Sunny days ahead for REC Solar

Singapore

IT IS light at the end of the tunnel for REC Solar.

A bigger solar power market, higher US anti-dumping tariffs against Chinese manufacturers and more stable prices for solar cells have helped to put the Oslo-listed firm on firmer ground.

REC Solar, whose integrated plant in Singapore is the largest globally outside of China, is expanding its production from 820 megawatts (MW) last year to 1,300 MW next year to take advantage of an anticipated upturn in the solar industry.

In an interview with The Business Times, REC Solar's CEO Martin Cooper said: "If you ask me what the worst thing in the industry was, I'd say it's the Chinese coming in. And the best thing? The Chinese coming in."

The arrival of the Chinese in the solar manufacturing in the past few years has driven prices down, forcing many solar manufacturers out of business and the closure of REC Solar's plants in Norway. Yet cheaper photovoltaic cells, coupled with improved quality, means that the cost of solar power has also come down, encouraging more widespread adoption.

The "holy grail" of the industry is to get solar panels to grid parity, or the point at which electricity from solar panels is as cheap as conventional power, and this has happened in sunny countries such as Italy, Spain, Hawaii, Australia and Singapore, said Mr Cooper. Costs of solar panels have come down by two- thirds in the last three years, from US$1.70 to US$0.60 for each megawatt, he said.

"What's happened in certain countries is that the governments don't have to give subsidies anymore."

While the industry is now still "heavily influenced" by government intervention to protect domestic solar manufacturers or to encourage take-up of solar power, sudden changes in policy could sometimes create boom and bust situations.

"Once you get to grid parity (and have market forces prevail), it's a proper grown up industry," said Mr Cooper.

The firm, which exports nearly all of the panels manufactured in its Tuas plant, sells mainly to Europe (60 per cent) and Japan (30 per cent). But with heavy US tariffs against Chinese and Taiwanese solar products introduced since June boosting demand for its products, REC Solar expects US' share of exports to ramp up from less than 10 per cent currently to 30-40 per cent next year.

Mr Cooper foresees a bright future for solar power globally, given that it currently generates less than one per cent of all electricity in the world. The industry will also become more Asia-oriented, he said.

REC Solar is the result of a split in the parent company in October last year; shareholders had bought out the wafer, cell and solar panel manufacturing arm to make it a separately listed company. The other part of the company, REC Silicon, is headquartered in the US and produces silicon materials.

Explaining the move, Mr Cooper said that the type of people who wanted to invest in silicon was different from those interested in solar. It also streamlines the firm's operational processes. "That gives us the flexibility to move the business at the speed we want," he said.

For now, the firm focused on growing its sales infrastructure to sell the anticipated 1,300 MW it will be producing. But come the first half of next year, it will decide on its next step, which could be a new plant anywhere from Europe to an emerging market, or next to its Singapore plant.

And it is poised to do so from an enviable financial position of having US$100 million in its coffers and zero debt.

Depending on what it would like to do and how much money it hopes to raise, changing its listing location could be an option too. Though its headquarters are in Oslo, its presence there is nominal, with an office of three staff.

Said Mr Cooper: "Norway is more a historical fact rather than something we've carefully chosen. There are two options: one is to come here because we're here; the other market we could consider is the US, because that's where a lot of the solar companies are listed.

But the decision will be part of a more holistic plan on future expansion, he added: "We'll probably do it at the time that we need the money."