on multiplying the existing form factor to increase the output. Bifacial, by contrast, is starting to push the envelope and offer more power output for an equivalent cost. Increasing the amount of power without occupying more real estate is a good thing and ultimately from an eBoS and a metal-BoS perspective – more power per steel, more power per copper does work. But I am not sure what the advantages are in saying that you have a 1000 W module that in its simplest form is just two 500 W modules stuck together.

Shoals is an American company playing on the international market. You’ve had part of your supply chain in China in the past – is that still the case? And I’m asking in light of recent trade tensions…

DS: We had operations in China in the early 2000s, when we were in automotive. But when we were starting to pick up a heap of module makers and inverter guys, who were manufacturing in China, we started to supply companies from some of our Chinese operations. In the last eight to 10 years, we have been able to manufacture in the U.S. and ship abroad. We think we have the most efficient labor force here, and at a great cost. Another good thing is that we have a lot of sea containers rolling into the United States, and all of those go home empty. We can take advantage of that and get great freight rates. Half of our customers are outside the U.S. We ship 15 to 20 sea containers a week to customers around the world. We’re not opposed to having local production for local customers though.

JW: If you look at our cost of goods and sold material, about 95% of that comes from North America.

DS: We practice what we preach.

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