Mexican Solar Aims to Seize US Market

Q: What progress has Solartec made toward strengthening its position as a manufacturer of solar panels?

A: Over the past 18 months, our efforts have been directed toward making the company more vertically integrated in the solar panels business. Our main competitor comes from China, which has a more integrated and robust supply chain than Mexico. When we started out five years ago, we had to import most components, as there was little availability of raw materials in the country. To this day, 80% of the raw materials we use come from other countries, mainly from China. However, we have created a new company, Solarcell, which will make polycrystalline cells with 17.2% efficiency rates for some Chinese customers, as well as Solartec modules intended for the US market. Anti-dumping policies are leading to a shortage of solar modules in the US, where we are currently exporting about 40% of our production. This is why we are looking at producing solar modules exclusively for that market through Solarcell. To move toward this, we decided to further integrate the company by purchasing Bosch Solar Energy’s wafer division in early 2014. We set up a new facility in Houston, Texas, which began operations in January 2015. Initially, this plant is only making polycrystalline modules of 250W, 260W, and 315W, as these are required in the US market.

Q: How do your panels compare to those of leading Chinese manufacturers?

A: We have the same warranties and certifications for the Mexican market as Chinese companies. Nonetheless, we only have an installed capacity of 50MW while Chinese companies have gigawatts of capacity. We are soon going to input 60MW of installations in the US, and we expect Solartec’s capacity to reach 110MW in modules in 2015. Compared to Chinese companies, this remains small. Chinese companies have more competitive prices right now because of the size of their industry, which is something Mexico still lacks. In addition, we still have to import raw materials. However, we can compete on projects. The service side is also completely different as our facilities are closely connected to the main Mexican markets. Large EPC companies, many of which come from Spain, are concerned with price as they can get cheaper equipment from Chinese suppliers. In addition, bankability is an issue as Solartec is a young company. There is a liability insurance company working with us on this problem so that we can compete with Chinese players in terms of bankability.

Q: How do you envision the balance between your sales in Mexico and the US?

A: The costs of production in the US are higher than in Mexico, but so are the revenues. We need to increase capacity in the US because, as a US company, we could receive more financing from government banks. I believe Solartec will grow faster in the US because of the demand in the country. We expect demand from the US for Solartec to increase by about 50-60MW in 2015. Right now, Solartec has some important clients in the US which request about 10MW per month, but we can only deliver slightly over 1MW at the moment. If Solartec could increase its production capacity, we could increase our sales tenfold. Nevertheless, we also want to be present in Mexico and develop the domestic market, given the amount of opportunities appearing here. This is why we decided to divide our production. In Mexico, we sold about 30MW in 2014, which was double that of 2013. We expect this trend to continue for 2015 and beyond.

Q: What sort of clients and projects do you think will drive demand in Mexico?

A: We actually have some projects with GM and Nissan, with the latter being in Aguascalientes. Mazda also has some lighting systems powered by our modules, and it is looking to supply part of its energy from solar generation in the next two years. Japanese automotive companies provide a very good market for solar power generation as they genuinely seek to include this energy source in their plants.

For 2016, we expect to work on smaller EPC projects ranging from 1-10MW. Considering the Energy Reform, we also foresee some large government-driven projects in two years or so. For the US market, we are also working with EPCs on small projects around the 10MW range. One of our dreams, which will hopefully become a reality, is to work with leasing companies in the US, such as SolarCity, because these have a very large demand for modules, financing, and credits.