By Jeff Moad
I had a bit of a déjà vu moment earlier this week while attending the Intersolar North America conference in San Francisco. The packed solar energy industry show and its 22,000 attendees had me thinking back on computer and semiconductor industry trade shows of 30 years ago, when growth seemed limitless and lots of people were jumping on the bandwagon. At Intersolar, T-shirted alternative-energy enthusiasts rubbed shoulders with buttoned-down corporate types whose companies are investing boatloads of capital in solar module manufacturing. Seeking to get noticed on the crowded Moscone Center show floor, companies were giving away flashy prizes at their booths.
Just below the surface, however, there are signs that the solar industry may be about to go through the inevitable maturation process, complete with consolidation, vertical integration, and, yes, even slowing revenues.
It’s not that solar is reaching market saturation. Far from it. But there are growing doubts about the availability of financing for big industrial solar projects. The federal cash-grant and loan-guarantee programs that have helped make solar financially viable and fueled the industry’s growth are beginning to lapse in the U.S. and Europe. And cash-strapped states like California are finding it difficult to finance promised feed-in tariff and loan programs.
Financial markets have noticed. Concerned about even a temporary slowdown in market growth, investors for several weeks have been driving down share prices of solar manufacturers such as JA Solar, Suntech, and Trina Solar.
But even as uncertainty begins to creep in, lots of new competitors are rushing to join the market. There’s already talk of an oversupply of solar modules, and deep-pocketed players like GE are poised to jump in, further driving down prices.
So, how does an established but not huge manufacturer adapt when faced with such rapidly changing market dynamics? At the Intersolar show, I got a chance to put that question to Richard Welch, vice president and chief operating officer at Unirac, a leading maker of photovoltaic solar module mounting systems based in Albuquerque, NM.
I met Richard a couple of years ago after Unirac was named a 2009 Progressive Manufacturing Award winner. Richard had joined Unirac from GE Aerospace as part of an initiative at the time to shift the company from a small, family-owned business to one that was professionally managed and able to support rapid growth. Richard helped lead Unirac through a Lean transformation that enabled the company to reduce costs, improve quality, and keep up with surging demand. In the five years after Richard joined the company, Unirac grew at a 60% compound annual rate, exceeding the market growth rate. Now part of the Hilti Group, Unirac saw its business double last year.
But times have changed. Like other companies in the solar business, Unirac has seen growth slow even as new competitors have flooded the market. Many of those competitors, Welch says, are coming from more established but slower-growing industries such as automotive. “These guys are hungry, and they are innovative thinkers,” he says. “We need to be able to stay ahead of them.”
To adapt to the changes in its market, according to Welch, Unirac plans to shift its focus to new product innovation, applying some of the Lean techniques that have served the company well on the production side. Specifically, he says, the company is working with experts from its parent company, consultants, and customers to comprehensively rethink the design and composition of its products with an eye toward reducing costs and growing its 30% market share in North America.
Historically, for example, Unirac and its PV component racking competitors have limited their product designs to the use of steel and aluminum materials. Unirac is exploring the use of a wide range of new materials, including plastics, that can help it reduce costs.
The company is conducting a series of innovation brainstorming sessions, with the focus on encouraging out-of-the-box thinking. The company has involved suppliers and customers in the brainstorming process. In fact, Unirac has conducted voice-of-the-customer sessions with 30 customers to better understand the kinds of product innovations they want.
“We’ve spent a lot of time and effort over the past few years using Lean to get more efficient,” Welch says. “The next step function in improvement for us has to come from the design and innovation side. It’s time to build a better mousetrap all over again.”
If history is any indication, in a couple of years a lot of the companies represented at this year’s Intersolar North America conference will have disappeared or retooled, having failed to keep up with rapid market changes. Companies like Unirac that are willing to continuously question and reinvent themselves, however, have a better chance of surviving the shakeout.
