Worldwide solar
Energy Innovations Corporation
Sunflower Solar System
August 18, 2007
Norwich University
Brian Olson
Alexandra Pierce
Jefferey Sharpe
Anthony Williams
I. Executive Summary
California based Energy Innovations Corporation (EIC) manufactures and develops solar technologies for commercial and residential properties. The firm’s flagship product, the Sunflower System, is the first high concentration photovalic (PV) system designed for commercial rooftop and adjacent ground-mounted applications. Combining the world's most efficient solar cells with proprietary lenses, self-powered tracking, and a unique two-axis tracking carousel, the Sunflower delivers more energy at less cost than traditional PV systems. Energy Innovations Corporation is currently in the final stages of testing the product and expects to deliver the first commercial units in 2008.
India is an excellent market for the Sunflower PV. It not only boasts a conducive climate to solar power, but the recent proliferation of high tech industries has proved incredibly taxing to the existing electrical grid. A widespread switch to solar power would mitigate this.
In this report, we will state clearly why we have chosen the Indian market for to produce sell, and export the Sunflower System. We have determined Chennai would be an ideal place to manufacture the product based on its location in the southern region providing a temperate climate year round. The high level of foreign direct investment (FDI) in India by American high tech firms is notable because the Sunflower System can be sold to American companies and other foreign MNC's to guarantee consistent power supplies at their Indian subsidiaries.
II. EIC and the Sunflower system
a) Energy Innovations Corporation (EIC)
Energy Innovations is an up and coming leader in power innovation. Their mission is to deliver cost effective, grid-competitive solar electric power. The immediate goal of Energy Innovations is to reduce the payback time for a solar system so that it becomes both a sensible and logical investment for individual, public and corporate electricity users around the world.
Their strategy is to improve the cost-effectiveness of existing photovoltaic-based systems through innovations in not only the collection of solar energy, but also the generation of electric power from it. To execute this strategy, Energy Innovations has developed a compact tracking system to concentrate solar energy and a customized photovoltaic cell designed to work efficiently under concentrated sunlight. After extensive beta testing of the Sunflower, they have created a photovoltaic-based system that is assured long life, reliability and ease of installation. The Sunflower was released domestically in the U.S. commercial and institutional market through Energy Innovation’s system integration arm, EI Solutions. (http://www.energyinnovations.com)
b) The Sunflower
The Sunflower is the first high concentration PV system designed for commercial rooftop and adjacent ground-mounted applications. By combining the world's most efficient solar cells with proprietary lenses, self-powered tracking, and a unique two-axis tracking carousel, the Sunflower delivers more energy at less cost than traditional PV systems.
The Sunflower uses a proprietary-designed Fresnel lens to focus the sun's rays onto a very small piece of photovoltaic material. Our PV cell is the most efficient cell in the world - over 35% efficient, meaning that 35% of the energy from the sun is converted into electricity. It is composed of three layers of PV material, each of which responds to a different wavelength of light, enabling it to produce far more energy than traditional single-layer silicon-based cells. Each cell is backed by a set of aluminum cooling fins that use natural air flow to keep it at an optimal operating temperature despite the concentration levels.
In order for a high-x solar concentrator to work, the lens must be pointed directly at the sun. This requires a tracking system that moves the module in both altitude and azimuth dimensions. The Sunflower design includes an integrated two-axis tracker. Each of the three sticks (each containing four lenses and cells) contain a highly reliable, military-grade motor that tracks the sun's altitude, and they are mounted on a carousel that tracks the azimuth. Tracking is also "closed loop," meaning that it does not rely on GPS locators or an internal clock to get its bearings; it relies solely on internal sensors to find and track the sun.
Additionally, the Sunflower is the first high-x concentrator designed for rooftop applications. Its low profile enables it to maintain its position even in high winds. Its feet are designed to quickly connect to adjacent units, perfectly spacing them apart to eliminate inter-unit shading. This configuration also creates a "peloton" effect - changing the shape of the wind's movement across the units to reduce its ability to move them - much like what you see a group of bicyclists do in a race to deflect the wind. The result is that Sunflower systems will withstand winds up to 120 mph without requiring any roof penetrations.
Lastly, the small amount of energy needed by the Sunflower to power its tracking system and motors is derived from a separate strip of traditional PV cells mounted on the center stick. As a result, there is no need to bring wires back from the building's electrical system, and all of the energy produced by the Sunflower can be used to power the building or export to the grid. (http://www.energyinnovations.com)
c) Product requirements
Concentrating solar systems only respond to direct rays of the sun, meaning that they cannot take advantage of diffuse light on a cloudy day or when the humidity is extremely high. As a result the Sunflower will be most advantageous in the parts of the world where the annual kWh/m2 is at least 100-200 kWh/m2 or greater, as that is the minimum solar output needed in order to make solar effective enough to be useful. The map below details worldwide annual solar distribution.
As a point of reference, all countries except those that are designated by the purple color, representing solar output of less than 100 kWh/m2 annually, receive enough solar energy to make solar power both a viable and effective option.
The only other requirement for the effective use and installation of the Sunflower system is a flat area for mounting, either on a roof or on the ground adjacent to a grid-tied building.
d) Reason to Internationalize now
Over the past 20 years, solar energy demand has grown consistently by 20-25% per annum, and has been against a backdrop of rapidly declining costs and prices. The declines in cost have been driven by a) increasing efficiency of solar cells, b) manufacturing technology improvements, and c) economies of scale. The photovoltaic solar industry now globally generates around $10 billion in revenues, which accounts for meeting less than 2% of the total global demand for energy. Despite this fact, as oil resources are depleting and their cost dramatically increasing, more and more governments around the globe are making the push to become “green,” or at least use renewable energy sources. (http://www.solarbuzz.com/StatsMarketShare.htm)
With governments around the globe making the push to switch to renewable energy sources, the fact that there is currently very little competition, and the fact that the solar energy market is still a very young and emerging market, is the exactly why Energy Innovations needs to bring its Sunflower solar system to the international market as soon as possible. The increased efficiency and durability of the Sunflower, coupled with its substantially lower price, will enable them to penetrate foreign markets currently being served by other solar energy companies, while being the first mover in other markets, thus capturing a dominant portion of the market share.
III. International Market Overview
Australia:
Year-round sunshine, a stable political environment, robust economy, English-speaking workforce, environmentally conscious population, and well-developed infrastructure make Australia a strong candidate for FDI by Energy Innovations Corporation. Australia’s main benefit is that it is a large, sunny landmass where solar energy production would be relatively simple. The Australian dollar is currently weaker than the American dollar, meaning that investment would be less costly. Business relations are amicable and the country’s infrastructure would make serving the entire nation possible.
The most notable drawback to investment in Australia is that the country is a net exporter of energy and demand does not exist for more power. Therefore EIC’s systems would have to be marketed strictly as an ecological alternative to the power grid. While the market for this does exist, it is more difficult to sell solar energy than somewhere with widespread power shortages. Also, the geographic distance between Australia and the United States would make shipping and travel costly.
Brazil:
Brazil offers a relatively stable economy, an educated workforce, a developed infrastructure, and a diverse culture that embraces foreign investors. Its mixture of natural resources suggest that as the economy expands, the nations populace will increase in wealth allowing for further growth. As a member of Mercosur, Brazil’s success has the potential spill over and help other alliance nations grow, providing further expansion of our enterprise within LATAM (Latin America). Additionally, Brazil may lead and assist with political and economic stability of member nations such as Argentina, Paraguay and Uruguay, allowing for sustained growth, which should affect non-Mercosur nations. Another added benefit to EIC, assuming a substantial increase market share in the region, is growth outside of the region through partner nations such as Netherlands, Germany, China, Japan, Canada, and the United States.
Unfortunately, banking on the success of Mercosur not a viable investment strategy. Without the successful implementation of the Mercosur agreement, Brazil is still a strong candidate for investment in terms of climate, location, labor costs, and potential for growth, but lags behind other candidate nations in terms of political, legal, and economic conditions.
Canada:
Canada is a favourable market politically, legally, and logistically because it is the United States’ largest trading partner, a member of NAFTA, and geographically nearby. The government is presently undertaking a number of “green” initiatives, including major investments in alternative energy sources. The bulk of Canada’s industry is located in areas favourable to solar energy, and Eastern Canada would be a reasonable location for EIC’s first foreign subsidiary. The country’s well-developed infrastructure would make transportation and installation simple.
However, Canada does have some major drawbacks. While industrialized areas are located in the southern regions, many of those areas are already served by hydroelectric energy. Other areas are located too far north to make use of solar power. Due to the government’s green policies, competition in the alternative energy sector is already fierce. Furthermore, the low barriers to entry are also available to EIC’s competitors; so early headway in the Canadian market does not really generate sustainable competitive advantage. Essentially, Canada is a safe market to enter, and the metrics support this. However, operations to not show the potential for ROI that other markets do.
France:
France is a highly favourable market for investment for several reasons. Climactic conditions can support solar energy, demand for power outstrips domestic supply, and the economy is robust and growing. As a developed nation and a member of the European Union, rules and guidelines for FDI make market entry relatively straightforward, and the country’s well-developed infrastructure supports industrial development.
While the metrics show France as a prime candidate for EIC investment, there are several qualitative drawbacks that make it a less viable option. Relations between the U.S. and France have been chilly in recent years, and while this has not caused formal political strife, public opinion in both countries does not support amicable business dealings between the two. Other important considerations are a strong Euro and that English is not widely spoken, making supplier and contract arrangements more difficult. Also, while France is in a location favourable to solar energy it does not have the climate or sunlight hours that more southern nations do. While France would likely be a safe market for FDI, like Canada and Australia it does not show the potential for long-term sustainable competitive advantage of emerging and developing markets.
India:
India is the most viable market for EIC’s products. While the political and legal systems – particularly patent laws – are more difficult to navigate than those of the other countries considered, India shows the highest potential for long-term ROI for a number of reasons. First, India has power problems. Major markets suffer from rolling brownouts and the widespread use of solar energy would remedy this. Secondly, India is a sun-drenched country near to the equator. It does not experience the unfortunate drawbacks associated with winter such as shortened daylight hours and unfavourable weather that other markets face; the rainy season in India is only three months long. Third, U.S. FDI in India, particularly in the power-hungry high tech sector, has been substantial in recent years. American companies rely on power to realize the savings of operating in India and cannot afford to be affected by brownouts. This situation provides a number of opportunities for joint ventures and contract agreements with American tech companies to help sustain their Indian operations. A side benefit of the country’s highly developed tech sector is an educated, English-speaking workforce at a fraction of the cost of hiring American expatriates. Finally, India’s underdeveloped infrastructure may be problematic for transportation and installation, but it also means that there are a number of locales in India that are off the power grid. Solar energy is a viable option for these locations, and potential exists for agreements with the government or with NGOs to do so.
Drawbacks are supported by the metrics. Because India is not yet a Western developed market, it presents more challenges for FDI, most notably problems with patent protection. However, as a number of American companies have already discovered, this rapidly growing market has the highest potential for profitability of any of the countries considered.
IV. Market Assessment Comparison
Criteria:
a) Market Potential – Based on demand for product, viability of solar conditions, competition, cost of available energy, electricity consumption/production ratio
0 = Product unnecessary in most applications; little available solar energy; high competition; existing electricity is inexpensive; more electricity is produced than consumed
10 = Customers seeking renewable energy solutions; high solar energy; low competition; electricity generation is costly; electricity shortage
b) Political – Based on political stability, diplomatic relations, and trade organizations (i.e. NAFTA, EU, etc…)
0 = Unstable government system; unfriendly towards U.S. or hostile neighbors; not part of an advantageous trading block
10 = Highly stable government; friendly towards U.S. and neighbors; active member of NAFTA or retains Most Favored Trade Partner status
c) Economy – Based on economic development, inflation, education, and public debt
0 = Negative economic growth; uncontrollable inflation; low literacy; uncontrollable public debt (IMF involvement)
10 = High economic growth; low inflation; high literacy rate; manageable public debt
d) Infrastructure – Based on electronic banking, ports of entry, and internal road networks (for product distribution)
0 = Electronic banking unavailable; limited/difficult ports of entry; incomplete road/bridge network
10 = Electronic banking prevalent; multiple ports of entry; complete and free-flowing road network
e) Legal – Based on tariffs and rule of law enforcement (civil and criminal)
0 = High tariffs on imported solar energy systems; no enforcement of copyright or international laws; high crime rate; rampant public corruption
10 = Low/no tariffs on solar energy systems; rigid enforcement of copyright and international laws; low crime rate; no public corruption
f) Total Score:
0 = High Risk: Conditions oppose any investment; failure nearly assured
5 = Moderate Risk: Investment conditions allow a reasonable chance for success
10 = Low Risk: Conditions encourage investment; high probability of success
Summary:
∑ Each category assigned a weight based on importance to Energy Innovations
∑ Sum of total weights from each category will equal 100%
∑ Raw scores are determined from each category based on country reports
∑ High weighted scores indicate a country is favorable for investment by EIC
Market Potential Evaluation
Country Australia Brazil Canada France India
Weight Raw Weighted Raw Weighted Raw Weighted Raw Weighted Raw Weighted
Market Potential 0.3 9 2.7 8 2.4 8 2.4 9 2.7 10 3
Political 0.15 9 1.35 9 1.35 10 1.5 8 1.2 8 1.2
Economy 0.2 9 1.8 9 1.8 10 2 10 2 10 2
Infrastructure 0.15 9 1.35 9 1.35 10 1.5 10 1.5 9 1.35
Legal 0.2 10 2 9 1.8 10 2 10 2 9 1.8
Total 1 46 9.2 44 8.70 48 9.4 48 9.4 46 9.35
V. India – Recommended Market
Demographics
The Republic of India is an attractive market for the Sunflower System due to several factors including: climate, the world’s second largest population (over 1 billion citizens), language: English is the primary language for business and academia, transportation, one of the largest labor forces in the world (Friedman 2006) and a multitude of multinational corporations already operating in the country. Literacy and patent protection are some issues of concern, with a literacy rate of 61% (CIA World Fact Book, 2007), and the government’s willingness to acquire intellectual property via an obscure law regarding national security interest (CBS 60 Minutes, August 12, 2007 Episode) however; they are not compelling enough to prevent us from developing and manufacturing our product within their borders.
It has made rapid economic progress in the last decade; it is the world's twelfth largest economy by market exchange rates and the third largest in purchasing power. The nation’s standard of living is expected to rise sharply in the next half-century; it currently battles high levels of poverty, illiteracy, malnutrition, and environmental degradation.
India is the seventh-largest country in the world in terms of geographical area, the second most populous country, and the most populous liberal democracy. Bounded by the Indian Ocean on the south, the Arabian Sea on the west, and the Bay of Bengal on the east, India has a coastline of over 7500 kilometers. The Himalayas extend from the eastern extremes to the North of India, to the east lies the Thar Desert. It borders Pakistan to the west; China, Nepal, and Bhutan to the northeast; and Bangladesh and Myanmar to the east. In the Indian Ocean, India is in the vicinity of Sri Lanka, Maldives, and Indonesia (BBC, www.bbc.co.uk/india.htm).
The country, nearly 3 million square kilometers, is comprised of 28 states and 7 union territories, all connected by an efficient transportation system of roadways, airports, waterways and railways. Exports and imports are essential to the GDP of India, and while agriculture remains the largest area of employment, the service labor, in the technology field, brings in the greatest amount of revenue. (CIA, 2007) India is cultural mix of religion, traditional labor and the fastest growing, technically educated, population in the world. Despite the dichotomy between the poor and the rich, the educated and the illiterate, those who have
Political Analysis
India enjoys the rights and privileges of the world’s largest democracy it has followed the structure of democratic nations, such as Great Britain, Canada and the United States governed by a constitution. It has a President and Vice President but the real power is that of the Prime Minister, Pratibha Patil, a woman, which is highly symbolic since typically women are not as highly educated as men, and whose roles have been historically trivialized simply to a wife, mother, and servant to her husband. With its structure like that of the United States it makes the country very attractive to American MNC such as Google, Microsoft, Ford, General Motors, Dell Hewlett Packard, and many others; for this reason it is also very attractive to us.
Financial Reasons for Choosing India
Foreign Direct Investment (FDI)
India encourages foreign investment through significant tax incentives to corporations conducting business within its borders in order to promote development and growth. Additionally, the government has reduced controls on foreign trade and investment with Tariffs on non-agricultural items in 2006 averaging 12.5% (percent).
Listed below are key incentives Energy Innovation Corporation and its international subsidiary will enjoy:
∑ Five year tax holiday for:
o Power projects.
o Firms engaged in exports.
o New industries in notified states and for new industrial units established, in electronic hardware/software parks.
o Export Oriented Units and units in Free Trade Zones.
o Firms engaged in providing infrastructure facilities.
∑ 100% tax deductions of export profits.
∑ 50% tax deduction on foreign exchange earnings earned in foreign exchange.
∑ 30% tax deduction on net income for industrial companies up to a 10 year period.
India is very interested in Foreign Investment opportunities through:
∑ Financial collaborations
∑ Joint ventures and technical collaborations
∑ Capital markets via Euro issues
∑ Private placements or preferential allotments
Value System Comparison to United States
Conducting business in a foreign country requires that we have an understanding of the local culture, customs, and views therefore; it is necessary for us to understand how Indian values differ from that of our own. Using Geerte-Hofstede model it provides us with that understanding of India’s values and compares them with that of the United States. The results show that India:
∑ They have a high level of inequality of power and wealth within the society with women typically on the bottom rung of the social ladder
∑ India is very similar to the US in Masculinity signaling little difference between the value of men and women.
∑ India’s lower UAI rating indicates they are more accepting of change and more open to less structure. This may result in them being more creative than the typical US worker.
∑ Their low LTO (long term orientation) rating indicates they are thrift and willing to work to overcome adversity, and obstacle. This may suggest they are strong problem solvers or possess the ability to stick with an issue until a conclusion may be found.
Technology and Infrastructure:
The highly skilled labor force and growing economy are conducive to a highly technical product such as solar panels. Additionally, opportunity exists for contracting with foreign firms operating in India to provide reliable power to their enterprises locally.
Many analysts argue that infrastructure is the weak link in India’s sustained development and in 2006 Prime Minister Manmohan Singh said an investment of over $150 billion is needed in the next few years to develop India's infrastructure (Press Trust of Inda, 2006).
India has one of the largest road networks in the world. It also boasts an efficient railway system that that extends 63,000 kilometers and carries over 11 million passengers and 11 Lakh tones of freight daily. It has a long coast line with 12 major ports (Kandla, Mumbai, Nhava Sheva, Marmagao, Cochin, Tuticorin, Chennai, Vishakapatnam, Paradwip, Haldia, Goa and Kolkata). Additionally, it has a well structured airport system with four major international locations strategically located throughout the country.
10 Reasons to Establish Operations in India:
1. Excellent climate – we can select region with lots of annual sunshine.
2. Stable political situation – an ally of the United States
3. Very good legal system – similar to the United States.
4. Efficient transportation system.
5. Tax incentives.
6. Trade free zones.
7. Large labor pool.
8. English language spoken.
9. Comparable value system.
10. One of the world’s fastest growing economy.
VI. Entry Strategy
a) Locally vs. Import
It is financially beneficial for us to produce the product locally (in India), deliver to that market, as well as export the product to other countries. India has and will continue to have a high demand for energy. It currently produces 630.6 kWh per annum, but consumes 527.9 billion kWh and exports 60 million kWh. They import 1.5 billion kWh per annum (CIA, 2007). The addition of a nationwide solar network would solve the problems the country has with rolling brownouts, as well as its difficulties connecting rural areas to the power grid. Solar panels could be easily installed in every village powering their every need. Partnerships could be developed within the private sector with companies interested in developing India’s villages, reducing our installation costs and allowing a faster deployment. The government is committed to developing its infrastructure therefore we must move quickly to capitalize on this.
b) Competition
There are a significant number of solar energy companies that are committed to providing the technology locally and or globally to reduce customers and various countries dependence on fossil fuel. There are currently 21 companies operating in India as retailers and installers of solar technology. Solar Energy, headquartered in Delhi, is one of the largest retailers and installers of solar energy products in India. They and the other 20 organizations may be willing to distribute the Sunflower System, as there is currently no manufacturer of solar energy based in India. This provides EIC with a distinct advantage over foreign producers of same or similar technology.
c) Localization requirements
We recommend that initial investment take place in the facilities designated for use by American customers. Most of these facilities will likely be located in the Bangalore region, where the high tech industry is centered. Chennai would be an ideal place to manufacture the product based on its location in the southern region providing a temperate climate year round. Expansion to other markets will be driven by demand. Most Indian urban centers like Delhi, Bombay, and Calcutta suffer from rolling brownouts, so state and local government contracts can be sought in these areas.
d) Brief marketing strategy
It will be necessary to first sell the Sunflower System to American high-tech companies as cost-effective, environmentally friendly brownout protection. This will not only provide an easy and effective port of entry but also, EIC can then utilize these large customers’ supply chains for future sales based on the same rationale. For direct sales in the Indian market, the Sunflower System as a solution to the country’s power problems can be sold to heads of government and of major industry. Other options include distribution by Indian solar companies. It is essential that the system be sold at a price point where large industrial operations will be able to recoup the cost of the system from the savings generated by moving off the grid and by doing away with expensive generator systems to protect from brownouts.
VII. Recommended Timetable for Implementation
a) Short Term
The first market to be targeted should the American high tech firms operating in Bangalore. These firms are well aware of the fact that such alternative, renewable energy sources are both necessary in brownout protection, and also that they offer a means of generating a significant cost savings over the expensive generator systems that most of them have in place currently. Approaching these companies in the United States also dramatically drives down entry costs.
b) Medium Term
Upon successfully entering and establishing ourselves in the Bangalore market, EIC should then turn towards the other major urban centers throughout India, particularly Delhi, Bombay, and Calcutta. Despite these cities being major urban centers, they are not void from the rolling brownouts that plague the country. The best approaches for entry into urban markets are likely through seeking local and state government contracts or contracting with established local solar companies willing to distribute the Sunflower System.
c) Long Term
Once successfully establishing EIC’s presence in the major urban areas throughout India, the next marketing objective should be to reach the rural areas of the country where brownouts are more prevalent and more severe in their duration. This would require pursuing partnerships with government agencies or NGOs looking to help develop rural India or with corporate entities interested in operating there; particularly agricultural enterprises. Long-term goals include widespread distribution of solar energy throughout India to help the country combat its power shortage and make a major investment in sustainable, renewable energy. While this is best achieved through pursuing partnerships, licensing, and distribution agreements in the short-term, EIC will eventually become entrenched in the Indian market, which will necessitate a full Indian division. This will serve as a launch pad to entering other markets in the region, such as Thailand, Indonesia, Sri Lanka, the Philippines, and Vietnam.
References:
1. Solarbuzz: Stats: market share. http://www.solarbuzz.com/StatsMarketShare.htm
2. Energy Innovations Incorporated: About us. http://www.energyinnovations.com
3. CBS 60 Minutes, August 12, 2007 Episode
4. Press Trust of India, 2007. Government Profile. Retrieved August 18, 2007 from www.ptinews.com.
5. Hofstede, 2007. Cultural Profile, India. Retrieved August 18, 2007 from www.geert-hofstede.com
6. Friedman, Thomas L. The World Is Flat: A brief history of the twenty-first century, C. 2006 Farrar, Stratus, and Giroux, New York, NY.
8. BBC, 2006. Country Profile: India. Retrieved August 17, 2007 from www.bbc.co.uk
Sunflower Solar System
August 18, 2007
Norwich University
Brian Olson
Alexandra Pierce
Jefferey Sharpe
Anthony Williams
I. Executive Summary
California based Energy Innovations Corporation (EIC) manufactures and develops solar technologies for commercial and residential properties. The firm’s flagship product, the Sunflower System, is the first high concentration photovalic (PV) system designed for commercial rooftop and adjacent ground-mounted applications. Combining the world's most efficient solar cells with proprietary lenses, self-powered tracking, and a unique two-axis tracking carousel, the Sunflower delivers more energy at less cost than traditional PV systems. Energy Innovations Corporation is currently in the final stages of testing the product and expects to deliver the first commercial units in 2008.
India is an excellent market for the Sunflower PV. It not only boasts a conducive climate to solar power, but the recent proliferation of high tech industries has proved incredibly taxing to the existing electrical grid. A widespread switch to solar power would mitigate this.
In this report, we will state clearly why we have chosen the Indian market for to produce sell, and export the Sunflower System. We have determined Chennai would be an ideal place to manufacture the product based on its location in the southern region providing a temperate climate year round. The high level of foreign direct investment (FDI) in India by American high tech firms is notable because the Sunflower System can be sold to American companies and other foreign MNC's to guarantee consistent power supplies at their Indian subsidiaries.
II. EIC and the Sunflower system
a) Energy Innovations Corporation (EIC)
Energy Innovations is an up and coming leader in power innovation. Their mission is to deliver cost effective, grid-competitive solar electric power. The immediate goal of Energy Innovations is to reduce the payback time for a solar system so that it becomes both a sensible and logical investment for individual, public and corporate electricity users around the world.
Their strategy is to improve the cost-effectiveness of existing photovoltaic-based systems through innovations in not only the collection of solar energy, but also the generation of electric power from it. To execute this strategy, Energy Innovations has developed a compact tracking system to concentrate solar energy and a customized photovoltaic cell designed to work efficiently under concentrated sunlight. After extensive beta testing of the Sunflower, they have created a photovoltaic-based system that is assured long life, reliability and ease of installation. The Sunflower was released domestically in the U.S. commercial and institutional market through Energy Innovation’s system integration arm, EI Solutions. (http://www.energyinnovations.com)
b) The Sunflower
The Sunflower is the first high concentration PV system designed for commercial rooftop and adjacent ground-mounted applications. By combining the world's most efficient solar cells with proprietary lenses, self-powered tracking, and a unique two-axis tracking carousel, the Sunflower delivers more energy at less cost than traditional PV systems.
The Sunflower uses a proprietary-designed Fresnel lens to focus the sun's rays onto a very small piece of photovoltaic material. Our PV cell is the most efficient cell in the world - over 35% efficient, meaning that 35% of the energy from the sun is converted into electricity. It is composed of three layers of PV material, each of which responds to a different wavelength of light, enabling it to produce far more energy than traditional single-layer silicon-based cells. Each cell is backed by a set of aluminum cooling fins that use natural air flow to keep it at an optimal operating temperature despite the concentration levels.
In order for a high-x solar concentrator to work, the lens must be pointed directly at the sun. This requires a tracking system that moves the module in both altitude and azimuth dimensions. The Sunflower design includes an integrated two-axis tracker. Each of the three sticks (each containing four lenses and cells) contain a highly reliable, military-grade motor that tracks the sun's altitude, and they are mounted on a carousel that tracks the azimuth. Tracking is also "closed loop," meaning that it does not rely on GPS locators or an internal clock to get its bearings; it relies solely on internal sensors to find and track the sun.
Additionally, the Sunflower is the first high-x concentrator designed for rooftop applications. Its low profile enables it to maintain its position even in high winds. Its feet are designed to quickly connect to adjacent units, perfectly spacing them apart to eliminate inter-unit shading. This configuration also creates a "peloton" effect - changing the shape of the wind's movement across the units to reduce its ability to move them - much like what you see a group of bicyclists do in a race to deflect the wind. The result is that Sunflower systems will withstand winds up to 120 mph without requiring any roof penetrations.
Lastly, the small amount of energy needed by the Sunflower to power its tracking system and motors is derived from a separate strip of traditional PV cells mounted on the center stick. As a result, there is no need to bring wires back from the building's electrical system, and all of the energy produced by the Sunflower can be used to power the building or export to the grid. (http://www.energyinnovations.com)
c) Product requirements
Concentrating solar systems only respond to direct rays of the sun, meaning that they cannot take advantage of diffuse light on a cloudy day or when the humidity is extremely high. As a result the Sunflower will be most advantageous in the parts of the world where the annual kWh/m2 is at least 100-200 kWh/m2 or greater, as that is the minimum solar output needed in order to make solar effective enough to be useful. The map below details worldwide annual solar distribution.
As a point of reference, all countries except those that are designated by the purple color, representing solar output of less than 100 kWh/m2 annually, receive enough solar energy to make solar power both a viable and effective option.
The only other requirement for the effective use and installation of the Sunflower system is a flat area for mounting, either on a roof or on the ground adjacent to a grid-tied building.
d) Reason to Internationalize now
Over the past 20 years, solar energy demand has grown consistently by 20-25% per annum, and has been against a backdrop of rapidly declining costs and prices. The declines in cost have been driven by a) increasing efficiency of solar cells, b) manufacturing technology improvements, and c) economies of scale. The photovoltaic solar industry now globally generates around $10 billion in revenues, which accounts for meeting less than 2% of the total global demand for energy. Despite this fact, as oil resources are depleting and their cost dramatically increasing, more and more governments around the globe are making the push to become “green,” or at least use renewable energy sources. (http://www.solarbuzz.com/StatsMarketShare.htm)
With governments around the globe making the push to switch to renewable energy sources, the fact that there is currently very little competition, and the fact that the solar energy market is still a very young and emerging market, is the exactly why Energy Innovations needs to bring its Sunflower solar system to the international market as soon as possible. The increased efficiency and durability of the Sunflower, coupled with its substantially lower price, will enable them to penetrate foreign markets currently being served by other solar energy companies, while being the first mover in other markets, thus capturing a dominant portion of the market share.
III. International Market Overview
Australia:
Year-round sunshine, a stable political environment, robust economy, English-speaking workforce, environmentally conscious population, and well-developed infrastructure make Australia a strong candidate for FDI by Energy Innovations Corporation. Australia’s main benefit is that it is a large, sunny landmass where solar energy production would be relatively simple. The Australian dollar is currently weaker than the American dollar, meaning that investment would be less costly. Business relations are amicable and the country’s infrastructure would make serving the entire nation possible.
The most notable drawback to investment in Australia is that the country is a net exporter of energy and demand does not exist for more power. Therefore EIC’s systems would have to be marketed strictly as an ecological alternative to the power grid. While the market for this does exist, it is more difficult to sell solar energy than somewhere with widespread power shortages. Also, the geographic distance between Australia and the United States would make shipping and travel costly.
Brazil:
Brazil offers a relatively stable economy, an educated workforce, a developed infrastructure, and a diverse culture that embraces foreign investors. Its mixture of natural resources suggest that as the economy expands, the nations populace will increase in wealth allowing for further growth. As a member of Mercosur, Brazil’s success has the potential spill over and help other alliance nations grow, providing further expansion of our enterprise within LATAM (Latin America). Additionally, Brazil may lead and assist with political and economic stability of member nations such as Argentina, Paraguay and Uruguay, allowing for sustained growth, which should affect non-Mercosur nations. Another added benefit to EIC, assuming a substantial increase market share in the region, is growth outside of the region through partner nations such as Netherlands, Germany, China, Japan, Canada, and the United States.
Unfortunately, banking on the success of Mercosur not a viable investment strategy. Without the successful implementation of the Mercosur agreement, Brazil is still a strong candidate for investment in terms of climate, location, labor costs, and potential for growth, but lags behind other candidate nations in terms of political, legal, and economic conditions.
Canada:
Canada is a favourable market politically, legally, and logistically because it is the United States’ largest trading partner, a member of NAFTA, and geographically nearby. The government is presently undertaking a number of “green” initiatives, including major investments in alternative energy sources. The bulk of Canada’s industry is located in areas favourable to solar energy, and Eastern Canada would be a reasonable location for EIC’s first foreign subsidiary. The country’s well-developed infrastructure would make transportation and installation simple.
However, Canada does have some major drawbacks. While industrialized areas are located in the southern regions, many of those areas are already served by hydroelectric energy. Other areas are located too far north to make use of solar power. Due to the government’s green policies, competition in the alternative energy sector is already fierce. Furthermore, the low barriers to entry are also available to EIC’s competitors; so early headway in the Canadian market does not really generate sustainable competitive advantage. Essentially, Canada is a safe market to enter, and the metrics support this. However, operations to not show the potential for ROI that other markets do.
France:
France is a highly favourable market for investment for several reasons. Climactic conditions can support solar energy, demand for power outstrips domestic supply, and the economy is robust and growing. As a developed nation and a member of the European Union, rules and guidelines for FDI make market entry relatively straightforward, and the country’s well-developed infrastructure supports industrial development.
While the metrics show France as a prime candidate for EIC investment, there are several qualitative drawbacks that make it a less viable option. Relations between the U.S. and France have been chilly in recent years, and while this has not caused formal political strife, public opinion in both countries does not support amicable business dealings between the two. Other important considerations are a strong Euro and that English is not widely spoken, making supplier and contract arrangements more difficult. Also, while France is in a location favourable to solar energy it does not have the climate or sunlight hours that more southern nations do. While France would likely be a safe market for FDI, like Canada and Australia it does not show the potential for long-term sustainable competitive advantage of emerging and developing markets.
India:
India is the most viable market for EIC’s products. While the political and legal systems – particularly patent laws – are more difficult to navigate than those of the other countries considered, India shows the highest potential for long-term ROI for a number of reasons. First, India has power problems. Major markets suffer from rolling brownouts and the widespread use of solar energy would remedy this. Secondly, India is a sun-drenched country near to the equator. It does not experience the unfortunate drawbacks associated with winter such as shortened daylight hours and unfavourable weather that other markets face; the rainy season in India is only three months long. Third, U.S. FDI in India, particularly in the power-hungry high tech sector, has been substantial in recent years. American companies rely on power to realize the savings of operating in India and cannot afford to be affected by brownouts. This situation provides a number of opportunities for joint ventures and contract agreements with American tech companies to help sustain their Indian operations. A side benefit of the country’s highly developed tech sector is an educated, English-speaking workforce at a fraction of the cost of hiring American expatriates. Finally, India’s underdeveloped infrastructure may be problematic for transportation and installation, but it also means that there are a number of locales in India that are off the power grid. Solar energy is a viable option for these locations, and potential exists for agreements with the government or with NGOs to do so.
Drawbacks are supported by the metrics. Because India is not yet a Western developed market, it presents more challenges for FDI, most notably problems with patent protection. However, as a number of American companies have already discovered, this rapidly growing market has the highest potential for profitability of any of the countries considered.
IV. Market Assessment Comparison
Criteria:
a) Market Potential – Based on demand for product, viability of solar conditions, competition, cost of available energy, electricity consumption/production ratio
0 = Product unnecessary in most applications; little available solar energy; high competition; existing electricity is inexpensive; more electricity is produced than consumed
10 = Customers seeking renewable energy solutions; high solar energy; low competition; electricity generation is costly; electricity shortage
b) Political – Based on political stability, diplomatic relations, and trade organizations (i.e. NAFTA, EU, etc…)
0 = Unstable government system; unfriendly towards U.S. or hostile neighbors; not part of an advantageous trading block
10 = Highly stable government; friendly towards U.S. and neighbors; active member of NAFTA or retains Most Favored Trade Partner status
c) Economy – Based on economic development, inflation, education, and public debt
0 = Negative economic growth; uncontrollable inflation; low literacy; uncontrollable public debt (IMF involvement)
10 = High economic growth; low inflation; high literacy rate; manageable public debt
d) Infrastructure – Based on electronic banking, ports of entry, and internal road networks (for product distribution)
0 = Electronic banking unavailable; limited/difficult ports of entry; incomplete road/bridge network
10 = Electronic banking prevalent; multiple ports of entry; complete and free-flowing road network
e) Legal – Based on tariffs and rule of law enforcement (civil and criminal)
0 = High tariffs on imported solar energy systems; no enforcement of copyright or international laws; high crime rate; rampant public corruption
10 = Low/no tariffs on solar energy systems; rigid enforcement of copyright and international laws; low crime rate; no public corruption
f) Total Score:
0 = High Risk: Conditions oppose any investment; failure nearly assured
5 = Moderate Risk: Investment conditions allow a reasonable chance for success
10 = Low Risk: Conditions encourage investment; high probability of success
Summary:
∑ Each category assigned a weight based on importance to Energy Innovations
∑ Sum of total weights from each category will equal 100%
∑ Raw scores are determined from each category based on country reports
∑ High weighted scores indicate a country is favorable for investment by EIC
Market Potential Evaluation
Country Australia Brazil Canada France India
Weight Raw Weighted Raw Weighted Raw Weighted Raw Weighted Raw Weighted
Market Potential 0.3 9 2.7 8 2.4 8 2.4 9 2.7 10 3
Political 0.15 9 1.35 9 1.35 10 1.5 8 1.2 8 1.2
Economy 0.2 9 1.8 9 1.8 10 2 10 2 10 2
Infrastructure 0.15 9 1.35 9 1.35 10 1.5 10 1.5 9 1.35
Legal 0.2 10 2 9 1.8 10 2 10 2 9 1.8
Total 1 46 9.2 44 8.70 48 9.4 48 9.4 46 9.35
V. India – Recommended Market
Demographics
The Republic of India is an attractive market for the Sunflower System due to several factors including: climate, the world’s second largest population (over 1 billion citizens), language: English is the primary language for business and academia, transportation, one of the largest labor forces in the world (Friedman 2006) and a multitude of multinational corporations already operating in the country. Literacy and patent protection are some issues of concern, with a literacy rate of 61% (CIA World Fact Book, 2007), and the government’s willingness to acquire intellectual property via an obscure law regarding national security interest (CBS 60 Minutes, August 12, 2007 Episode) however; they are not compelling enough to prevent us from developing and manufacturing our product within their borders.
It has made rapid economic progress in the last decade; it is the world's twelfth largest economy by market exchange rates and the third largest in purchasing power. The nation’s standard of living is expected to rise sharply in the next half-century; it currently battles high levels of poverty, illiteracy, malnutrition, and environmental degradation.
India is the seventh-largest country in the world in terms of geographical area, the second most populous country, and the most populous liberal democracy. Bounded by the Indian Ocean on the south, the Arabian Sea on the west, and the Bay of Bengal on the east, India has a coastline of over 7500 kilometers. The Himalayas extend from the eastern extremes to the North of India, to the east lies the Thar Desert. It borders Pakistan to the west; China, Nepal, and Bhutan to the northeast; and Bangladesh and Myanmar to the east. In the Indian Ocean, India is in the vicinity of Sri Lanka, Maldives, and Indonesia (BBC, www.bbc.co.uk/india.htm).
The country, nearly 3 million square kilometers, is comprised of 28 states and 7 union territories, all connected by an efficient transportation system of roadways, airports, waterways and railways. Exports and imports are essential to the GDP of India, and while agriculture remains the largest area of employment, the service labor, in the technology field, brings in the greatest amount of revenue. (CIA, 2007) India is cultural mix of religion, traditional labor and the fastest growing, technically educated, population in the world. Despite the dichotomy between the poor and the rich, the educated and the illiterate, those who have
Political Analysis
India enjoys the rights and privileges of the world’s largest democracy it has followed the structure of democratic nations, such as Great Britain, Canada and the United States governed by a constitution. It has a President and Vice President but the real power is that of the Prime Minister, Pratibha Patil, a woman, which is highly symbolic since typically women are not as highly educated as men, and whose roles have been historically trivialized simply to a wife, mother, and servant to her husband. With its structure like that of the United States it makes the country very attractive to American MNC such as Google, Microsoft, Ford, General Motors, Dell Hewlett Packard, and many others; for this reason it is also very attractive to us.
Financial Reasons for Choosing India
Foreign Direct Investment (FDI)
India encourages foreign investment through significant tax incentives to corporations conducting business within its borders in order to promote development and growth. Additionally, the government has reduced controls on foreign trade and investment with Tariffs on non-agricultural items in 2006 averaging 12.5% (percent).
Listed below are key incentives Energy Innovation Corporation and its international subsidiary will enjoy:
∑ Five year tax holiday for:
o Power projects.
o Firms engaged in exports.
o New industries in notified states and for new industrial units established, in electronic hardware/software parks.
o Export Oriented Units and units in Free Trade Zones.
o Firms engaged in providing infrastructure facilities.
∑ 100% tax deductions of export profits.
∑ 50% tax deduction on foreign exchange earnings earned in foreign exchange.
∑ 30% tax deduction on net income for industrial companies up to a 10 year period.
India is very interested in Foreign Investment opportunities through:
∑ Financial collaborations
∑ Joint ventures and technical collaborations
∑ Capital markets via Euro issues
∑ Private placements or preferential allotments
Value System Comparison to United States
Conducting business in a foreign country requires that we have an understanding of the local culture, customs, and views therefore; it is necessary for us to understand how Indian values differ from that of our own. Using Geerte-Hofstede model it provides us with that understanding of India’s values and compares them with that of the United States. The results show that India:
∑ They have a high level of inequality of power and wealth within the society with women typically on the bottom rung of the social ladder
∑ India is very similar to the US in Masculinity signaling little difference between the value of men and women.
∑ India’s lower UAI rating indicates they are more accepting of change and more open to less structure. This may result in them being more creative than the typical US worker.
∑ Their low LTO (long term orientation) rating indicates they are thrift and willing to work to overcome adversity, and obstacle. This may suggest they are strong problem solvers or possess the ability to stick with an issue until a conclusion may be found.
Technology and Infrastructure:
The highly skilled labor force and growing economy are conducive to a highly technical product such as solar panels. Additionally, opportunity exists for contracting with foreign firms operating in India to provide reliable power to their enterprises locally.
Many analysts argue that infrastructure is the weak link in India’s sustained development and in 2006 Prime Minister Manmohan Singh said an investment of over $150 billion is needed in the next few years to develop India's infrastructure (Press Trust of Inda, 2006).
India has one of the largest road networks in the world. It also boasts an efficient railway system that that extends 63,000 kilometers and carries over 11 million passengers and 11 Lakh tones of freight daily. It has a long coast line with 12 major ports (Kandla, Mumbai, Nhava Sheva, Marmagao, Cochin, Tuticorin, Chennai, Vishakapatnam, Paradwip, Haldia, Goa and Kolkata). Additionally, it has a well structured airport system with four major international locations strategically located throughout the country.
10 Reasons to Establish Operations in India:
1. Excellent climate – we can select region with lots of annual sunshine.
2. Stable political situation – an ally of the United States
3. Very good legal system – similar to the United States.
4. Efficient transportation system.
5. Tax incentives.
6. Trade free zones.
7. Large labor pool.
8. English language spoken.
9. Comparable value system.
10. One of the world’s fastest growing economy.
VI. Entry Strategy
a) Locally vs. Import
It is financially beneficial for us to produce the product locally (in India), deliver to that market, as well as export the product to other countries. India has and will continue to have a high demand for energy. It currently produces 630.6 kWh per annum, but consumes 527.9 billion kWh and exports 60 million kWh. They import 1.5 billion kWh per annum (CIA, 2007). The addition of a nationwide solar network would solve the problems the country has with rolling brownouts, as well as its difficulties connecting rural areas to the power grid. Solar panels could be easily installed in every village powering their every need. Partnerships could be developed within the private sector with companies interested in developing India’s villages, reducing our installation costs and allowing a faster deployment. The government is committed to developing its infrastructure therefore we must move quickly to capitalize on this.
b) Competition
There are a significant number of solar energy companies that are committed to providing the technology locally and or globally to reduce customers and various countries dependence on fossil fuel. There are currently 21 companies operating in India as retailers and installers of solar technology. Solar Energy, headquartered in Delhi, is one of the largest retailers and installers of solar energy products in India. They and the other 20 organizations may be willing to distribute the Sunflower System, as there is currently no manufacturer of solar energy based in India. This provides EIC with a distinct advantage over foreign producers of same or similar technology.
c) Localization requirements
We recommend that initial investment take place in the facilities designated for use by American customers. Most of these facilities will likely be located in the Bangalore region, where the high tech industry is centered. Chennai would be an ideal place to manufacture the product based on its location in the southern region providing a temperate climate year round. Expansion to other markets will be driven by demand. Most Indian urban centers like Delhi, Bombay, and Calcutta suffer from rolling brownouts, so state and local government contracts can be sought in these areas.
d) Brief marketing strategy
It will be necessary to first sell the Sunflower System to American high-tech companies as cost-effective, environmentally friendly brownout protection. This will not only provide an easy and effective port of entry but also, EIC can then utilize these large customers’ supply chains for future sales based on the same rationale. For direct sales in the Indian market, the Sunflower System as a solution to the country’s power problems can be sold to heads of government and of major industry. Other options include distribution by Indian solar companies. It is essential that the system be sold at a price point where large industrial operations will be able to recoup the cost of the system from the savings generated by moving off the grid and by doing away with expensive generator systems to protect from brownouts.
VII. Recommended Timetable for Implementation
a) Short Term
The first market to be targeted should the American high tech firms operating in Bangalore. These firms are well aware of the fact that such alternative, renewable energy sources are both necessary in brownout protection, and also that they offer a means of generating a significant cost savings over the expensive generator systems that most of them have in place currently. Approaching these companies in the United States also dramatically drives down entry costs.
b) Medium Term
Upon successfully entering and establishing ourselves in the Bangalore market, EIC should then turn towards the other major urban centers throughout India, particularly Delhi, Bombay, and Calcutta. Despite these cities being major urban centers, they are not void from the rolling brownouts that plague the country. The best approaches for entry into urban markets are likely through seeking local and state government contracts or contracting with established local solar companies willing to distribute the Sunflower System.
c) Long Term
Once successfully establishing EIC’s presence in the major urban areas throughout India, the next marketing objective should be to reach the rural areas of the country where brownouts are more prevalent and more severe in their duration. This would require pursuing partnerships with government agencies or NGOs looking to help develop rural India or with corporate entities interested in operating there; particularly agricultural enterprises. Long-term goals include widespread distribution of solar energy throughout India to help the country combat its power shortage and make a major investment in sustainable, renewable energy. While this is best achieved through pursuing partnerships, licensing, and distribution agreements in the short-term, EIC will eventually become entrenched in the Indian market, which will necessitate a full Indian division. This will serve as a launch pad to entering other markets in the region, such as Thailand, Indonesia, Sri Lanka, the Philippines, and Vietnam.
References:
1. Solarbuzz: Stats: market share. http://www.solarbuzz.com/StatsMarketShare.htm
2. Energy Innovations Incorporated: About us. http://www.energyinnovations.com
3. CBS 60 Minutes, August 12, 2007 Episode
4. Press Trust of India, 2007. Government Profile. Retrieved August 18, 2007 from www.ptinews.com.
5. Hofstede, 2007. Cultural Profile, India. Retrieved August 18, 2007 from www.geert-hofstede.com
6. Friedman, Thomas L. The World Is Flat: A brief history of the twenty-first century, C. 2006 Farrar, Stratus, and Giroux, New York, NY.
8. BBC, 2006. Country Profile: India. Retrieved August 17, 2007 from www.bbc.co.uk
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