Adrian Ferraretto and his team at Tindo Solar are daring to go where everyone has feared to tread – establishing a new solar module manufacturing business in Australia.
The plant, which will have a capacity of 60MW a year, and which will begin commercial production in the next few weeks, is running counter to all received wisdom – that no one can compete with low cost Chinese manufacturers.
Tindo, which means the sun in the local indigenous language, will be the only manufacturer in Australia, following the decision by Silex Systems to cease cell production, and put module manufacturing on hold because of the competition from Chinese imports. In an interview with RenewEconomy, Ferraretto explains where he hopes to succeed where others failed. Here is an edited transcript.
Q: The first question is why?
A: Well, China has taken over the solar panel industry. It used to be a small player and now it is a huge player, and I’ve been really scratching my head about that because there is no logical reason why solar panels can be made any cheaper in China than anywhere else in the world. It’s not like it’s a labour intensive process, it’s all machines and people in white lab coats. It’s just a general attitude, particularly here in Australia, that China is the factory of the world and whatever we do it would be cheaper and better coming out of China.
It’s something that has been in my head for a long time. I was the head of SolarShop in Australia, and when I was in that role I used to see factories around the word. I’m a mechanical engineer so I have an interest in that. It’s something I always wanted to do and I got close a couple of years ago, and after I resigned from SolarShop in July 2010 I decided to follow through with this idea to make panels in Australia.
Q: Are you going to be competing directly against Chinese manufacturers?
A: Yes, we are.
Q: That’s counter-intuitive isn’t it?
A: We hope one day to export to China.
Q: Are you serious?
A: Yes, and why not? If we were making panels like the Chinese, we couldn’t compete. Instead of having eight people in my production line, I would need to have 100 people. We have to do it differently here. But having said that, my cost of labour is less than a Chinese factory.
Q: But it’s not just an Australian issue is it, because solar module makers in the US and Europe are also bleeding?
A: The top 10 Chinese manufacturers lost $497 million collectively in the third quarter of last year, and we haven’t seen the last quarter. Everyone is bleeding. The Chinese are bleeding as much as everyone else. It’s a sea of red out there. It’s getting cheaper and cheaper and cheaper, they are clearing warehouse stock, writing down inventory, they’ve got red ink over their financials. I’m not sure why it’s happening. It’s not a case of Europeans struggling or Americans struggling, it’s all manufacturers. And they’ve only got themselves to blame really.
Q: What are you going to be doing that’s different, to ensure you don’t have a sea of red as well.
A: We’re just making panels for local market. We’re not trying to sell panels into Europe. It’s hard to compete in the container business. But the way the Chinese come to Australia is via a wholesale or an importer, who distribute them to installers. Their costs to do that is about the same cost as our manufacturing, so we are looking to make the usual margin that the distributor makes, because we are going straight to the installer, not through wholesalers.
Q: What is the capacity of your plant.
A: 60MW – if we were to run it at 24/7. But we are going to start by putting our toes in the water. We’re not planning to run it at the capacity from the start. We’ve got 60 installers around Australia, so we will be helping them develop. The other thing we are trying to do is differentiate our product and service. We are not making a DC module, we are making an AC module, so each module has an inverter built into it. You also get better yield, because instead of the system working at the efficiency of the weakest panel, which could be in the shade, the output of each panel can be individually maximized.
And we have a monitoring system where you can see how the panels are working, how many watts they are producing, each day, each week, each month, over their lifetime. No one else does that yet. We have excellent tools to show people how systems would work on their roofs – pitch, orientation, how much energy will be generated, how many RECs. We sell mounting hardware, and the circuitry, and we’ve gone for high quality parts, including the cells. We are not trying to produce the same product that the Chinese are doing. We are trying to not just sell panels, but to offer great services as well.
Q: So what are your forecasts for the Australian market?
A: When I first started in 1999, there was no grid-connected solar. In 2006, there was no more than 1MW installed for a whole year. In 2011 it was probably more like 800MW. In 2012, we think there may be 200MW to 250MW, and we’ve seen pretty much every state pull back. And the economics of the technology has also shifted, so for the first time in six months we’ve seen the price of silicon and modules going up. Manufacturers are going to have to make a profit sooner or later.
Q: What about grid parity? Are we there yet, and what does that mean for you?
A: That’s a hard one. If you are a business and you are generating your own power, grid parity is already there. In NSW, between 2pm and 8pm, you can get charged 42c/kWh. For this factory (in South Australia) we were quoted 40c/kWh, and the feed-in-tariff, before it was cut, was 44c/kWh. Now we get 9c/kWh for exported energy. At that rate, you don’t have grid parity.
Q: Will you have your own panels on your roof?
A: We will have a 100kW system on the roof, but we have to produce them first. When the plant is commissioned and goes into production we will install them. But I’ve got a 30kW system on my home – it must be the biggest residential system in Australia.
Q: How much have you invested in your plant?
A: About $7 million. And it’s all our own money, no debt, no grants. We went through an exhaustive process for grants but we didn’t succeed. We made a presentation to the bank in the week that SolarShop went into receivership, so the bank got scared as I had been a director. $7 million is not bad, but we are not manufacturing solar cells. That would be the next step, but it would require a grant, because it would cost around $30 million.