Transforming the Industry One Inverter at a TimeWed, 02/22/2017 - 15:58
Q: Why did Huawei leap from telecoms to energy and what competitive advantages are gained from being in both?
LT: Even though we are starting to enter the PV sector in Latin America, our experience in the energy industry is not a recent development. For many years we have provided energy infrastructure for the telecommunications sector, especially in remote locations that have no power supply. In Mexico we work with Claro Americas providing end- to-end solutions for that type of technology. We are also close to PV technology; last year Huawei topped the global solar PV inverter shipment rankings. The main value from Huawei telecommunication and IT technology is Big Data management, which will eventually be the most important element for power generation. Huawei’s new and innovative technology will help our customers optimize and control their energy production processes, which will be key for the development of solar energy in Latin American countries, given the lack of government subsidies in the region. The record-low prices seen in Mexico in the past power auctions mean companies require a high-tech complement to survive in such a competitive environment.
DS: Huawei entered the telecommunications sector early in the 21st century, transforming itself from a small company to a tech giant with annual revenues of US$50 billion. The company’s growth drove Huawei’s directors to diversify their business, which coincided with the solar energy boom in Europe and Asia in 2010. During this period, a number of solar energy companies appeared on the market, prompting Huawei to incorporate this sector into its business portfolio. The technological expertise Huawei had accumulated from the IT industry allowed us to grow rapidly in solar and we now are one of the top manufacturers and distributors of solar energy components.
Q: What is Mexico’s role in Huawei’s global portfolio and what challenges have you encountered entering the market?
LT: Mexico is a large market with strong potential because of its population and energy requirements. It is a tough market for solar businesses but given the implementation of the Energy Reform we see it as an important segment in the next three to four years. One of the main challenges for Huawei is user habits. In Latin America the market for PV inverters has not blossomed as much as in other countries and investors lack experience or knowledge of new technological trends. So it might be difficult to explain its benefits. The first step for Huawei entering Mexico will be to apprise the players of the benefits of Huawei’s technologies and solutions.
DS: We are confident about our product’s quality and competitive prices and we have a well-prepared local team that knows the market and its needs. But we are still a fairly unknown brand in this country and we have a product that is not common in the national industry, so we are working on promotion and product awareness. Solar developers in Mexico are used to installing large and inefficient central inverters, which we want to replace with Huawei’s string inverters. It will be challenging to transform the industry’s habits but we are confident of success once developers realize the monetary savings offered by our product.
Q: How will your unique technological expertise and innovation impact the development of the power market?
LT: The auctions’ winners are facing the challenge of producing energy at the bidding cost they were awarded, which means they will have to optimize their processes to lower their levelized cost of electricity (LCOE). Many people mistake CAPEX for the LCOE alone but it is important to calculate the LCOE formula correctly, especially now that technology costs are dropping every day and looking at CAPEX alone will not be enough anymore. Through our innovative solutions Huawei can help customers optimize production and improve their OPEX along the projects’ 25-year period of operation.
Q: What does “smart” mean in the case of energy solutions and how does Huawei integrate this vision into its products?
LT: The solar inverter is merely the hardware we provide for our PV solutions. The real key to making power plants smart is Huawei’s software. Traditionally the inverter’s function was to convert DC to AC, but after we combined it with information and communication technology (ICT) it transformed into a controller with the capacity to collect Big Data. The data allows easy and accurate visualization for better control. The data will be transferred through power line communication technology (PLC) for processing. The software, called NetEco, and its function of Smart IV Curve Diagnosis will identify the causes of failures and suggest methods and techniques to further optimize production.
DS: For Huawei, developing smart energy solutions consists of designing products addressed to optimize an entire project’s performance in terms of both costs and production. A smart solution does not only consist of one product but in a range of components and accessories arranged to improve the plant’s operations. In this area, Huawei’s IT expertise comes into play as many of the technologies developed for the telecommunications sector can be applied to solar energy solutions.
Q: How has Huawei addressed the communication speeds of string inverters?
DS: It could be said the weakest technological point of a string inverter is communication speed. Central inverters use Ethernet connections while string inverters use RS-485 connectivity, which is not conducive to fast communications. To overcome this challenge Huawei designed a system based on PLC, which avoids the need for RS-485. Our product offers 10 times faster communication than regular string inverters, which is attractive to technicians and developers working in the solar industry. In Mexico, where PPAs are offered at considerably low costs, using efficient technologies becomes relevant for maintaining the project’s profitability.
Q: How do industry trends influence your R&D strategies?
DS: Huawei invests between 15-25 percent of its revenues in R&D, depending on the department. This is a strategy that has set us apart from the competition. Investing in technological innovations allows us to have the best products on the market, which pushes the company to adapt to new trends. In 2014, Huawei decided to stop manufacturing central inverters as a result of the industry’s demand for more efficient components.
LT: Year by year the whole industry is shifting from central to string inverters. Since 2008 the percentage of string solutions has been higher than central solutions, a trend which will continue. Huawei is the most important player in this area. We are the only company that offers string solutions at the utility scale.
Q: What are the company’s expectations for the solar industry in Mexico?
LT: In the next two to four years, Mexico will become the largest market in the solar business. Huawei will keep innovating and bringing more value-added products to promote the development of the market. In the first phase our main targets are utility-scale projects. We hope to release our new series for residential scale by the middle of 2017.
DS: It is difficult to predict the future behavior of the solar industry at this moment. We see an interesting but aggressive market with fierce competition. We expect significant growth in the Mexican solar energy industry, mainly driven by the liberalization of the sector. As a components supplier we feel deeply positive about our future here, particularly considering the high quality and innovative features of our products. Apart from supplying high-tech components, Huawei also can help our customers with presales and aftersales services, a part of our business we expect will become important in this country, too.