After starting out in the film industry, Pérez joined SunEdison and discovered that both sectors are more similar than they might first appear. And not just because both "shine". They share, among other things, a high level of dynamism and growth. But for this Galician, who heads up the international division of this growing solar company which was integrated into MEMC Electronic Materials six months ago, the solar industry is more interesting.
Interview date: June, 2010
Interviewer: Pepa Mosquera
SunEdison has just created a joint venture (commercial agreement) with First Reserve Corporation, and there is a considerable amount of money involved: $1,500 million. What are the main objectives of this alliance?
The main objective is to turn solar power from a small business in a major energy source. To this end, a combination of two factors is needed: a company with great development potential such as SunEdison, and an infrastructure investor such as First Reserve, which is a leader in energy finance (the fund manages $20,000 million dollars in assets, many in energy).
Until now, solar energy has only been rolled out through small projects, each of which has been handled on a stand-alone basis, including the procurement of project finance. We understand that solar PV is already at that point where it really can compete with conventional energy sources and attract funding that supports its growth. This alliance will allow us to execute all the projects we have in the pipeline in the US, Italy, Spain and Canada more quickly.
Does your agreement with First Reserve constitute an example of where the solar market is heading?
The solar industry needs to evolve towards companies like ours, towards large industrial companies. We have production plants worldwide and have been developing technologies mainly for the semiconductor industry for the last 50 years (SunEdison joined MEMC Electronic Materials, Inc. in November 2009). We are therefore applying this experience in the solar industry. When you take a company listed on the New York stock exchange that really believes solar energy has the potential to compete with conventional energy, you have to think more creatively and create the infrastructure required for development. The market has to "transition" away from small developers that have been trying to make money towards large companies that can actually achieve technological progress.
And I suppose this is a long-term agreement?
Very long term. Both First Reserve and us make long-term investments. We believe it will be a joint venture that will mark a before and after in the solar industry. Sun Edison does not build a plant and walk away, we stick with projects during their entire life.
What kind of projects is SunEdison most interested in?
All kinds. It depends somewhat on the markets. In the United States, we have mainly focused on roof-based arrays and have signed agreements with major distribution companies. With one of these, we are rolling out 25 MW across dozens of rooftops and that is our model there. We also have major projects too. In Italy, we are building the largest plant in Europe, with a capacity of over 70 MW (near the town of Rovigo in the Véneto region). Like I said, it depends on the market.
What about Spain?
Our strategy in Spain is going to be very similar to that in the US, i.e. forming partnerships with large companies willing to develop solar programmes or solar energy. What they will find in us is a great ability to roll out these programs very quickly, because we probably have the best solar energy engineers and a financial capacity that no other company has. The financial position of SunEdison and MEMC is one of the strongest in the industry, we have almost $1 billion in cash.
At present, the Spanish market is very fragmented. You have a developer that reaches an agreement with a retail centre, another with a company, etc., but then they do not have the financial capacity to execute the projects. There is a lot of frustration at all levels because these projects cannot be taken through to completion. What I would like to see is that companies began to see that both SunEdison and a number of other companies do have the ability to execute projects. The sector must become more professional.
Are you worried about the current status of the solar sector in Spain?
We are concerned, of course it is a worry. Any company that wants to invest and has the capacity to do so, seeks stable regulatory frameworks when looking where to allocate its resources. We do not care if the feed-in tariff drops by X percent, we have the technological capacity to adjust and to reduce costs to make solar energy profitable. That is our raison d'être. If we did not believe we can compete with conventional energy within four years we would not be in this business. We do not want to have a big part of a small market; we want to achieve a big share of a huge market. That is much more interesting for us than competing in highly regulated markets that still remain small.
What about the possibility of retroactive application of the feed-in tariff cut in Spain?
As I said, we do not care whether the feed-in tariff is cut or not. However, we are concerned about uncertainty; not knowing what will happen. It would be nice for the market to be defined. Retroactive cuts would, in my opinion, be a disaster since one cannot even trust that the model being followed will continue to be applied in the future. You therefore cannot align financing, investors, or strategies with anything. You are simply selling a model that you have no idea about how it will work. This does not just affect solar energy, but all renewables. All banks and financiers would look to Spain as a place where they cannot invest. Without wanting to exaggerate, I imagine it could also affect the credibility of the Spanish bond market. It would be a disaster. Nevertheless, strategically, we are really interested in Spain. In fact, we have our international headquarters in Spain.
Have you decided what share of your investment will go to each country?
We created the joint venture to invest in four markets: Spain, Italy, Canada and the United States. We have not decided how much of the investment will be assigned to Spain. It could be 80% or 10%. It will depend somewhat on how the Spanish market and the regulatory framework there evolve. Besides the United States, Canada, Italy and Spain, which other countries are in SunEdison’s sights? We are very much attracted by all of southern Europe, as well as Spain and Italy, France and Greece. This is a country that we are following very closely. It is now going through a delicate situation, but its geographical location is very interesting.
What about the Southern Mediterranean?
That too, although more in the mid term, perhaps four or five years from now. Morocco, for example, announced 2GW targets for renewable energy in February and has recently put out 500 MW to tender. The North African market I see consisting of large plants that can export solar energy to Europe, as proposed by the Desertec programme, while a distributed energy model is more likely in Europe, with more roof-top arrays than ground-based plants.
We are also closely following the UAE, where we are building the first roof-mounted solar array in the city of Masdar. Canada is another highly important market for us (last year the first plant in the country with a capacity of 9 MW was built), along with India, China and Korea, while we have a small team in South America.
Is there any region or country with a solar development model that you most value?
I love the energy generation for own use model in the United States because it helps make people aware that consuming solar energy is good. There, major companies want to consume their own energy and are willing to pay a small premium to consume clean energy and to announce that they do so. Furthermore, the roll-out of distributed, roof-mounted arrays in the US enables one to establish much more long-term relationships with customers, advising them on how they can save energy, use energy more efficiently, or monitor their solar arrays, etc. It’s a day-to-day relationship. In many cases in the US we are managing to ensure energy consumed is equal in price or even cheaper than conventional energy.
Elsewhere, people make solar energy more speculative. I cannot understand why Europe, where environmental awareness is much greater than in North America, has not moved towards generating clean energy for one’s own use. We all need to work very hard to push the regulatory framework in that direction.
What about innovation? How much does SunEdison invest in R&D?
Our goal is to reduce costs to become competitive with conventional energy, so we have hundreds of people working on research and development. It is obvious that we spend a considerable amount of money on R&D and the (cost reduction) curve. Now, it is essential that there sufficient turnover to allow the industry to continue growing and reducing costs. Solar energy as an option is fantastic, especially because of its distributed nature.
SunEdison became part of MEMC Electronic Materials, Inc in November 2009. Has this merger changed the company’s vision?
No, the company’s ethos and culture have not changed at all. At a strategic level, yes it has changed. Since we joined MEMC, SunEdison’s team has been growing. We used to have all the knowledge and infrastructure, but not the capital. MEMC gives us the financial clout and peace of mind that we have the resources to implement our strategy much more quickly. We used to be projects developers, i.e., we were responsible for managing, developing and financing projects, but now we also understand the technology. The combination of SunEdison and MEMC gives both parties an overview of the industry and value chain, as well as the financial structure needed to grow.
SunEdison’s current portfolio amounts to 130 MW of installed photovoltaic capacity and 90 MW under construction. Are you going to add many more megawatts in the near term?
In the US, the model is more about small arrays, rarely exceeding 700 kW, whereas in Europe, the average is a megawatt. Nevertheless, the sum of all these small installations -350 MW - is what has given SunEdison the know-how regarding the technology and developing and financing projects. Thanks to our integration with MEMC, we will roll out more megawatts this year than we did throughout our entire history as SunEdison. In addition, we are interested in evaluating projects with other companies, forming strategic alliances and operating in markets with sector leaders. I do not want to compete with leaders in Spain; my intention is to become their ally if possible.
Are you thinking of certain companies in particular?
Yes, I have certain companies in mind that I cannot mention because it is not the right time to do so.
What about acquiring arrays that have already been developed by other companies?
No, this is not our strategic positioning. We like to control the value chain from beginning to end and, above all, use our engineering know-how when constructing arrays.
Before joining SunEdison you were in the film industry for many years. Any there any connections between the two sectors?
Well, both shine! (Seriously though), although it does not look like it, they have many things in common. Like solar projects, movies are made using project finance, but, above all, what I experienced in the film industry on joining was very high growth. The same can be said of the solar industry. It has a huge potential for growth and expansion. Both businesses are also very dynamic. But I prefer the solar industry; it is proving to be more interesting.
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