Interview with Sunpower chief Tom Werner part 2

Part 2 of Climate Spectator interview with Sunpower's CEO looks at how he sees solar becoming competitive without subsidies, the value in being owned by an oil company, and prospects for off-grid solar in Australia.

This is the second part of an interview transcript with Thomas Werner CEO of Californian-based major global solar PV manufacturer, Sunpower, and the company’s Australian Managing Director, Chris O’Brien. The first part of the interview transcript is here.

Tom Werner (TW):          the good news is the cost of energy will continue to come down and you’ll see things like what we did in Chile where you have a merchant power plant where we’re selling through the grid at market rates.

Tristan Edis (TE):               On that one, often I get people saying to me, ‘oh we’re competing without subsidies’.  Then you delve a little bit deeper and you say okay what do you mean ‘without subsidies’?  And they reveal that they aren’t counting say an upfront tax credit as a subsidy or they aren’t counting a renewable energy certificate as a subsidy. 

So, in relation to Chile, what are the circumstances around that- are you seeing any kind of government support structure or subsidy either on the upfront cost or per megawatt-hour?  Are you saying you’re competing in the wholesale market?

TW:        Yeah.  None.

TE:          None whatsoever?

TW:        You know, I get what you’re on about on subsidies totally.  .  Now, to be fair, [in the case of Chile] you have incredible sunshine, you have flat land, I mean it’s perfect for solar.  And you have relatively expensive electricity, so those factors coming together allow you to make it work.

But today, you know, in Australia, there’s a big debate of do we need to change the RET , and the rise of small scale solar and is it causing electricity price rises- which is understandable because retail electricity prices have gone up dramatically.  But if you look at what you can produce solar energy today without incentives, you’re talking about ground-mount solar now achieving  ten cents a kilowatt hour or a hundred dollars a megawatt hour plus or minus.  

TE:          What  locations are we talking about?

TW:        Here.  And in residential…

TE:          Okay.  So, we’d be talking say north of Broken Hill kind of area.

Chris O’Brien (Australian Managing Director of Sunpower):          Yeah.  You’re talking in the high DNI areas and you’ve seen the maps no doubt so in that darker zone which goes all the way through to Queensland, not far from the grid.

TE:          Would we be saying Broken Hill or a bit north of that?

CO’B:     Yeah.  Broken Hill is about where it dips down to.

TW:        Yeah.  And if you look at rooftop, rooftop might be two, two and a half times that, so twenty to thirty cents or dollars per megawatt hour.  You know, that seems like it competes pretty effectively here. 

Now, I didn’t answer your first question completely.  Where things are going is in our view is solar providers will add storage and energy management and we’ll control both load and generation in time, allow our customers to match the two and optimise.

Being owned by an oil company

TE:          Does Total still have  I think the sixty-six per cent stake in your company?

TW:        Yeah.  It’s between sixty and sixty-six percent depending on the… Our number of shares outstanding changes every time; essentially employees getting stock.

TE:          Okay.  What the hell are they in the solar business for? 

BP and Shell pulled out.  They realised they couldn’t make a go out of it; presumably they didn’t see the synergies.  Are there synergies here?

TW:        Yeah.  Completely.  Think of a mine site. 

You go to a mine and you say okay you’re paying four hundred dollars a megawatt hour or forty cents a kilowatt hour using diesel and of course the carbon footprint is huge.  You can make that a diesel solar combo or a solar battery and you can pay half that much for energy and make a difference in the environment.  So, Total can go to a customer and say I can do either for you. 

So, they believed that solar pricing would come down, that it would become more economic through the grid and they wanted to offer that to their customers and they wanted to take a positive position on climate change.  It’s real. 

But we have a business to run, so we’re going to keep doing fossil fuels and we’re going to offer our customers choice.  And they were right.  Their timing wasn’t perfect, but they were right.

TW:        And so, what can they do?  They can offer a strong balance sheet, supplement long term R&D plus access to a hundred and thirty countries. 

So, we go to the Middle East.  You know, I didn’t know much about Saudi Arabia. Yet  because I can go there with somebody who’s been doing business there for decades, they give us access to a much broader market.

Also I dealt with BP and we have a guy that worked at Shell and ARCO.  Total has sort of mainstreamed Sunpower. So we’re not some new energies division hidden away; we’re a core part of the company , so you go to the management investor seminars  Sunpower is very much part of what they talk about.  Whereas at BP my sense was it was sort of an adjunct thing on the side.

Off Grid Solar

TE:          Alright.  I suppose that brings us to off grid projects in Australia. 

Off grid projects in Australia, in mining sites is obviously the substantial opportunity here in Australia.  Yet they’ve been paying diesel prices for a long time. You look at the numbers for many years now, solar has looked not too bad. 

Now you’re saying solar’s  a hundred dollars a megawatt hour.  I’m a bit sceptical to tell you the truth.    

So what’s stopping it from happening? Or is it just about to take off?  Are we going to see a whole heap of announcements coming out soon?

TW:        Tristan it’s difficult to get the counterparty to sign a long term PPA.  That’s it. 

Now, don’t be sceptical about a hundred dollars a megawatt hour.  We’re a public company and we quote that and we build it and import it, so plus or minus, right.  So, the project we’re building in America, you know, we are a material part of the company, so we can’t be doing that… I can’t be saying these sorts of things if they’re not true.

TE:          But I mean it’s different in Australia.  If you go and do that in, say, Nevada or something like that, the availability of labour and personnel is much more easily availabe locally  than in it is in the Australian environment.

TW:        You’re kind of right so, I say plus or minus.  But it’s not like twenty cents, right.   We’re going to be very close to $100 per MWh. 

You have to do large scale though. It’s not going to be a two megawatt ground mount system that’s  going to hit those kind of numbers.  You need fifty megawatts.

TE:          Fifty?

TW:        Yeah.

TE:          Oh, you’re going to struggle to find some sites that are off grid that can take fifty I suppose.

TW:        Sorry, I was being generic about ground mount , not necessarily off grid.I agree by the way.  Price point on an off grid system, it might be ten megawatts, that’s different. BOS and labour costs are different.

Chris O’Brien -Australian Managing Director (CO’B):         This is my  view.  You know, you go to the major miners here and obviously they live and die on commodity price and they don’t plan much past two or three years, so to invest in something that’s going to give you effectively twenty-five years of energy and spend the money upfront, that’s not appetising to them. 

But then again, you flip it and you have the right partnerships with independent power producers and start working clever ways out of financing, you know, and selling dollars per megawatt hour and it does change the game and that’s what we’re moving into in the future. 

TE:          But are we going to need that ARENA money to see this happen?  Because all indications I’m seeing is that ARENA money isn’t around after June 30 [Ed’s note: interview held before Federal Budget was released].

CO’B:     Yeah.  You know, let’s wait and see.  Let’s wait and see.

TE:          Okay.  But if the money is not there, do you think there’s still…?

CO’B:     There’s still a strong economic argument when you’re talking about producing energy at four hundred dollars a megawatt hour because you have to shoot diesel out into the middle of nowhere.

TW:        That’s where I start here is… solar energy is economic in Australia, so the capital markets will figure it out.  It just may be a little messy and may take a little bit of time, but the fundamentals are there. 


Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles