Development of the Solar Power Market in Canada

The solar power market is still at a relatively early stage of development and future demand for solar power products and services is uncertain. Solar power falls into the emergent green energy sector and benefits from rising public and private support to help with industry growth. Over the next five years to 2023, revenue for the solar panel manufacturing industry is expected to grow with a forecast to increase at an annualized rate of 3.9%(Miller, 2018). The products and services provided by the industry depend on the equipment operator and the location of the project. Different locations might require different types of technology, depending on the amount of sunlight available at the location (measured as sunlight density) (Miller, 2018). The two standardized product offerings in this business sector are concentrating solar power (CSP) and photovoltaic power (PV). Concentrating solar power (CSP) involves directing heat from sunlight onto a solar cell or panel. The heat is then converted into electricity through processes with different levels of efficiency (Miller, 2018). Photovoltaic (PV) power relies directly on solar cells to generate electricity from the sun’s energy. As solar technology develop at a more rapid pace, it will result in bringing down solar equipment costs and increasing efficiency. There are many business risk associated in the solar panel industry (See Appendix A), therefore expansion is necessary to mitigate some of the risk. Founded in 2001 in Canada, Canadian Solar is one of the world’s largest solar power companies and a leading vertically integrated provider of solar power products, services and system solutions with operations in North America, South America, Europe, Africa, the Middle East, Australia and Asia (Solar Inc, n.d.). Canadian Solar designs, develops and manufactures solar ingots, wafers, cells, modules and other solar power products with most of their manufacturing operations done in China and Southeast Asia. Their product line includes a range of solar modules built to general specifications for use in a wide range of residential, commercial and industrial solar power generation systems (See Appendix B). Furthermore, Canadian Solar is one of the most bankable companies in the solar industry, having been publicly listed on NASDAQ since 2006 and currently has 12000 employees (Solar Inc, n.d.). Canadian Solar business consists of the following two business segments: MSS Segment and Energy Segment (Annual Report: CSIQ-2017-20F, 2018, p.42). The MSS Segment primarily involves the design, development, manufacturing and sale of a wide range of solar power products, including standard solar modules, specialty solar products, solar system kits and O&M services. Their Energy Segment consists of solar power project development and sale, EPC and development services, and operating solar power projects and sales of electricity. In the MSS Segment, standard solar modules are arrays of interconnected solar cells in weatherproof encapsulation. KoolPower Dymond solar panels are the best solution for Oman’s market as these panels can withstand Oman’s desert like climate such as high temperatures, sandstorms, salt-water corrosion and etc. (See Appendix C). Specialty solar products include Andes Solar Home System and Maple Solar System which both offer off-grid solar system. The solar system kit is a ready-to-install package consisting of solar modules produced by Canadian Solar and components, such as inverters, racking system and other accessories, supplied by third parties (Annual Report: CSIQ-2017-20F, 2018, p.43). Lastly the O&M services include inspections, repair and replacement of plant equipment, site management and administrative support services (Annual Report: CSIQ-2017-20F, 2018, p.43). In the Energy Segment services, Canadian Solar provides solar project development and sales, which build large power projects such as supplying and building for whole neighborhood. The EPC and development services include engineering, procurement and construction work for solar power projects owned either by Canadian Solar or by third parties. Lasting the operating solar power projects and sales of electricity began to operate certain Canadian solar projects and generate income from the sale of electricity. Although most of these solar projects are developed for sale, Canadian Solar may operate them prior to selling (Annual Report: CSIQ-2017-20F, 2018, p.44).  
Operations

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Canadian Solar has a flexible vertically integrated business model that combines internal manufacturing capacity with direct material purchases of both cells and wafers. This tactic has benefited them by lowering the cost of materials for solar module products. In doing so it provides Canadian Solar with greater flexibility to respond to short-term demand increases. Supply chain management for MSS Segment depends on Canadian Solar ability to obtain a stable and cost-effective supplies of polysilicon, solar ingots, wafers and cells. Canadian Solar has contractual agreements in silicon wafer to establish forth price and quantity information, delivery terms and technical specifications (Annual Report: CSIQ-2017-20F, 2018, p.44). These agreements generally provide for a period of time during which Canadian Solar can inspect the product and request the seller to make replacements for damaged goods. A number of long-term supply agreements have been completed with several silicon and wafer suppliers in order to secure a stable supply of raw materials to meet production requirements. These suppliers included GCL, LONGI, Deutsche Solar and LDK. Canadian Solar purchases solar cells from a number of international and local suppliers, in addition to manufacturing their own solar cells and having toll manufacturing arrangements with their solar cell supplier. Canadian Solar generally require the seller to bear the costs and risks of transporting solar cells until they have been delivered to the location specified in the agreement. In the Energy Segment, Canadian Solar MSS segment supplies part of the solar modules used in their energy segment. For the solar power projects that are developed, they have the option of either using their own engineering and operation teams or hiring third-party contractors to build and operate the projects prior to sale. Manufacturing the MSS Segment, solar modules are assembled by interconnecting multiple solar cells by tabbing and stringing them into a desired electrical configuration. The interconnected cells are then laminated in a vacuum, cure them by heating and package them in a protective lightweight anodized aluminum frame. Then are sealed and weatherproof the solar modules to withstand high levels of ultraviolet radiation, moisture and extreme temperatures. Canadian Solar selectively uses automated equipment to enhance the quality and consistency of their finished products and to improve the efficiency of the manufacturing processes. Key equipment in the manufacturing process includes automatic laminators, simulators and solar cell testers. The assembly line design provides flexibility to adjust the ratio of automated equipment to skilled labor in order to maximize quality and efficiency. Canadian Solar Energy Segment engages all aspects of the development and operation of solar power projects, including project selection, design, permitting, engineering, procurement, construction, installation, monitoring, operation and maintenance and also provide EPC Services to 3^rd parties. The solar power projects development process primarily consists of the following stages: market due diligence & project selection; project financing; permitting and approval; project design, engineering, procurement and construction. For quality and control, Canadian Solar has in-house testing center and is backed by leading independent testing institution. They have registered their quality control system according to the requirements of ISO 9001:2008 and ISO/TS 16949 standards. TUV Rheinland Group, a leading international service company that documents the safety and quality of products, systems and services, audits their quality systems. Inspecting and testing incoming raw materials to ensure their quality is absolutely necessary for Canadian Solar. Canadian Solar monitors the manufacturing processes by inspecting and testing incoming raw materials to ensure there desired quality and inspect the finished products by conducting reliability and other tests. This has led Canadian Solar to have the highest price/performance ratio in the highest module quality and the highest likelihood of being recommended by IHS (See Appendix D).

Target market with demographics of target customers

The economic development of Oman has over the last three decades been driven by natural gas and oil, which has benefited the increase living standards and infrastructures (See Appendix E). Currently one third of Oman’s current energy needs are met by oil and as its oil reserves are predicted to have a remaining lifespan of only 40 years the government is faced with the question of what will replace this source of energy when it runs out. Oman has one of the highest ratio of “sky clearness” and receives extensive daily solar radiation ranging from 5,500-6,000 Wh/m2 a day in July to 2,500-3,000 Wh/m2 a day in January, giving it one of the highest solar energy densities in the world. According to the Authority for Electricity Regulation in Oman, “Oman and solar energy has the potential to provide sufficient electricity to meet all of Oman’s domestic electricity requirements and provide some electricity for export”. In 2011, natural gas accounted for 71% of the country’s energy supply with oil products accounting for the remaining 29% (See Appendix F). Oman does not have an interconnected national grid; rather the electricity grid comprises the Main Interconnected System (MIS) in the north and the Salalah power system in the south with the current most power consumption being; residential, commercial, industrial and government (See Appendix G). Therefore the demand for energy in the Sultanate of Oman is increasing rapidly, due to a combination of rapid industrialization, urbanisation and population growth, increased water desalination processes and a strong increase in economic growth. The government of Oman has started to examine the possible use of renewable natural resources for the production of electricity, with a view to diversifying the energy base of the Omani economy. Canadian Solar will need to make adjustment to current renewable energy targets for the Middle East (See Appendix H) by being the first to enter into the profitable Oman’s market through a manufacturing facility. Canadian Solar customers will include: residential, commercial, industrial and government, making up about 95% of the used power consumption in Oman. Residential will be the main target market that Canadian Solar will need to focus on, with the served available market being residential, commercial, industrial and government and total available market being entire Middle East. Current relevant demographics for residential sector in Oman include: age structure – 25-64 years 47.72% (male 939,335/female 697,799); literacy rate 93%; urban population 78% of total with a 2.15% per year (2015-20 est.); GDP per capita $15668.37 and 16% unemployment rate.

Citation

• Miller, D (2018, June). Solar Panel Manufacturing in the US. IBISWorld Industry Report 33rr1c Retrieved November 20, 2018 from IBISWorld database.
• Solar Inc. (n.d.). The Canadian Solar Difference. Retrieved November 20, 2018, from https://www.canadiansolar.com/na/about-canadian-solar.html
• Annual Report: CSIQ-2017-20F.[Pdf]. (2018, April 26). Washington, D.C. 20549: UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

Appendix

Appendix A

Appendix B

Appendix C

Appendix D