SunEnergy in the United Kingdom: Strategy Proposal Christian Bogue Friday April 15, 2011 Hamburg, Germany Wir entwickeln Energie und Märkte
About the United Kingdom● Facts and Figures: ● Capital: London ● Population: 62M ● Currency: pound sterling (GBP) ● Top level domain name: .uk ● Time Zone: Greenwich Mean Time (GMT) ● Language: English ● Prime Minister: David Cameron ● ….and they drive on the left side of the road.
England, Britain, United Kingdom – Not interchangeable● England is a single nation.● Britain is simply an island consisting of England, Scotland and Wales.● The UK includes Britain and Northern Ireland.● Why does this matter? ● Because Scots don„t like being called Brits, nor do Welshmen like being termed English.
UK PV Market Policy: A brief timeline● April 2010: FiT comes into effect● May 2010: New coalition government emerges with mandate to cut long-term budget deficit, including spending on renewables.● Oct 20, 2010: Comprehensive Spending Review ● Result: drastic cuts in healthcare, welfare and defense, but not renewables; investor fears dissipate.● Nov 12, 2010: Comments by Greg Barker, Minister of State ● Quoted: “large field arrays should not be allowed to „distort‟ the market for roof-mounted PV.” ● Result: further shake in investor confidence.● February 7, 2011: Early review of FiTs announced ● Shifted ahead to April 2011 instead of April 2012● March 18, 2011: tariffs for systems over 50kW will be „fast tracked“ in their consideration with changes effective „as soon as practical.“
UK PV Market Policy: proposed FiT reductions● System costs fell 30% in recent years but…● …the new rates represent a 70% decrease…● …effectively making all 50kWp+ projects economically unviable.● New rates would take effect by parlimentary recess on July 19th. Essentially, economically attractive projects are capped at 50kWp.
What does this mean for the Market?● “These systems often drive economies in a market, and therefore bring costs down. By threatening the development of these systems the installation prices for photovoltaic solar energy schemes are likely to remain high in the UK” - Ash Sharma of IMS Research● “Limiting solar power to small-scale installations means the sector will simply never take off, other than creating a niche industry. And while countries such as Japan, Italy, Germany, China and the U.S. have said that they will be giving greater financial support to solar power and already have substantial solar PV capacity in place, the UK government has taken the opposite approach, making it clear that nuclear energy is definitely part of the plan for power generation in the UK.” - Ash Sharma of IMS Research● The UK is no longer the “hot market” in Europe.● Demand will shift from concentrated, large-scale projects to residential/small commercial projects widely distributed across the UK.
What does this mean for SunEnergy?● Macro impact on bottom line: ● Higher system prices means higher margins… ● …but purchase volumes will be smaller... ● …and time to market will be longer. ● UK sales will only be a small percentage of total SEE sales.● Market positioning: ● SEE‟s capability will not be measured by project references… ● but rather by the classic measuring stick of a commodity market: ● Price (not cheap, but highly calibrated to the market) ● Availability ● Reliability in delivery times ● variety of power class and price bands (Asian vs. Euro producers, etc.) ● ….as well as the bundled services we offer with our products.
Profiling our Customer: 3 types of firms● Micro-installers ● new to PV and/or buying installing very small quantities: ≤1 Pallet; only recently MCS certified; ● Insufficient purchasing volume for sunk transaction costs (calculating transport, writing an offer, invoicing, delivery)● Established retail partners ● Firms already established, strong businesses in PV ● Pareto‟s principle: these are the 20% of firms responsible for 80% of demand ● SEE staff act as key account reps● Project Partners ● certified electricians with MCS certification as an additional qualification, but PV is not their core business. ● Perform installation work only ; intended for SEE key market segments.
Market Entry Strategy: A three-pronged approach● Outsourced sales to micro-installers ● Serve the early-phase, new entrant installer market ● good potential, but have practically no business in PV● In house sales to established retail partners ● Become the dominant supplier for local market leading installers: firms with 20-30 installs per month.● Targeted Niche Development ● Build SEE brand in 1-2 vertical markets…. ● Such as district councils and/or state-funded schools ● Tailored marketing strategies required ● Serve carbon reduction compliance markets ● Where PV is seen as tool to comply with environmental law and not as an income generating asset
Strategy Element I : Serving the Micro-installer market● We contract the services of Sales Agent Services, Ltd. ● UK based recruiting firm for “external” sales agents, who: ● earn commission only ● are screened by SAS, Ltd, interviewed/selected by SEE ● Offer sales prices with margins determined by SEE ● Report directly to SEE ● Retaining fee for SAS, Ltd. is between £1.000 - £3.000 ● 12 week ramp up time between start and finish ● SEE can serve the 1500+ registered MCS certified PV installers without needing new sales staff.
Strategy Element I : Serving the Micro-installer market (2)● This element allows us to: ● Aggregate small amounts of demand into sizeable order volumes (of a container, for example) ● Minimize the transaction costs of small orders (calculating transport, writing an offer, invoicing, delivery) ● Serve all 1500+ MCS certified installers in the UK… ● ….without having to hire new personnel. ● Set a fixed selling price with a +/- margin (for example, no lower than 7% margin)
Strategy Element II: Established retail partners● Make dozens of installations per month● Have order volumes large enough to warrant close customer relations● Have a wide geographical coverage● capacity for execution of multiple projects simultaneously● have strong sales/marketing team for future sales growth
Strategy Element II: The Challenge● Most distributors want to serve this group● We are not the only ones that sell high quality modules (Samsung/Hyundai/Sharp)● We are not the only ones offering a “Partner Program”● The UK culturally doesn‟t feel a part of Europe ● ….and Europe is in our name ● ….the letters GmbH don‟t make much sense either.● It‟s easier to call a local number than +49….● Made in Germany is fine…as long as it appears British.Summary: Winning this group over will not be easy, especially against local UK distributors, but….it is still possible!
Strategy Element II: The Answer● Slide 15: correct positioning in commodity markets● UK sub-page on website with .co.uk domain name● Virtual office space ● UK mailing address and telephone number● contingent storage in UK warehouse (to be discussed)● “Road show” in May to key identified installers presenting: ● Formal presentation and materials ● Immediate, concrete marketing/sales action (defining “support”)
Note: Wholesaling ≠ Partner Program● There is no lack of “high quality components” in the marketplace.● Partners want project referrals first; site visits/seminars second. ● Training/development is a core competency of technical centers and educational institutions, not SEE.● Customer service is an expected part of the package…● ….as is technical support;Summary: The SEE Partner Program is a value-add in the marketplace, but only after the key elements of our primary business are addressed (price, availability, product range, etc.)
Partner Programs – value add after our core offering Look Familiar?
Strategy Element III: Brand Building in Vertical Markets● We generate project demand through engagement with vertical markets. ● Universities, local councils, etc. ● …but exclusively for the maximum FiT band—50kWp● We focus on developing carbon “compliance markets” ● Facilities with ≥6000 MWh of half metered electricity per annum ● must reduce their carbon emissions or face penalties ● Again, exclusively for the maximum FiT band—50kWp ● Interested in PV for compliance purposes, not profits● Dependency on “partner” for sales is reduced ● Think of it as good insurance in a competitive market or hedging against swings in demand from wholesaling
Next Steps● Review/Approve/Feedback from Management Team, then:● Contract for services with SAS, Ltd to target segment I (CB)● Re-focus sales work on established retail partners (CB)● Development of UK oriented website subpage (Mktg Dept)● Identification of best potential vertical market (CB)● Development of vertical market sales tools (CB/Mktg Dept)● Planning of partner visit/road show for key accounts (CB) A brief note on Recruiting: UK employers require 90 days resignation announcement for their managers.Add 8 weeks of training time in Hamburg for a future UK manager and we have a starting date of October…. Just to keep in mind!