Canadian Solar CEO Shawn Qu has experienced the power of policy. The Ontario-based company produced all of its solar modules at seven Chinese plants until a 2009 energy act in the Canadian province created incentives and drove up demand. Last month, the company opened its first Canadian solar module manufacturing plant. Qu was mum on the company's future manufacturing expansion plans. However, he is keen to grow the company's U.S. presence and has expanded their California-based product development office from three to 25 employees since 2008.
Qu recently spoke to me about energy policy, the future of North American solar market, Chinese competition and the role fossil fuels -- yes fossil fuels -- will have in the future.
BNET: Where is the solar market headed in North America?
Shawn: As of today, solar photovoltaic has already become a major industry, especially in Europe. For example, in Germany, peak power demand is around 65 gigawatts and by this year total photovoltaic solar, if counted by DC, will approach 30 gigawatts. It shows the potential.
I think in the next three to five years, we'll see the so-called levelized cost of energy for photovoltaic achieve the grid parity point in some countries. (The point where alternative-generated electricity is at least as cheap as grid power). Japan will be first, followed by Germany and then California. Once we achieve that point, we'll see solar adopted in a big way.
Moving forward, we're going to see major wealth in North America, especially in the U.S. I believe that in the next three to five years we'll probably see the U.S., which originated and invented the photovoltaic in the Bell lab, become the largest PV market in the world.
BNET: What will drive the acceleration in the market in the next three to five years?
Qu: I think policy is important and also connectivity or connection to the grid. But the No. 1 driver is the cost reduction in solar. As I mentioned, solar has already achieved grid parity with the retail electricity rates in Japan. I think it will achieve grid parity in California in the next two to three years.
The second driver is that many citizens now recognize the environmental benefit of renewable energy. As long as renewable energy can get close to the retail electricity price it will be a good future for photovoltaic.
BNET: What can the U.S. solar industry do to improve the market here.?
Qu: No. 1 is technology. The U.S. solar industry is very innovative and lots of new technology is there in both solar cell technology, power management and power conversion technologies originated in the U.S.
I think the technology and also financing are going to be the two factors the U.S. can contribute to the global implementation of solar.
BNET: Many U.S. lawmakers and citizens want the U.S. to not only contribute the technology, but want the manufacturing here as well. Should the U.S. put their manufacturing in countries like China where costs are lower or do you think it's possible to have manufacturing in North America and still be cost competitive?
Qu: I think should a correct a misconception. I read a report from the SEIA, the solar industry association in the U.S. , and it clearly showed that the U.S. is a net exporter of solar rather than a net importer.
People may see the news of some assembly work moving to China and to other developing countries. But solar has a long value chain and there are quite a number of products that are produced in the U.S. For example, the U.S. is a strong polysilicon producer, and polysilicon is the most important feedstock for solar. Canadian Solar actually uses some U.S.-made polysilicon.
I think if somehow the U.S. can put together policy to grow the market, during that process the price will get lower and there will be improved efficiency in manufacturing and in technology and the end result, I think, is the U.S. will be able to improve its global competitiveness.
BNET: What should that policy in the U.S. look like? Should it mirror the policy in Germany?
Qu: There are many interesting and effective policy initiatives in the U.S. already. For example, the investment tax credit for renewables is proven to be an effective tool for renewable energy applications in the U.S. On the state level, California has some interesting policies, such as the 30 percent renewable energy standard portfolio target. New Jersey also has good policy.
I think a national policy would help. For Canadian Solar, it's like working in 50 different countries, not one, because every state has its own policies and procedures. Policy wise, the U.S. already has a good framework. It doesn't have to be a feed-in tariff like Germany. Feed-in tariffs work, but I think an investment tax credit and renewable energy standard portfolio can work too, as long as they're consistent and as uniform as possible and can lower the cost of entry into the market.
BNET: What are Canadian Solar's plans for the U.S.?
Qu: Canada and the U.S. is only one border line, so for me North America is just one large market.. But we are trying to get as localized as possible and want to get more involved in local product development because it takes a long time, professional effort and requires huge balance sheets (to develop a PV power generation plant). Canadian Solar has the financial strength and the balance sheet to support the major solar product development work in the U.S.
PV product development has to localized, just like real estate development. You have to know which land can be leased or bought; you also have to know the local policies with different utilities. We always work with local companies.
BNET: What affect will unrest in the Middle East and rising oil prices have on the solar industry?
Qu: In my mind, all of these oil crises like the current unrest in the Middle East will certainly impact supply and will let people think more about renewables. But I pay attention to the long-term trend, not these short term spikes. In the long term, we will see higher energy consumption around the world because all of these new emerging economies like China and India. The urbanizing is just occurring at a crazy speed, it's just crazy. You're talking about 20 to 30 percent of the world population improving their living standards and that trend is going to last the next 20 to 30 years.
We are going to see energy costs moving up rather than down over that same period. It will requires every economy to think very carefully about energy security, and to increase local generation and the distributed generation of electricity.
BNET: Will renewables replace fossil fuels in the near future?
Qu: I'm also a trained scientist, so I always take a balanced view. I think we'll have a balance to our energy portfolio where fossil fuels do a play important role, but in a clean way. At the same time, we'll see the renewable energies, distributed generations supported by energy policies and new bank of technologies to play a much more important role in the fossil fuel structure.
Photo from Canadian Solar