They were the second-best performer on NASDAQ last year. They were listed as one of two companies with exemplary business strategy in a recently published China Cleantech Report. They ended the third quarter of the last year with profit, and according to the published data they surged more than 700 percent last year, with a market value ending year over US$ 1.5B. Although everything is up and running for Canadian Solar Inc.(NASDAQ:CSIQ), its chairman and CEO, Qu Xiaohua, remains cautious and warns that it will take another three to five years until people at CSIQ can be sure their business model is successful.
“Although our business model gave us an advantage over our competitors, it will take another three to five years, until we can talk about results. It is possible that in that period, someone will come up with better ideas and takes this advantage,” says modestly Qu. He then adds: “but this was actually just the first step.”
So, what is the model that brought Canadian to the focus point of every analyst in the solar market? CSIQ started as a module manufacturer and turned into a one-stop shop and provider of solar power solutions. It was exactly this shift that brought them profits in the last year.
“We were working on this model since 2009, and did not give up on it. It required a lot of effort and belief. Our model is different from the solar grade silicon business, where everything depends on long-term contracts, and thus the business depends on trends. In the long run this kind of model is not sustainable,” says Qu. He further explains that their sustainable way of doing business is the reason why they are ranked among the top three companies according to market value, although their sales are sometimes even 50% lower than those of their competitors.
But, not only has the market recognized their model – competitors recognized it, too. Qu is pleased to see that no one is talking about solar grade silicon or vertical integration as a sustainable model anymore; instead, they are talking more and more about the CSIQ business model.
Maybe this is the reason for Qu’s optimism when asked about possible overproduction in the Chinese market, and consequent depression, like we saw in 2012.
“I have been in this business for twelve years now, and sometimes what you see on paper and what is going on in the market are two different things. For example, we have so many orders that even if we worked 24 hours every day with full capacity we would still not be able to deliver. I think that this overproduction problem is related to second and third tier producers, which do not have their own products, but are working for someone else,” says the Canadian CEO. He then explains how the company is not facing overproduction difficulties this year.
“Despite the European market contracting in the last few years, we believe that in the next two years markets all around the world will continue to grow and will stay stable,” says Qu.
He pointed out that they expect the biggest growth in the Chinese market, but that the American, Japanese and Southeast Asia markets should also not be ignored. So, what is their strategy for the Chinese market? Most of the analysts and market insiders would say the distributed model, but not Qu.
“At this moment, distributed network is just a sign of future direction. We will continue to make money through solar farms, because there are still too many difficulties with distributed network, and it will take a lot of effort until that market is fully functional,” explains Qu, who sees the biggest problems with distributed network in payment for the services and proprietary rights.
“Solar farms are simple. You build it and sign a contract with the electric company, and that is it. With distributed network you have problems with payment, because you are dealing with individual consumers. Further, you have problems with proprietary rights. That is, you need to sign an agreement with every landlord in the area. There should be some kind of platform like, let us say, PayPal to solve these problems. I really do not see any company that could overcome these problems in the near future,” says the CEO, who hopes that China will learn from the American or Japanese markets.
“I hope that the day will come, when buying solar energy will be the same as buying a heating boiler. A consumer buys it and operates it itself.”
Due to the complexity of developing distributed systems, Canadian plans to stick with its business model of investing in the less risky markets of developed countries. After all, some analysts believe that it was the investment in the Canadian market that helped them go through the toughest last two years in the market.
There is still a lot of space for growth in the developed countries when it comes to the solar market. Due to a decrease in the costs of solar components, even markets that did not see any profit before are now starting to rise. Whoever manages to overcome differences in policies between different markets will be a market leader for sure. Another direction is getting solar energy directly to households. Of course, distributed network and some other energy models should play a role here. “So, in that aspect there is a lot of space for development,” says Qu.
But this does not mean that they will not continue to develop in the Chinese market. In the next two to three years, they plan to reach GW-level projects through cooperation with provincial governments. They have already signed framework agreements worth 3GW, but, as Qu pointed out, only a part of it will be feasible.
