“Each sunny day means money in the bank account.”

“Each sunny day means money in the bank account.”
“Each sunny day means money in the bank account.”
  23.11.2018  |  08:06
Čas branja: 11 min
Dr Uroš Merc, Chairman of the Board of the BISOL Group

Slovenian export companies that bravely ventured into the British market include the manufacturer of solar panels, BISOL. This company has been present in the British market since 2011, when they established BISOL Solar Limited. After some beginner’s ups and downs, BISOL managed to establish solid partnerships and a wide distribution network, particularly in the central and northern parts of Britain.

BISOL is embodied by its director Uroš Merc, a doctor of electrical engineering, who wholeheartedly believes in the future of renewable energy sources and highlights that “one does not have to live in the South of France to be able to use the sun to produce energy.” We spoke to Merc, who is rather difficult to track down between numerous trips around the world, about how they built business in the British market, what is the future of photovoltaics in the world markets after state subsidies were cut back, and also about how the company will grow in the future and where he sees the main challenges of the photovoltaic industry.

Great Britain is more famous for its gloomy and often rainy weather than for being sunny, but you use the sun to do business. Why are you interesting for the British? How much do the British use the sun to produce energy?

There might be slightly less sun in Britain than in Slovenia, but to calculate the economics of the erection of a solar power plant, the price of electricity and the potential of a market are more important than how many hours a day the sun shines. The photovoltaic market in Britain awoke a little later than in Germany, Italy and France, but it soon became a very strong market. It has even been the strongest market in Europe in the last few consecutive years. At the beginning, support schemes were employed by Britain to promote particularly the construction of large solar power plants and projects. Today, Britain, like most other markets, is focused on the segment of small solar power plants on residential structures, increasingly emphasising the private use of energy produced in such a manner.

What is the correlation between the number of sunny days and the efficiency of a solar panel?

Clearly, we do not need to make a strong argument in favour of sunny days; the more sunny days there are the more solar energy is produced by solar power plants, and of course, each sunny day means more money in consumers’ bank accounts. The differences in the number of sunny days in Europe are not dramatic, but we need to know that solar power plants are not powered merely by the sun but also by the light, and Britain has a lot of diffused light just like Slovenia does today. The number of sunny days is also not the key to the calculation of economics if we intend to erect a solar power plant. The fact is that Spain has more sunny days than other European countries and, in principle, this should mean that electricity is Spain is cheaper than in, for example, Britain. On the other hand, the price of electricity in Spain is much more government regulated than in Britain, which means that it might be more profitable to erect a solar power plant in Britain than in Spain.

An important business strategy of the group is also local presence in the most important export markets. You have been present in the British market since 2011 and we could say that your entry more or less coincided with the introduction of subsidies for the exploitation of solar energy, which were introduced by the British government in April 2011. How have you been growing in the British market?

BISOL has three pillars. The first and the most important is our manufacture of photovoltaic modules in Slovenia, in a town called Prebold, where over 200 employees work. The second pillar is turnkey construction of power plants, and the third pillar comprises solar power plants, where we produce electricity and sell it to earn money. The first few years in Britain went very well, then there were a few downs, but I can say that our results have always been positive, and our long-term presence in the British market has also been paying off. Our employees say that our market share in Britain is approximately 1.5 per cent, which is relatively high. However, it is even more important that we have established stable partnerships in Britain, which is a demanding market for all actors. In the British market, we are currently most involved with residential and commercial projects, but we also run large projects. The largest individual supply in the history of our group was a 58 MW solar power plant we built for the Belarusian state oil company.

BISOL has never had any interest in being the largest and the cheapest in the world, nor do we want to compete with huge Asian countries, which generously stimulate their manufacturers of solar panels with subsidies and support schemes. Our strategy is to be as close to end clients as possible in order to understand what is happening in a market and to closely collaborate with local partners, particularly with distributors or installers. We have also been collaborating in Britain with a large company that builds approximately 10,000 houses annually and endeavours to equip them all with solar panels. On the basis of our British partner’s solution called SolFiT, we have been manufacturing integrated solar panels, which may replace roofing. Together, we have also developed an innovative way to install these panels. This segment, which is called BIPV (Building Integrated PV), in which solar panels take over the role of primary roofing, is expected to experience the highest growth and the British market is one of the leading markets in this field. In this context, we also see a broader picture of a market for testing and development, which can then be used for our operation elsewhere across the world. The solution of integrated installation of panels has won many awards in Britain and is very important for us, as it has opened the door to certain other important clients. All panels look alike at first sight, but this is not the case. Only in Prebold are over 800 different products manufactured.

In 2016, the British government drastically cut financial aid for the use of solar energy. How have you been adapting your operation to this fact?

With constantly decreasing prices of solar power plants and relatively high electricity prices in Britain, there is increasingly less need for subsidising of the production of solar energy, which makes the British market especially interesting and promises future growth. As far as support scheme cuts go, Britain is not the only one. At the beginning, all states generously subsidised the erection of solar power plants but have now dropped this. Nevertheless, the erection of solar power plants has been continuing worldwide. There have been no support schemes in Italy for years, but still, the market functions perfectly. The same is true for the Benelux countries, where we have been present for a number of years. Ten years ago, the prices of photovoltaic models were higher, while today, the photovoltaic industry can perfectly compete with conventional energy sources. Many people who purchase electricity coming from the grid pay more than if they had produced the energy themselves. It suffices to say that the French energy giant EDF makes the construction of new nuclear power plants in Britain conditional on the guarantee of the British government to purchase electricity produced by nuclear power plants at a fixed price for the next 40 years.

You say that the photovoltaic industry is currently running more or less without government support. How have manufacturers been adapting to this fact?

We have been working in four shifts for the past two and a half years, and each year, we produce more. It is also very important for us that we are financially very stable, and we finance everything with our own funds. Our production is increasingly automated, which enables us to optimise our costs.

How have you set up your distribution network in Britain? Where are you present?

Our distribution network is spread across Britain, but most supplies are made to the central and northern part, also thanks to our partnership with the company SolFit, for which we have been manufacturing the namesake solution. We have also had a warehouse in Britain from the outset, which enables us to swiftly respond to our clients’ needs.

How do you see the dynamics of the British market in the next five or ten years? Will the solar energy market continue to grow, and if yes, why?

The answer is simple. The market will continue to grow, since the prices of electricity from solar panels are lower than the prices of electricity coming from the grid. I firmly believe that the main development for the manufacturers of photovoltaic modules has yet to come.

In your peak period, your market share in Belgium reached almost 40 per cent. How did you manage that and how is your business there today?

We managed particularly well thanks to our main salesman, who is from Belgium and put together a very strong team. Our presence in Belgium is still significant and the Belgian market is the most mature for us. BISOL’s products are present in 80 markets and it is interesting to compare the stages of development of the photovoltaic market in individual countries. For example, if I want to come up with an answer for workers in Britain, I think about the solutions we employed in Belgium. Today, we only do business with three distributors in Belgium, who are very well located, and two installers who facilitate our contacts with end clients. We remain faithful to the distributors with whom we do good business.

How important is Belgium today in BISOL’s operation?

Belgium and the Netherlands remain our most important markets, and a quarter of our sales are expected to be generated in these two countries this year. Italy and France are also among our more important markets, and we have been gaining momentum in Switzerland. The Baltic States and Hungary have been opening up in recent years. We make our living in these markets, all other markets are just cherries on top. These include, for example, Ukraine and Vietnam. Every now and then we have projects in Kazakhstan, and we are relying on doing business in Saudi Arabia and Oman, which are still opening up. We also have a multi-million project coming up in Mexico.

The EU has not prolonged the trade barrier it imposed on the imports of Chinese solar panels in 2013. How will this affect the photovoltaic market in the EU if we know that China has defined photovoltaics as one of its key industries?

There had been no import duty on Chinese modules until 2013, and the European Commission is wrong if it believes it protected us. The Chinese swiftly moved their production to Vietnam and have been sending modules to Europe from there. Today, Chinese manufacturers not only receive production facilities from the state but have an important advantage in terms of costs. They only pay a 6.5-per cent value added tax on raw material input and get a 17.5-per cent tax refund on everything they export. If we purchase glass for solar panels in China, where the price is half of that in Europe, we must pay a 60-per cent customs duty, which puts us in a very subordinate position. Let me put it this way: this is as if two people ran a hundred metres, the first one had their arm and leg tied, and the other one takes performance-enhancing drugs. Even after the elimination of the import duty on Chinese products, I do not expect many changes, since today the Chinese are strongly present in the photovoltaic market. However, this will not stop us. We know that a certain share of clients will always want to purchase European high-quality products and products in relation to which they may rely on warranty. We have been collaborating with some distributors for over ten years, and we believe that we will continue to do so.

How turbulent will Brexit be for the photovoltaic market?

I believe that Brexit will not negatively impact our industry. We do not feel any major consequences, and the demand for solar panels has not decreased. The only change for us is that today all prices in Britain are pegged to the euro exchange rate. However, we will be delighted when the conditions stabilise, since this is always important for business.

In addition to photovoltaic modules, the BISOL Group is increasingly gaining ground as a manufacturer of load-bearing constructions for solar power plants, hybrid and off-grid solar systems. How important can this section of business become?

The sub-constructions to which modules are mounted still have a lot of room for improvement, and the margins of these products may also be higher. At BISOL, we have our fair share of experience with the development of products and the optimisation of solutions, which probably stems from our past. We used to have 70 employees who worked on the design and installation of power plants.

Solar power plants today are much better than they used to be. Do the modules that are used today differ much from the modules used ten years ago?

The competition in the market and progressively lower prices of modules force manufacturers to keep monitoring new developments in the market and introduce new materials. At the same time, we are very conservative when it comes to the choice of raw materials, as we give our clients 25-year warranties. I would like to point out that the modules we manufactured twenty years ago still function perfectly well. At BISOL, we have an environmental chamber, in which products undergo accelerated ageing. In this way, we test how individual materials work out in the long term. Tests of more advanced materials show that they continue to function for up to 100 years.

Can you say how successful your business will be this year and how much revenue you expect?

Business is excellent, the only problem is that the prices of solar panels dropped this year by 25 per cent and we have to put all our efforts into maintaining our turnover. After an exceptional 2016, when we generated a turnover of EUR 80 million at the group level, we expect a EUR 40 million turnover this year. The difference, of course, is due to large projects, which happen one year but not the other or they are delayed. This year or at the beginning of next year, we will install a new production line in Prebold, which will be fully automated and will enable us to be even more flexible in our operation.

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