Joaquin Castillo is an industrial engineer and has been working in renewables since 1996 when he was involved in installing the first 150-kW wind turbines that wrote the first pages of wind power history in Spain. During his time at Spain's third biggest power company (before it was absorbed by Gas Natural), Union Fenosa, Castillo toured the Mediterranean basis – North Africa, Italy and Greece – until 2003 when Italy's Enel entered the picture, reaching an agreement with Unión Fenosa to develop renewables. At this time, Castillo began to take over the most strategic area of the company’s operations, that of business development. Since joining First Solar in 2007, Joaquin Castillo has used the skills and experience developed during his time at Enel to look into the future of the solar industry.
Interview published in issue 91 of Energías Renovables, Renewable Energy Magazine’s Spanish sister publication (July 2010).
Interview date: July, 2010
Interviewer: Luis Merino
What made you decide to change companies?
First Solar was looking for someone to help boost its presence in Spain and what most attracted me to the company was its clear view on things. First Solar focuses on a series of objectives and demonstrates its ability to achieve them. The photovoltaic industry seemed to me a bit like going back to the start of the wind industry, but with another technology. The truth is that I feel fortunate; I believe that First Solar is a born leader, not only in terms of growth, but also at reducing costs, all of which it aims to achieve in an environmentally sustainable manner.
Our primary objective is to bring down the cost per kWh of photovoltaic solar power so that it can compete with fossil fuels. We have the lowest manufacturing costs on the market. We managed to break the psychological barrier of $1 per watt peak in 2008 and we are now at 81 cents. Our aim is to cut these costs by a further 20-30 cents by 2014.
We are also leaders in environmental issues. Since the inception of the company, we have implemented a pioneering programme to recycle modules, which is pre-funded and completely free for the end user. Through this scheme, we make a commitment to end users to collect and recycle their modules.
Is First Solar a member of PV Cycle?
Yes, we are founding members. In fact, we try to contribute our experience in this field because it is not just a theoretical programme but is actually something that is already up and running. All our factories boast a recycling plant. We currently process small quantities of product, i.e. that which is broken during manufacturing or transportation. However, by recovering and reusing 95% of semiconductor materials and 90% of glass, we are demonstrating that you can close the cycle, which we believe is part of our corporate responsibility. We want to share this type of solution. In a similar manner to what Volvo did when it invented the seat belt, they did not keep it for themselves but shared it with the rest of the automotive industry. What is critical – the competitive difference – is the module production process not the recycling process.
How did First Solar come about?
It was founded in 1999. It was the brainchild of Mike Ahearn, the current CEO who was Managing Director until a year ago, and John Walton, the son of the founder of Wal-Mart and silent partner so to speak. They were looking for a technology in which to invest in the medium to long term. That was First Solar’s advantage; it did not rely on a financial investor expecting returns in the very short term. Thus, although the company was founded in 1999, it did not really get going until 2006, when it was floated on the Nasdaq stock exchange. It is now on the S&P 500 index. The company developed the technology over the period from 1999 to 2006, and there was enough time to do things properly without stepping on the accelerator. During this period, $150 million was invested. Now we are going faster. In 2006, we only just reached 100 MW of production, while we will exceed 2 GW next year. We have multiplied output by 20 in just five years.
Where are First Solar’s production plants located?
Our original plant with four production lines is in Perrysburg, Ohio (United States). This plant is our benchmark. We also have a plant in Frankfurt/Oder (Germany) and will open a new plant there next year: We have four plants in operation in Kulim (Malaysia) and another two under construction that will be ready in the first half of 2011. And then we have the Blanquefort plant (France), which, by our standard, is an average sized plant because it has two production lines (with a capacity to produce a little over 100 MW/year). This latter plant will go online in early 2012. All together, we will have a production capacity of over 2 GW in 2012.
Is size a critical factor for First Solar?
Economies of scale play an important role, helping to reduce costs and enable solar power to compete with fossil fuels. Boosting production capacity is not only about establishing more plants. You can also increase the efficiency of modules and the production capacity of factories. The same production line that produced 30 MW three years ago now produces 53 MW with the same equipment. It is a continuous, highly automated process, starting with the glass and ending with a finished module two hours later. The only human involvement is at the end when the cables are connected.
Which technologies does First Solar work with?
All First Solar plants are equal in design… in operating parameters. The design comes from Bruce Sohn, our current President, who has been working 20 years at Intel, a company that follows the "copy intelligent" approach. Our choice is thin film with an advanced semiconductor, which adapts very well to the solar resource, including diffuse radiation, so that the modules perform excellently even on cloudy days or at high temperatures.
Additionally, this technology requires less semiconductor material than traditional silicon modules, which brings down raw material costs. As a cost leader, as well as analysing the cost of producing our modules, we also control all the other elements required to use a First Solar module (structures, inverters, wiring, etc.). We have a clear roadmap with regard to reducing the cost of the module and also the other elements.
What is First Solar’s business model?
There are two models. One in Europe that is, if you will, more traditional. There, we have a number of select clients with whom we work in the medium and long term (Juwi, Conergy, Phoenix, Assyce, EDF, etc.) and basically, to whom we provide modules for both ground-based arrays and rooftop systems. Sometimes we also collaborate with these clients financially, to allow construction projects to be completed more quickly. This is one of First Solar’s competitive advantages. We are probably among the companies that can present the most attractive balance sheets. At the end of 2009, we had $1,114 million to invest in projects and debts of around $140 million. That is an advantage. There are several examples. In Spain, we partnered with Assyce to complete a 20-MW project (two 10-MW arrays) in Badajoz, in which First Solar provided funding for the construction. We also structured the project finance and sourced the investor, which enabled Assyce to develop the project much faster.
And in the US?
Here we have a more integrated model. In 2007, we acquired Turner Renewable Energy, an engineering, construction and procurement company. And later, in 2009 and 2010 we bought two companies – OptiSolar and NextLight – which contributed a portfolio of more than 2 GW in the US. Therefore, we deal with the entire value chain: we develop, build, operate and maintain arrays, and even finance them. Subsequently, we sell them to electric utilities, especially in California. This has enabled us to understand that not only the importance of cutting the cost of modules but all the factors that affect this business.
What are First Solar’s plans in Spain?
In late 2010 we will have rolled out an accumulated capacity of approximately 150 MW through our clients. 50 to 60 MW of this capacity will be installed this year. This may represent a share of around 10% of the market. Europe is a strategic market for First Solar and in Europe we have identified four key countries: Germany, France, Italy and Spain. Our goal is to reach a market share of around 30% in 2014. We are not focused only on ground-based arrays; there is a 2-MW plant on the roof of Michelin’s plant in Valladolid. It is true that there are not many rooftop systems around, however the sector is developing as we speak.
Will this be the case, irrespective of the nature of the new regulatory framework in Spain?
Our company never plans short term. We have never devised our development strategy based solely on what is happening in any market today. When we talk about achieving a market share of 30% in 2014 it is because we think that Spain is a market where PV has to exist. The sun is here, not in Norway. And here is where conditions prevail for this technology to succeed. First Solar wants to actively contribute to the development of the Spanish market.
Francisco García Lorenzo, First Solar’s Regulatory Affairs Director: I believe that we cannot see the wood for the trees at the moment. Spain is a leader in renewables – it has been for the last 25 years – and that was not achieved without a cost. It is a success story for all… for industry and government. In line with this leadership and as a company that has long term plans, First Solar is convinced that we have to be here and that any decisions taken should allow for a sustainable market. Technological development and clear government support is needed if solar energy is to compete with fossil fuels.
Lastly, while many rumours exist we have still not seen a firm proposal from the Government one way or another. I advocate not commenting on opinions but on firm proposals. Right now, a draft has been prepared by the Spanish Photovoltaic Industry Association (ASIF), which proposes a clear and transparent reduction in the feed-in tariff, models for introducing self consumption and other advantages for the sector. To date, this is all that is on the table and has been agreed by most of the industry. In this regard, I believe we should be cautious, keep working and hope that we can achieve a sustainable long-term framework.
After the photovoltaic boom in Spain in 2007 and 2008, what growth rates would you expect in Spain for it to be an attractive market?
By definition, we like predictable and robust markets, with significant growth. Precisely why I said 30% of the market is because we like to define our presence by market share rather than by relative size. It is also more credible to say that our goal is to have a certain share in 2014 than to give a precise figure for the size of the market in five years.
Currently, based on the estimates of the European Photovoltaic Industry Association (EPIA), we calculate that the Spanish market will be in the order of 600 MW per annum. Of course, we will be happy if it is larger than this. We will never be limited by our ability to respond to a larger market. We have shown that we can grow in size quickly and we will continue to do so. First Solar is not going to settle at 2 GW of production capacity.
Will photovoltaic energy still be profitable if feed-in tariffs are cut dramatically?
As world leaders on cost, we believe we are well positioned to reach the famous grid parity. I do not particularly like talking about this concept because it has 200 definitions, each with 200 interpretations. However, what is certain is that, in the race to reduce costs, the sooner you reach grid parity, the better. We are well positioned. In 2009, our overall market share was 15%. One in six solar panels installed in 2009 were manufactured by First Solar.
Francisco García Lorenzo: When we talk about grid parity, I think laying the foundations to encourage or promote self consumption may be the first step towards photovoltaic energy becoming competitive.
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