On July 13th, Renesola (NYSE: SOL) restated its total solar wafer and module shipments into the range of 2.2-2.4GW. This is 400MW more than previously guided range of 1.8-2.0GW. In addition, the company announced total solar wafer and module shipments for the first half of 2012 to reach level of 1GW, or 544MW in Q2, which is 14% growth over Q1, 2012. Renesola also disclosed new distribution agreement with Greek company, Big Solar, for 100MW of its “Virtus”, high-efficiency modules.
SPVI followed developments in Renesola extensively. We discussed module expansion, polysilicon efficiencies and conditions and impacts governing growth of Renesola’s quasi-mono technology.
Primarily a wafer player, Renesola started to move into module sales aggressively since late last year. In May, during first quarter conference call, the company stated that Q1 module sales reached 91MW, while Q2 module sales were expected to be in range of 150-170MW. It was anticipated that by yearend Renesola will end up with 1.2 GW module capacity and 600MW module shipments. Current announcement indicates that SOL is doing very well in the new field and modules sales are increasing. What is behind the success? It seems that Renesola’s offers highest average efficiencies for all of its 156mm*156mm, 60-cell module lines. CEO Xianshou Li frequently said that the best pitch for sales is “better products”. Indeed, Renesola’s modules stand out among peers in terms of performance.
As a note, in PV industry, “performance” usually means large power output combined with conversion efficiency. Right now, all SOL’s modules are rated 250W or higher while the mainstream c-Si modules are in the range of 235-245W. Of course, several top players have high performance products. We have reviewed Canadian Solar’s (NASDAQ: CSIQ) ELPS and Yingli Green Energy Hold. Co. Ltd (ADR) (NYSE: YGE) Panda and in general terms concluded that these two high-end products have not delivered cost efficiencies to the bottom line, thus companies are hesitant to increase production or capacity. As a result, the shipments of the high-performance modules remain a small portion of overall c-Si shipments. On the other hand, Renesola’s modules are likely made with newer turn-key cell lines without special processes and have lower costs than either ELPS or Panda.
Of course, some may question the quality/reliability of SOL’s products, whether they are up to the quality of the top players like YGE or TSL? While the branding is one of the areas where Renesola must build its presence, the quality issue is related to equipment, input of materials/components and the quality control. Since Renesola is famous for its wafer products and have been on the forefront of innovation including state of the art equipment, modules made by the company expect to offer the same quality as peers.
So how a wafer player could end up with the overall best efficiency in the industry? We have seen LDK Solar (NYSE: LDK) moving into modules before Renesola, now ending up with a large stockpile of unsold inventory. The answer has to do with the vision of Renesola’s CEO, Xianshou Li, who was named the 2011 CEO-of-the-year in the solar industry. In April, 2011, Mr. Li famously predicted the sharp module ASP decline for the end of the year. Late in the year, Li forecasted a higher demand in 2012 among the gloom and doom sentiments in the industry. Those predictions have taken Renesola to hold onto its expansions in time when everyone was spending, and expand when others were conserving rest of their cash accounts.
This timing could not be better. Module glut was forcing small players to exit markets. Some companies started selling equipment, which was still sitting unpacked in containers in China’s ports, offering heavy discounts. Equipment makers, losing demand also cut prices. In result some of the top cell/module lines were available at half price. Sources stated that Renesola was able to acquire some of the equipment at those heavy discounts.
High performance modules use high performance cells. Since most (90%) of its Q1 modules do not use Virtus wafer, regular polycrystalline wafers have been also improved. Renesola’s current 240MW cell capacity got either upgraded or the company uses only cells from tolling. For its Virtus line of products, despite the big contract with Big Solar, it is unclear whether Renesola has brought costs down to effectively contribute to the gross margin. The company had received its share of criticism for lack of transparency on costs and some misleading statements, so moving forward there is a lot of attention to those details.
Chinese media reported last month that Renesola started building 20, 30MW each, cell lines at its manufacturing base at JiaShan County. The total cost has been estimated around $180M, for 600MW this is a Capex of $0.30 per watt. There could be various causes for the change of the strategy, which had Renesola hold off cell development in the past. For one, the company relies on Taiwanese partners for cell tolling. Since the U.S anti-dumping decision, companies have increased tolling fees. Other markets do not have duties, and Taiwanese may not be able to provide high-end cells in required quantity. Another reason has to do with ability to further enhance conversion. Renesola can improve already excellent efficiency characteristics of its wafers by experimenting with new cell equipment. Own cell lines will have better Capex and technical stats, which will best Taiwanese equipment.
As a new module player, SOL can also benefit from a lower selling cost as its sales force has a pay rate matching current economy and PV industry condition. It is well known that some sales people at several large companies used to command very high pay rate.
Until now Renesola was grouped with companies like JinkoSolar (NYSE: JKS) or Hanwha SolarOne (NASDAQ: HSOL). Those businesses are forced to offer lower ASP in order to just hold to its share of the market, a clear pattern seen in Q1, 2012 results. Thanks to efficiency Renesola may be the first example of differentiation due to conversion, something which many analysts see as a factor, which in the future will only intensify separation between companies
