Solar Energy Market: Potential Business Opportunity By Accessing Chinese Technology

BUSINESS ENVIRONMENT ANALYSIS

There have been, currently, some markets discussions regarding the possibility of expanding the insertion of Solar Photovoltaic Energy in the Brazilian Electric Matrix. In order to accelerate de demand for this type of energy, the resolution published by ANEEL (National Agency of Electric Energy), in April 2012, contained key changes to incentive the use of this renewable energy source. Some of the most relevant ones are:

 Net metering: it will work as a compensation system in the energy bills. Houses that have PV modules (solar energy panels) will be able to produce their own energy, and this value will be computed by the house’s energy meter. In the months that the production of the house is superior to the value demanded, the owner will have a credit to be used in his next energy bill. The credit value generated can not be converted financially, and it will only be used to compensate other months of the year when the house’s energy demand in greater than the production. This mechanism is interesting for house owners since this energy generation is subject to exogenous factors, such as the level of solar radiation available each month.

 Registration: the registration process for house production and the current demands for the environmental licensing have been simplified in order to make the process easier and faster.

 Stage Acess Seem: one of the steps required included a valuation for the “Access Seem” document to be issued by the distributor in order to carry out the connection. Now this step is no longer required for mini and micro generation. Which means that for household producers, the “Access Seem” has to be automatically issued, reducing the time need to activate the connection.

 Assignment to the distributor: the full responsibility for the collection of generating units information, at the micro and minigenerators, is attributed to the distributor responsible for the area that the unit is located. They are also responsible for sending the data sheet and statement of operations of the plant to ANEEL.

 Energy control: permission for the distributor to account for the energy generated and consumed by small autoproducers (up to 1 MW) at different points, as long as the consumer units have the same owner and are within its concession area. This means that if, for example, someone has two houses, one at the beach and one in the city, and both are within the area of the same distributor, the owner can use the energy generated in both of this houses to create energy credits for the compensation system in the energy bills, mentioned above.

These changes in the regulatory market created an interesting opportunity. However, the technology available in the Brazilian industry for this specific purpose is not yet fully developed, and there is a need to exploit products that are technologically already more advanced. In Asia, China has become one of the main producers of equipment for this sector. After high levels of investments focused on technological transfer and development, combined with high volumes of subsidies and explicit growth rates goals, the country became one of the key players in the world for this market, assuring itself a large productive scale that helps his competitiveness in the global framework.

LEGAL ENTER MODE

As pointed out before, the Chinese market is highly developed in the manufacturing of solar energy equipment. In order to access this technology and gain competitiveness in the Brazilian market, the most adequate entry mode seems to be contracting manufacturing, or outsourcing.

This entry mode choice, will allow Ecil Energia to gain access to the products available in the Chinese industry, applying a minimal level of investment. Although, once the products are in Brazil, they may need to go through some adjustments, in order to better adapt to the needs of the Brazilian customer. Considering the possible necessary adjustment, a few things need to be taken into account before choosing the best Chinese supplier:

1. It is important to point out that the PV module, mounting bracket and the power converter are not the only relevant components to generate and convert solar energy. Other equipment such as the cables and connectors need to be taken into consideration. It is known that some suppliers adapt their products in such ways that their parts will only work if they all come from them. This means that if you choose a supplier with such characteristics you are forced to acquire all of the parts from him in order to adjust the product to the Brazilian market. Such choice needs to be carefully considered, since you increase your risk by limiting yourself to only one company. If something goes wrong with their production, you will not have the option to resort to another supplier and fulfill the demand.

2. Another thing that needs to be taken into account is the relation between energy generation x physical space necessary. It does not matter if you have a very cheap product but it is too big and generates the same KW value that another panel that is smaller. You need to consider the overall value for the client, since they have a limited space for the panels. That being said, since we are dealing specifically with a product oriented to house’s solar energy generation, the ideal scenario would be to find a solution that could be installed in a rooftop utilizing a minimum number of panels that could generate the necessary energy to supply the demand of a house  less space occupied with more energy being generated.

This is an important fact to be considered while searching for a supplier, since the product specification needs to be in line with the Brazilian consumer’s needs.

3. The cilice base can have two different types of photocell: monocrystalline or polycrystalline. They have distinctive uses, the first is used for smaller solutions (generating more energy using less space), and the second can be used for solar energy farms (generating less energy but with more available space). So it is important to assure that the chosen supplier has the monocrystalline photocell, since if fits better the need of the Brazilian customers.

However, the company is subjected to the quality level and the delivery time defined by the Chinese firm, and if the product does not fit the specifications drawn up in the contract, Ecil Energia will need to rely on local courts to enforce the arrangements, which could become a problem. Other risks involved in overseas contracting manufacturing include cultural differences (such as language barriers), distribution channels, among others.

Considering the points mentioned