Shining on logistics
First Solar counts on carriers, 3PLs to deliver materials safely to project sites.
By Chris Dupin
While clouds have been hanging over the solar energy industry in recent years due to weakening government support in Europe and the United States, executives at Tempe, Ariz.-based photovoltaic panel manufacturer First Solar gave a sunnier forecast for the industry when they met with security analysts in April, saying they expect net sales to jump from $3.4 billion in 2012 to nearly $4 billion this year, and even upwards of $4.8 billion by 2015.
The projected increase in sales reflects the company’s belief that its solar module shipments will grow from 1.6-1.8 gigawatts this year to almost 2.7 gigawatts by 2015.
That could mean growing volumes of cargo shipped by First Solar, which manufactures its modules in both Malaysia and Ohio.
Matt Reese, First Solar’s global commodity manager, said the company ships between 25,000 and 30,000 40-foot containers annually, moving both finished goods and raw materials around the world. About 60-70 percent of that volume crosses the U.S. border in some fashion.
The company also transports materials domestically — it has a relationship with J.B. Hunt — moving about 2,500 to 3,000 truckloads a year.
Most of the company’s PV modules are installed at utility-scale solar projects, principally being built in the sun-rich U.S. Southwest. The company has other projects scattered around North America and is developing business in new regions that are beginning to emerge as strong solar energy markets.
“We put together a whole package that is essentially a power plant and we do it from scratch,” said Alan Bernheimer, a First Solar spokesman. “We find the sites. We negotiate contracts and the power purchase agreements with utilities, who are the customers for the power.
“Then typically, when we’re ready to build it, we find an investor, a power company or a financial company that wants to own one of these assets long term as they might any other kind of power plant,” he said.
The projects can be enormous in size, and take several years to construct. First Solar is currently building 16 utility-scale projects around the United States, including the world’s two largest PV plants in California, each with a total power output of 550 megawatts. These projects will take three to four years to complete, and use 9 million solar modules covering about 3,000 acres.
The heart of these types of power plants are the solar modules — essentially large semiconductors that convert sunlight into electricity — which First Solar manufactures on four lines in Perrysburg, Ohio, and 24 lines in Malaysia. First Solar decided last year to close its manufacturing operations in Europe due to the continent’s debt crisis.
In particular, First Solar makes thin film solar panels, which use a semiconductor called cadmium telluride, instead of silicon.
Unlike other PV manufacturers which rely on silicon wafers to make their panels, First Solar’s panels are made in a continuous production line, said Shellie Molina, the company’s vice president of supply chain. Glass sheets enter the factory and emerge about three hours later as finished panels.
The company purchases glass from NSG Group, which has factories worldwide, including locations in both the United States and Southeast Asia close to First Solar’s Malaysian factory. Reese said glass arrives at the company’s plant in special steel racks and finished panels are shipped out in corrugated boxes.
“We are always looking to continuously improve our processes and, generally speaking, the majority of the suppliers that we do receive glass from, have been shipping internationally for a lot longer than First Solar has been around,” he said. “Breakage really isn’t too big of an issue.”
In addition to being a manufacturer of solar panels, Molina said the company is one of the largest engineering, procurement, and construction companies in the country because of the complexity in arranging the logistics and construction of utility-scale solar power plants.
“That is another whole level of supporting those plants, getting the module itself to the actual installation location, as well as all of what we call the balance of system components,” she said. These include the posts and racks for mounting solar modules, transformers, and shelters.
“We do our best to make it as lean and just-in-time as possible,” Molina explained. “There are things that fall outside of our control — permitting, weather and things of that nature. But for the most part, we try to be as flexible as possible so we are not loading up the site with a lot of material prior to a build schedule.”
Since many of the power plants the company is building in North America are located in the Southwest (there are some projects underway in Maryland and Ontario, Canada), most of the containers First Solar receives come through the ports of Los Angeles and Long Beach and are trucked directly to the construction sites and married with other components as the power plant gets built.
Molina said these projects are not built first and then switched on, like many fossil fuel-powered plants are. Instead, solar projects are constructed in modules so the plants can actually start generating income even when they’re only partially complete.
Reese noted while the solar industry has been hurt by global economic conditions, First Solar has product pipelines that will take it several years to fill.
“So when we forecast, we’re looking at an order book that could be anywhere from 12 to 24 months out and that is what we are currently shipping against,” he said. “Because of that, our ability to forecast remains very stable. We don’t really play into a seasonable shipper-type of role. We are much more stable in terms of global volumes.”
Reese said First Solar has direct contracts with four of the world’s top ocean container carriers. “We go into the market every year and talk to probably eight or 10 of those carriers in the top 10 to 15 in terms of overall capacity and then come up with usually three or four who will service our account for the next 12 months,” he said.
First Solar’s Malaysia plant is located in Kulim, near the port city of Penang. Cargo bound for the United States moves on feeder ships to larger regional ports such as Singapore, Tanjung Pelepas, and Kuala Lumpur, and then gets loaded onto mainline vessels for transport across the Pacific.
“The key to really making this work is also having a good supply chain partner in terms of a freight forwarder,” Reese said, adding the company uses Expeditors International for both forwarding and custom brokerage services.
While the European solar market has contracted during the past two years, First Solar continues to grow in new markets, such as India and China, and recently built a utility-scale project in Western Australia.
First Solar exports some modules made at its Perrysburg plant with assistance from the U.S. Export-Import Bank. Those shipments must move on U.S-flag vessels, and the company has relationships with the U.S.-flag arms of Maersk Line and APL.
As service contracts negotiations are underway this spring, Reese said ocean freight rates seem to be under pressure, and it appears overcapacity in the liner market could come into play later this year.
“One of the conversations that we’re having right now with our contracts being open is looking to partner for a longer-term period than 12 months,” he said. First Solar is considering the potential impacts of operating under contracts with durations in the two- to three-year range, as opposed to the traditional 12-month period.