While solar power may not be exactly new as a source of energy, it is only within the last decade or so that there has been a greater impetus towards using it, as the technology becomes more cost effective and efficient. Leading the way in the development of solar power is Q-Cells SE, a German company which is also the world’s largest manufacturer of photovoltaic cells. In 2008, Q-Cells announced that they will be investing around RM5b to open a production plant in Selangor Science Park 2 – their first such plant outside Germany.

Technology Business Review spoke to Bernhard Rack – the Executive Vice-President of Operations for Q-Cells Malaysia on the company’s growth and plans for its new venture.

In the beginning

Established in Thalheim, Germany at the end of 1999 by four gentlemen, one of whom – Mr. Anton Milner is the present CEO of the company – Q-Cells has had a very impressive rate of growth in just under 10 years. It has for instance, grown from just 19 employees as of July 2001 – when it produced its first solar cell, to more than 2,500 workers by the end of 2008. Furthermore, production has also risen from a capacity of 9.3 megawatts peak (MWp) per year in 2002 to 574.2 MWp by 2008. As we can see from the corresponding table, Q-Cells has had a highly impressive record for the six years from 2002 to 2008.

And now with the setting up of a Malaysian production plant, Q-Cells looks set to consolidate its position as the dominant player in the solar cell manufacturing. As Mr. Rack revealed, the Malaysian operations is expected to produce 600 MWp per year. When we compare this to the 574 MWp per year currently being produced by the lines in Germany, we can see that the company’s capacity is expected to more than double.

While obviously solar power is a relatively new concept to Malaysia, it has been around for quite a number of years in other countries. For instance, in Germany, the history of solar power goes back to more than two decades. However, admittedly, as Mr. Rack told us, it was only considered a niche product then. Today solar power, along with the other renewable sources of energy, account for around 10% of all energy being produced in the country.

The push towards renewables

So how is then that renewable energy has become increasingly popular in Germany? According to Mr. Rack, the movement started as a result of increased concerns over the effects of fossil fuels on the environment. He opined that while much has been talked about with regards to energy security and the depletion of fossil fuels, the fact of the matter is that they will not run out so soon. On the contrary, he believes that the world’s supply for fossil fuels will last for another 100 to 200 more years.

While fossil fuels may last for two more centuries, there is no guarantee that the quality of the air would be as good as it is now. For instance, Mr. Rack pointed out, China has recently placed 110 new coal power plants online, and for every 1 kilowatt of energy produced an hour, ~ 1000 grammes of carbon dioxide ( coal) are being released in the environment.

Along with public desire, there must also – Mr. Rack pointed out – the political will to promote green energy. For instance, in Germany, several legal initiatives such as the Renewable Energy Act have been put into place to help encourage the growth and development of renewable energy. And perhaps one of the most interesting is the concept of the feed-in tariff.

A feed-in tariff, as he explained, is a concept that is being practiced in Germany as well as in other countries such as Spain, France and Italy. In Germany, it works by allowing people who generate energy using renewable sources such as solar power, wind power, or biomass to feed in energy into the electricity grid. What’s more, they are paid almost double the amount of the normal electricity tariff. For example, the cost of electricity is around Euro0.25, those feeding electricity back to the grid from renewables would receive around Euro0.43.

Therefore, there are incentives to encourage the development and take-up of solar energy. One problem however is that of costs – namely the fact that at present, producing energy through solar cells tends to cost more than producing it from fossil fuels. Be that as it may, Mr. Rack expressed his confidence that, “we (solar energy) will be competitive to the grid within the next three to five years,” and pointed to several factors such as the drop in the prices of raw materials as a result of the economic downturn. As such, in less than half a decade, there will not be any more reason to “produce energy using polluting sources”. What is needed however is the political will to bring that about.

Dispelling the myths

When asked about whether or not the recent drop in oil prices will have an effect on the take-up of solar power, Mr. Rack opined that such factors should not play too large a role in arresting the march towards renewables. He also pointed out that we need to take into account the cyclical nature of oil prices. For example, while oil prices may be at a low owing to the economic crisis, prices will shoot up again once the economy recovers.

Solar energy is thus inevitable especially when taken into consideration that in the not so distant future, the cost of producing electricity from solar power will be competitive even against the lower prices of fossil fuels. Furthermore, Mr. Rack also clarified some misconceptions with regards to solar energy, one of the most common is the belief that in order to produce the amount of energy the world needs, the world has to be covered with solar cells.

On the contrary, as he explained, all that is needed to produce the 18,000 terawatts per hour per year (TWh/a) that the world is consuming is an area between 500 by 500 square kilometres to 700 by 700 square kilometres. In other words, the amount of space that is needed is even smaller than the size of the Sahara or Gobi Deserts.

A global entity

Having already made a name in Germany, the expansion of Q-Cells into Malaysia marks the company’s drive to become a truly global company, especially when taking consideration the huge growth market in Asia. Bernhard Rack revealed that being located near the centre of East Asia, Malaysia is strategically located and furthermore its stable political and economic environment is an attractive feature. Apart from that, he also praised the well-qualified and highly-educated workforce – especially in the fields of engineering and management.

Mr. Rack revealed that recently Q-Cells received the results from their plant at Selangor Science Park 2, which showed production of 67,000 solar cells from just part of the line. All in all, the production in the Malaysian plant is expected to be around 500,000 cells per day, thus altogether Q-Cells will be producing around one million solar cells per day in both its German and Malaysian plants.

He was also eager to point out that Q-Cells is not in Malaysia to take advantage of low-costs, despite what some people might think. He explained that seeing that solar cell production is mostly automated, and the costs for fabrication and other equipments are relatively the same, the difference in headcount costs does not make much of a difference.

Mr. Rack also revealed that in total, Q-Cells Malaysia is expected to hire up to 800 employees by the end of 2009. As far as research and development (R&D) is concerned, around 40 of them will be in the Technology department, which is separated into two groups – line optimisation and R&D. The first is responsible for quality control and troubleshooting, while the latter handles process development such as optimisation of process recipes, input parameters, new cell layouts, and sourcing for consumables from local sources.

Although the R&D efforts in Malaysia will be used in Malaysia, it will also be shared with Q-Cells in Germany as well as in other overseas locations. This points to the potential importance of the Malaysian operations as a R&D centre for Q-Cells. In total, the amount of money spent on R&D in Malaysia amounts to RM7.5m per year.

Seeing the silver lining in the cloud

When asked about how he sees 2009 turning out for Q-Cells, Mr. Rack admitted that it would not be an easier year. While, as he revealed, that it has never been as attractive as it is now to buy solar cells especially in Europe owing to the fall in prices and other incentives such as the feed-in tariffs, other obstacles have emerged.

One of the biggest obstacle is the volte-face by banks and lending institutions, which has seen credit drying up. While in the past, it was easier to get credit; the opposite is quite the case now. As such, people are finding it hard to get money. He calls it an overreaction and stated his belief that eventually people will realise that blocking the flow of money does more harm than good to the economy.

However, he is confident that the crisis will play itself out within the next six months, which is why he emphasised that now – more than ever – is the best time to invest in solar cells. One point he brought up is the fact that those investing in solar cells can expect to have 30% savings on costs now than if they were to go in later.

As the old saying goes, every cloud has its silver lining, and even though the global economy might be down at the moment, there are still some positives that have resulted from this crisis. Mr. Rack illustrated for instance that before the downturn, silicon costs accounted for 50% of the cost of production of solar cells.

This he explained was due to several factors such as shortage, as demand from both solar cell producers and semi-conductor producers. He also shared that one must take into consideration that the demand for silicon from the solar cell producers is higher than that from semi-conductors, as such there was a lack of capacity. However, as more silicon is produced to meet increased demand, the prices have gone down exponentially, which has also been aided by the slump in the semi-conductor industry.

Promoting solar power in Malaysia

Bernhard Rack is not just someone working in a manufacturer of solar cells, but also strongly believes in its potential and growth. He shared that although presently, the cost of solar power in Malaysia is around higher than other sources, he is confident that it will become competitive within the next three to five years.

However, what is important – he emphasised again – is the political will to make that happen. As he said, “we have to prepare by today,” so that there will be enough time to put the infrastructure in place and to train people accordingly. Having said that he also noted that the company has had good support from Federal agencies such as MIDA as well as from the Selangor State Investment Centre (SSIC) and the Selangor State Government.

Mr. Rack also revealed that he has made some contacts with interested parties in Malaysia who are looking to take up solar energy. He gave the name of a well-known resort in the country which is looking to become a “green resort”, and as such is looking to place solar cells on the sea to generate power for their operations. He also explained that one of the advantages that Malaysia has is that solar cells can be placed flat, whereas in Germany – and other parts of Europe – the cells have to be placed at an angle owing to the position of the sun.

Other discussions are also taking place with a foreign car company and also the Low Cost Carrier Terminal (LCCT). Unsurprisingly, Mr. Rack is quite optimistic about the latter named project, and expressed his views that it would be quite a showcase for Malaysia as around 17,000 people travel through the LCCT each day, and as such travellers can see solar power at work when they come into the country.

Apart from that, Mr. Rack explained that solar power can help connect people who are not already on the power grid. For example, in Malaysia, there are still quite a number of areas that do not have power supply from conventional sources – especially outlying places in Sabah and Sarawak. As such, by being able to provide the people living in these areas with a steady source of electricity, Q-Cells will be able to help boost their living standards.

Towards a Solar Valley

During the course of the interview, Mr. Rack revealed that he has been talking with SSIC to create a truly green park at Selangor Science Park 2 – where every aspect of the Park’s power demands will be met by renewables, in particular solar power. Ultimately, this is in line with his vision of bringing about a “Solar Valley”.

Currently, the only major solar cell producer in Selangor Science Park 2 is of course Q-Cells. However, Mr. Rack revealed that there are aspirations to bring about a subsidiary of Q-Cells to the Park. This company, he told us, manufactures thin film modules.

While thin-film solar cells have lower efficiency rates than multicrystaline silicon cells manufactured by Q-Cells, they also have the advantage of being cheaper.

While, the cost of production may be cheaper, Mr. Rack explained that manufacturing thin-film cells require a larger production space than it takes to manufacture silicon cells. As such, although there have been plans to bring in a daughter company since mid of 2008, there are still some issues that have to be ironed out before that becomes a reality.

But if and when those issues are resolved, then we would see Selangor Science Park become a regional leader in solar cells with both Q-Cells and the thin film subsidiary – silicon solar cells and thin film modules – being manufactured within its vicinity.

When asked whether or not it would be possible for the thin film plant to be located apart from Q-Cells plant, Mr. Rack explained that although it may be possible, it would not be entirely feasible. He pointed out several factors - most pertinently - the fact that by being adjacent to each other, back-office services, corporate functions, facilities management and warehouse/logistics can be shared.

Furthermore, it will also – as Mr. Rack pointed out – help boost the attractiveness of the Science Park as it will be pull factor for supporting industries to base themselves there. As such, it will create a whole new eco-system that will turn Malaysia into a veritable hub for solar energy.

A bright future

Whether or not the subsidiary comes to Selangor Science Park 2 or Malaysia is a question that has yet to be answered. What is not in doubt though is the commitment that Q-Cells has for their operations in Malaysia. It is a commitment that can be seen by the fact that there is room for four fabrication plants in their facilities, whereas presently there is one.

Each plant incidentally, as Mr. Rack revealed, can produce 600 MWp per year, which means that with four plants, Q-Cells in Malaysia has the capacity of producing 2.4 Gigawatts peak (GWp) per year, thus pushing the capacity of the company to five-times of what it was in 2008.

And already, as he shared, the piling and the laying of the base for the second site has been completed. This process, he explained, is usually the most time-consuming one when building a new fabrication plant. As such, once the economic recovery kicks in, production can begin without too many delays.

It has to be said that Bernhard Rack’s optimism about the prospects of Q-Cells and solar energy in general was quite infectious. He named Europe as the biggest market for Q-Cells, with the USA, India and potentially the whole of Asia as other growing markets.. However, when asked to name his pick for the market to watch in the future he named China as he choice.

He explained that this is because he sees China facing a problem with pollution owing to its high energy demand which is being supplied by fossil fuels. Interestingly enough, China is also the largest producer of silicon in the world, which would be beneficial to any silicon solar cell manufacturer such as Q-Cells, and incidentally 80% of the silicon used by Q-Cells in Malaysia come from China.

It should also be noted that not only will Q-Cells manufacture solar cells in Malaysia, but it will also help in the installation and the training of the people to handle the cells. And of course, as mentioned above, it will also encourage the establishment of supporting industries.

However, as Mr. Rack reiterated, it is a process that takes time and this is why it is important to start now and which is also why he has been holding talks with the authorities to convince them of the prospects. He also expressed his views that there should be a feed-in tarrif - not, as he explained, to subsidise the costs, but more to help generate energy for the grid especially during the peak hours in the day when electricity usage is higher but also when the sun is at its highest.