B2B Presentation on SunPower Corporation

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Final presentation for MBA business-to-business marketing course at Boston University.

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  • Source: U.S. DOE
  • Source: Energy Information Administration (EIA) Office of Coal, Nuclear, Electric and Alternative Fuels Solar Energy only comprises 1% of total U.S. Renewable Energy consumption.
  • Source: Plunkett, Jack. Plunkett’s Renewable, Alternative, & Hydrogen Energy Industry Alamanac, 2008.http://www.irecusa.org/fileadmin/user_upload/NationalOutreachDocs/SolarTrendsReports/IREC_Solar_Market_Trends_Report_2008.pdf
  • Source: “Global Potential for Solar Electricity: A Supply and Demand Perspective” by Paula Mints, Navigant Consulting Oct 2, 2008An overview of the top players is included in the appendix.
  • Sources:“Solar Photovoltaic Cell/Module Manufacturing Activities,” December 2008, Energy Information Administration, 21 October 2009, <http://www.eia.doe.gov/cneaf/solar.renewables/page/solarphotv/solarpv.html>
  • Sources:http://ga.water.usgs.gov/edu/wuhy.htmlhttp://www.energysavers.gov/your_home/electricity/index.cfm/mytopic=10450
  • Source: SunPower web site
  • Source: SunPower annual reports
  • Source:http://us.sunpowercorp.com/business/why-sunpower/best-technology/index.php
  • Source: SunPower web site
  • Source: SunPower presentation at San Diego Solar Conference 2006 by Steve Rutherford
  • Source: Lazard Consulting report for Sunpower, presented to the California Energy Commission in August 2008http://www.energy.ca.gov/2008_energypolicy/documents/2008-08-21_workshop/comments/SunPower_TN-47827.pdf
  • Source: “The Drivers of the Levelized Cost of Electricity for Utility-ScalePhotovoltaics” by SunPower Corporation Aug 14th2008 www.us.sunpowercorp.com/.../SunPower_levelized_cost_of_electricity.pdf 
  • Sources: SunPower web siteGreentechmedia: PG&E to buy 800MW from Optisolar, SunPower (http://www.greentechmedia.com/articles/read/pge-to-buy-800mw-from-optisolar-sunpower-1281/)
  • Source: “Solar PV Commoditization” from RenewableEnergyWorld.com
  • http://www.pv-tech.org/chip_shots/_a/signs_of_the_times_sunpowers_marketing_campaign_shows_up_at_san_jose_airpor/
  • Source: http://www.greentechmedia.com/articles/read/pge-to-buy-800mw-from-optisolar-sunpower-1281/
  • Source: Julie Blunden (SunPower VP of Corporate Communications) presentation to the “Solar Energy Expert Conference by solarplaza” 2 September 2008, Valencia, Spain http://www.youtube.com/watch?v=7zTARu3Y8WE
  • http://www.renewableenergyworld.com/assets/documents/story/2008/Top%20Ten%20Rankings%20FINAL%208%20%20PM%20July%2023.pdf
  • http://www.easybourse.com/bourse/actualite/sunpower-to-supply-up-to-600-mw-panels-trackers-to-fpl-656019
  • Source: SunPower Loses Market Share In California To Asian Companies September 4, 2009, 08:37 http://www.solarplaza.com/news/sunpower-loses-market-share-in-california-to-asian
  • Source:California Public Utilities Commission Market Share Data
  • Source:California Public Utilities Commission Market Share Data
  • Source: FUTURE STATE OF THE PV INDUSTRY – TRENDS AND TECHNOLOGIEShttp://kammen.berkeley.edu/C226/7r.pdf
  • Source: SunPower web site
  • Interview with Julie from SP
  • Only other renewables are real substitutes because of RPS…http://ezinearticles.com/?Some-Pros-And-Cons-Of-The-Most-Popular-%20FormsOf-Alternative-Energy&id=422952http://www.alternativeenergysource.org/pros_cons.htm
  • http://www.dailykos.com/storyonly/2008/8/17/19534/8164/58/569472http://www.nwcouncil.org/energy/grac/meetings/2008/12/CSP%20solar%20resource%20assessment%20121808.pdfhttp://www.iea.org/textbase/nppdf/free/2005/ElecCost.pdfhttp://www.geo-energy.org/publications/reports/Factors%20Affecting%20Cost%20of%20Geothermal%20Power%20Development%20-%20August%202005.pdf
  • Source: DOE
  • http://tonto.eia.doe.gov/energyexplained/images/charts/renewable_energy_consumption_by_source_and_sector-large.jpg
  • Source:SUnPower web site
  • Source:The Drivers of the Levelized Cost of Electricity for Utility-Scale PhotovoltaicsSunpower Corporation 14 Aug 2008www.sunpowercorp.com
  • Source:
  • Sources: “Tracking the Sun II: The Installed Cost of Photovoltaics in the U.S. from 1998-2008”, Lawrence Berkeley National Laboratory“Pricing Pressure Beating Down on Sunpower”, Greentech Media, April 2009 :http://www.greentechmedia.com/articles/read/pricing-pressure-beating-down-on-sunpower-6088/“First Solar to Build 10MW ThinFilm Solar Power Plant in Nevada”http://www.bouldercitytimes.com/2008/07/25/FirstSolarToBuild10MWThinFilmSolarPowerPlantInNevada.aspx(Mark Bachman of Pacific Crest in a note to clients, Nov 2009)“We expect SunPower to continue to lose share as investors are not willing to pay the premium prices for its commodity product” “Sharp, Suntech and Solarworld AG are best positioned for market share wins in the U.S.”SunPower stocks down 30% Suntech stocks up 22%
  • B2B Presentation on SunPower Corporation

    1. 1. Noor Ashadawi<br />Christopher Bisoni<br />Sheila Farrar<br />Stefano Perotta<br />Lee Wong<br />MK859<br />November 30, 2009<br />1<br />
    2. 2. Agenda<br />2<br />
    3. 3. Agenda<br />3<br />
    4. 4. What Is Solar Energy?<br />Solar energy is a scalable, powerful, abundant, and increasinglycost-effective clean and renewable energy source.<br />Tremendous potential:<br /><ul><li>About .01% of the Earth’s land covered with 10%-efficient solar cells could provide the whole world’s current energy needs. </li></ul>4<br />
    5. 5. Current U.S. Renewable Energy Consumption<br />Solar Energy only comprises 1% of total U.S. renewable energy consumption. Why?<br />5<br /><ul><li> Capital intensive
    6. 6. Relatively young technology
    7. 7. Only recently cost competitive due to technological advances and </li></ul> greater incentives … BUT<br />
    8. 8. Types of Solar Technology<br />Photovoltaics (PV):<br />Direct conversion of sunlight into <br /> electricity<br />Concentrated Solar Power (CSP): <br />Concentration of sunlight to <br /> produce heat to be converted into <br /> electricity <br />6<br />
    9. 9. U.S. PV Market Size<br />Historical Growth:<br /> 35% yearly growth <br /> (1998-2008)<br />Current Size: $1.26 billion in sales<br />Future Growth: 15-20% yearly growth in sales expected<br />California is 70% of the PV market<br />7<br />
    10. 10. U.S. PV Market (MW): Main Players<br />8<br />Note: all sectors, including residential, commercial, and utility<br />
    11. 11. Business Customer Segments<br />Commercial (62%)<br />Retrofit existing buildings <br /> with PV systems<br />Utilities (13%)<br />High potential because of increasingly prevalent and stringent renewable portfolio standards (RPS) legislation<br />Projected 53% CAGR for both segments until 2012<br />9<br />
    12. 12. PV Substitutes: Commercial Segment<br />10<br />From where else can a business or retail location obtain electricity?<br />
    13. 13. PV Substitutes: Utility Segment<br />11<br />From what other RPS-compliant sources can a utility generate electricity?<br />
    14. 14. Trends and Their Effects<br />12<br />Trends<br />Effects<br />Entry of low-cost manufacturers<br />Commoditization of product<br /><ul><li> falling prices
    15. 15. slimming margins
    16. 16. consolidation of supply chain</li></ul>Technological improvements<br />Global economic downturn<br />Increase in concern about global warming<br />Increased government subsidies and incentives <br />
    17. 17. Agenda<br />13<br />
    18. 18. SunPower Corporation<br />“SunPower designs, manufactures and delivers high performance solar electric systems worldwide for residential, commercial, and utility-scale power plant customers.”<br />14<br />
    19. 19. SunPower: Company Health<br />15<br />Average Gross Profit margin 22%<br />Largest commercial installation base in North America<br />SunPower’s goals 1. Improve panel efficiency<br /> 2. Reduce production costs 50% by 2012<br /> 3. Increase production capacity<br />
    20. 20. SunPower: Competitive Advantages<br />16<br />
    21. 21. SunPower: Total Solutions Provider<br />17<br />43% of sales<br />57% of sales<br />
    22. 22. SunPower: Best Technology<br />18<br />
    23. 23. Levelized Cost Of Electricity (LCOE)<br />Levelized cost of energy= (Total Lifetime Cost) / (Total Lifetime Energy Output)<br />It is an estimate of the overall cost of generating electricity, including all the costs over the lifetime of the project : initial investment, cost of capital, operations and maintenance, fuel, etc<br />19<br />SunPower<br />
    24. 24. SunPower: Return on Investment<br />High ROI through low Levelized Cost Of Electricity (LCOE)<br />Achieved through:<br />Lower capital costs<br />Higher efficiency PVs decrease land development costs<br />Higher capacity factor<br />Tracking increases NPV due to higher delivery during peak demand time<br />Lower cost of capital<br />Proven technology lowers risk<br />Problem: LCOE calculations are not standard, and are based on numerous assumptions.<br />20<br />
    25. 25. SunPower’sMain Business Customers <br />21<br />
    26. 26. Decision-Making<br />22<br />
    27. 27. Benefits vs. Needs<br />Utility & Commercial Needs<br />SunPower Benefits<br />23<br />
    28. 28. Competitors<br />24<br />Value-for-money competitors dominate the market<br />
    29. 29. Marketing Strategy<br />Positioning: differentiated premium product<br />25<br />
    30. 30. SWOT Analysis<br />
    31. 31. Agenda<br />27<br />
    32. 32. Recommendation 1: Background<br />Demand for solar by utilities is driven by renewable portfolio standards (RPS) legislation in 27 states<br />In solar, utilities have historically favored CSP due to lower costs<br />California requires 33% renewables by 2020<br />Most aggressive in the country<br />Does not have a solar “carve-out”<br />PV is competing with other renewables on a level playing field<br />This year, PG&E signed for an 800MW PV plant—with 250MW being produced by SunPower<br />28<br />
    33. 33. Recommendation 1<br />Which utilities to target?<br />Average load<br />Average <br /> wind<br />Load (MW)<br />Wind & Solar Output (MW)<br />Load – (wind+sun) <br />Average sun<br />Solar energy is complementary to wind energy. <br />24-hour cycle<br />29<br />
    34. 34. Recommendation 1: Target California Utilities with Large Wind Investments<br />Operational<br />In Development<br />Proposed<br />No solar installations are currently operational<br /><ul><li>Some PV is being built and proposed, but less than CSP
    35. 35. Very little wind is being planned for</li></ul>30<br />
    36. 36. Recommendation 1<br />∞<br />Which utility to target?<br />31<br />
    37. 37. Recommendation 1<br />Target SDG&E through 2010 request for proposal, emphasizing the following:<br />32<br />
    38. 38. Recommendation 1: <br />Three year supply deal with Florida Power and Light Company (FPL) in 2008 for 600MW (three projects totaling $728 million)<br />PG&E Deal for 250MW (undisclosed dollar amount)<br />Proposed SDG&E deal for 250MW<br />Potential payoff= approx $300 million<br />33<br />
    39. 39. Agenda<br />34<br />
    40. 40. Recommendation 2: Reduce Premium Price Gap<br />Proposed Strategy: to maintain a competitive LCOE in order to remain a leader in the industry<br />“SunPower’s competitive pricing remains relatively safe as long as competition’s prices decline around 20%.” (Tom Werner, CEO)<br />What Is Actually Happening?<br />Industry prices are expected to further decrease by 25% to 50% due to product commoditization, excess inventory and economic downturn.<br />LCOE is becoming less competitive<br />“We expect SunPower to continue to lose share as investors are not willing to pay the premium prices for its commodity product.” (Mark Bachman, Pacific Crest Securities)<br />35<br />
    41. 41. Recommendation 2<br />Why?<br />SunPower is not addressing competitor’s pricing pressure and in relative terms SunPower’s premium is increasing.<br /><ul><li>As a result, SunPower is losing market share to lower-cost producers.</li></ul>Example: CA Utilities Market<br />36<br />
    42. 42. Recommendation 2<br />SunPower should maintain Q1-09 net margin (about 2.5%), at least in the short term, to limit the gap with industry average and defend market share.<br />37<br />
    43. 43. Recommendation 2<br />38<br />How?<br />Maintain premium pricing for PV panels<br />Reduce margins on downstream services<br />Current trend in industry:<br />Downstream margins are shrinking<br />
    44. 44. Agenda<br />39<br />
    45. 45. Recommendation 3<br />40<br />SunPower has distinctive consumer advertising<br />SunPower has highest unaided consumer awareness <br />SunPower consumer advertising does not address commercial needs<br />Efficiency that drives ROI<br />Reliability<br />
    46. 46. Recommendation 3<br />Message: satisfaction of high-profile customers <br />Add quotes from customers emphasizing economic benefits and reliability<br />41<br />
    47. 47. Recommendation 3<br />Target<br />Commercial decision-making unit (CEOs, CFOs)<br />Location<br />Airports<br />Print ads: HBR, Business Week, Forbes, etc.<br />Effects<br />Free positive PR / advertising for existing customers<br />Trickle-down effects to residential segment<br />Funding<br />Revenue is expected to grow 40%, so with same budget weight (3% of sales), additional funds will pay for campaign.<br />42<br />
    48. 48. Agenda<br />43<br />
    49. 49. Summary <br />44<br />Target SDG&E<br />Reduce Price Premium Gap<br />B2B Ad Campaign<br />
    50. 50. Appendix<br />45<br />
    51. 51. PV Substitutes in Utility Market<br />46<br />
    52. 52. Investment<br />O&M<br />Fuel<br />47<br />
    53. 53. Relative Growth of Renewables<br />Although hydropower and biomass comprise the largest portions of renewable energy sources in the U.S., they have experienced minimal growth compared to solar and wind.<br />48<br />
    54. 54. Renewables by End Use<br />49<br />
    55. 55. PV Segment Analysis - Offer<br />SunPower’s Presence<br />50<br />
    56. 56. PV Segment Analysis - Needs<br />51<br />
    57. 57. Breakdown of LCOE Components<br />
    58. 58. Effect of Incentives on LCOE<br />Huge Effect of Incentives on all renewables, especially on solar<br />53<br />
    59. 59. PV Players Positioning<br />54<br />
    60. 60. PV Pricing<br />55<br />
    61. 61. Sunpower Benefit Challenge<br />Quantifiable<br />Credible<br />Can SunPower sustain his Premiun Brand/High End game?<br /><ul><li>More established players have better brand equity
    62. 62. Disruptive thin film technology (lower efficiency but much lower cost)
    63. 63. Value for money from major players and from China</li></ul>56<br />

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