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Nano Solar
Nano Solar
Opportunity
Key Risks
Strategic Options
1. Do not enter the US market. Continue to invest in
European and Asian markets.
2. Enter US Utilities and Commercial Market Immediately.
3. Delay entry into the US market. Conduct an industrial
scale pilot project in the US. Based on the results, decide
whether to and when to enter the US Market.
Recommendation
Tactical
Recommendations
Option 3.
Analysis Summary
Nanosolar is focused on selling a single type of thin-film PV module called the Nanosolar Utility
Panel. The utility panel is 50% less energy efficient than bulkier c-Si modules, but makes up for
this fact by being 90% less expensive to produce. Due in part to the deteriorating
macroeconomic climate, the global market for PV modules was 15% oversupplied in 2008
(6.85GW supplied for 5.95 GW demanded), and the product is rapidly commoditizing.
Government support is less predictable in the US than Europe because of overlapping state and
federal programs, and overlapping regulation. While some states such as California may have
generous incentives and a lower risk of regulatory change, the PV market in those states is
highly competitive. In such a competitive market, product differentiation and a strong and
focused sales force is required to approach industrial and commercial customers to sell the
relative cost and ease of installation benefits of Nanosolars modules. In Europe the important
approach point is system integrators who make the panel selection decision.
Nanosolars value proposition is its lower cost per watt to purchase and install (see Figure 1 on
page 2). Because thin-film PVs require 43% more roof space per watt generated, it is more
valuable to larger commercial and utility customers than residential customers. However, there
is a trend toward using the sleeker thin-film panels in residential installations due to aesthetics,
and Nanosolars primary competitor, First Solar has established this market. First Solars 2009
production cost is identical to Nanosolar and challenges Nanosolars low price proposition. By
reaching the US market first, First Solar already established a relationship with Solar City, a
residential installer, after a successful utilities pilot project. It is recommended that Nanosolar
take a similar approach to the US market by first conducting a pilot project for utility and
commercial customers, and based on those results deciding whether to enter the US market in
earnest. Nanosolars focus should remain on industrial scale projects that benefit most from its
lower installation costs.
The US residential market should be approached with caution because a significant investment
is required to establish installer relationships there. Nanosolars focus on production efficiency
and its virtually non-existent sales force (1 person in the US and 1 person in Switzerland)
require that a significant investment be made to hire, train, and task sales staff.
Figure 1: Nanosolar Competitor Relative Performance (source: case page 5)
framework. On the high end prices are constrained by First Solar which has announced 2012
production cost targets of $0.65/watt (exhibit 10a). First solar also has the advantage of
increased capacity (albeit at low utilization) from its Malaysian facilities. If it desired to push
Nanosolar on price, it has the volume of product and economy of scale to do so. Therefore, it is
in Nanosolars best interest to maintain a pilot project price 10-15% below First Solar to reflect
the higher utilization and operational efficiencies that currently differentiate it. This will be a
significant cost savings to utility companies and large scale industrial and commercial projects.
At the same time, the price will still be high enough to encourage and maintain US government
incentives in the short term.
Strategic Recommendation for Nanosolar CEO
While continuing to seek out new European utilities projects, a medium scale (1-5MW) pilot
utility project should be conducted in the southwest United States. The purpose of this pilot
would be to evaluate the regulatory ease at which the project could be initiated, and the benefits
in the form of subsidies that could be used to help fund the project. Pilot marketing activities
should be initiated with the purpose of identify key needs of utility companies and commercial
businesses.
Roscheisen would agree that while there is some risk associated with delaying entry into the US
market, US economic and government volatility means that the timing is not right to seek
consistent state sector support. A pilot project will provide the information necessary to make
further informed marketing decisions about future market development and expansion, while
allowing time for the US economy to stabilize.
June 2008:
December 2008:
April 2009:
$4/kg
$2/kg
$0.50/kg
March 2007:
$1.29/watt
March 2009:
$0.93/watt
2009:
1136MW
2010:
1186MW
2009:
2008:
$46.6 million
2009:
$164.6 million
$0.65/watt