Localised manufacturing of silicon cells and modules should return to the US because of demand in the North American market and more profitable use of capital investment, a senior energy analyst said yesterday.
Sanjay Shrestha, managing director at Lazard Capital, a US brokerage firm, told delegates at Intersolar NA: “You can add greenfield cellular and module facilities in US in the current environment. There are going to be benefits. It will [improve] working capital management, bring you closer to demand and the amount of quality production might even be higher.
“To have a sustained growth and capital formation in this industry it is very critical that the entire supply chain focuses on return on investor capital (ROIC) and making healthy margins while continuing to come down the cost curve through technological innovation rather than the supply chain.”
Shrestha said that based on a projected module cost of 60c/W at a 1GW fab in the US, the payback period would be nine years with a 10.8% ROIC.
Despite 30% lower production costs in China, a 1GW plant with pricing of about 54c would see a 8.3% ROIC, he said.
“In the US, it's a bit more expensive, but when you take into consideration the tariff right now it's actually cheaper to be building plants here. It makes economic sense for large-scale fabs to serve the North American market given that this has got to be a rapidly growing market on a global basis for many years to come.”
US module prices could be up to 10% cheaper after accounting for import tariffs, he said.
“With the local content issue, import tariffs and increasing focus on long term warranty, we clearly think that it does make a lot of sense to consider supply chain to have localised manufacturing in markets like North America.
“We talk about 'let's make it in China given the lower costs and export'. But we don't think that model will work going forward.
“This should be a distributed manufacturing model rather than exported from China to all different parts of the world.”
Shrestha also said that he anticipated a shortage of polysilicon in the second half of 2014, especially for supplies priced below $20/kg.
“For the first time in at least five years, demand has the potential to exceed supply and the industry could go into a short supply mode in 2014. The industry needs to think about this and start planning for it.”
Shrestha said that Chinese companies would also do well to establish manufacturing sites in North America.
“I would strongly encourage some of the leading Chinese companies to take this into consideration. If they continue to want to be a long-term player on a global basis, they do have to make sure they have a distributed manufacturing strategy.”
Lazard Capital forecasts that solar is going to be the fastest growing segment of the global power market with an additional 50GW in 2015 from 33GW in 2012.