Wednesday, November 18, 2009

Solar Panel Makers Seek Local Ties

NOVEMBER 17, 2009

SunPower, Suntech Build Out Dealer Networks to Establish Brands

By JERRY A. DICOLO, Wall Street Journal

Solar panel makers, taking cues from industrial products like Trane air-conditioners and Andersen windows, are racing to roll-out networks of installers across the U.S. and internationally as they try to establish their brands in the residential market.

SunPower Corp., Suntech Power Holdings Co. and others are enlisting hundreds of locally-owned installers with partnerships that offer training, sales support and help with marketing and advertising.

With the dealer networks, the manufacturers hope to build brand awareness in what many see as a commodity product. But the moves come as solar-panel manufacturers battle weak demand due to the recession and an oversupply of panels.

Companies such as First Solar Inc. and SunPower have recently lowered their forecasts for the year, hurt by excess inventory and price competition.

Most panel makers sell directly into the utility market and use distributors to reach consumers. Now some are betting that by cutting out distributors and working directly with small local installers, they can increase the loyalty of installers to one brand while raising profits.

"It's going to be a significant part of the business," said Mark McKahan-Jones, head of Suntech's dealer sales division. The company, which is based in China and said Monday it plans to open a U.S. facility near Phoenix, has enrolled 200 U.S. installers so far.

Smaller rival SunPower, which is based in San Jose, Calif., has about 900 installers, including 200 in the U.S. In addition to sales and distribution support, SunPower offers its installers access to training programs and co-marketing funds.

By agreeing to work directly with a panel manufacturer, small installers say they pay less for panels than from larger distributors. They also have credit agreements, can get help arranging loans for customers and are offered technical support.

In California, by far the largest solar market in the U.S., SunPower had nearly 30% of the market in the third quarter under the state's subsidy program, according to FBR Capital Markets using data compiled from the program. In the program, which does not include utility installations, Evergreen Solar Inc., Kyocera Corp., SunTech and Sharp Corp. rounded out the top five.James Albert, founder of ISI Solar, a New City, N.Y., which installs panels from various makers, said brand recognition comes into play in about half of his jobs. "There is no question that branding and associating yourself with much larger entities is important," he said.

Sharp's solar division also has a dealer partner program, but Ron Kenedi, head of the Americas for Sharp solar, said the company is focused on only the top installers with long track records in the industry. "We don't try to get as many dealers as possible," Mr. Kenedi said.The solar industry is still split on whether the brand of a manufacturer or a local installer should take precedence. "I don't want to usurp their effort with my brand," Suntech's Mr. McCahan-Jones said of local partners.

SunPower Chief Executive Tom Werner said regional advertising and marketing has allowed the company's high-efficiency, sleek panels to fetch premium prices.

Mr. Werner said his strategy in some ways mirrors that of Apple Inc., which has a loyal customer base willing to pay more for its well-designed products.

Although the market is nascent, some customers do ask for SunPower panels by name, said Jonathan Gonzalez, head of customer service and marketing for Poco Solar Energy Inc., an installer in Santa Clara, Calif. that is in SunPower's dealer network.

"If they don't know about solar at all, that is one of the brand names that will pop out," he said. Poco, which has about 30 employees, is considering adding a SunPower logo to its employees' shirts, he said.

But others aren't convinced, particularly larger, more established installers.

"Because Suntech, Sharp and all these panel manufacturers have such great technology and the quality is superb, it doesn't really matter which module you use," said Lyndon Rive, chief executive of SolarCity, a large installer based in Foster City, Calif., with more than 460 employees.

"I can't tell you the difference between a Suntech and a Sharp panel," he said.

Sharp's solar division also has a dealer partner program, but Ron Kenedi, head of the Americas for Sharp solar, said the company is focused on only the top installers with long track records in the industry. "We don't try to get as many dealers as possible," Mr. Kenedi said.

Government subsidies continue to drive the U.S. solar-panel market, with California and New Jersey leading in solar installations due to high tax credits and rebate programs.

While national statistics on the solar-panel market are sparse, California's solar subsidy program provides data that are often used as a proxy for U.S. demand.

Using data from the subsidy program as well as its own forecasts, market-research firm iSuppli Corp. estimates that residential installations will make up roughly 20% of total U.S. demand in 2009.

"The residential market is very important, because it is a higher margin type of business," said Mehdi Hosseini, a solar analyst with FBR Capital Markets.

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