Strategic Management: REC Solar

SMU-18-XXX

This case was written by Professor GENG Xuesong and Lipika Bhattacharya at the Singapore Management University. The case was prepared solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Copyright © 2017, Singapore Management University Version: 2017-2-5

SMU Classification: Restricted

REC SOLAR: STRATEGISING ON A SOLAR COASTER

I keep a list on my desk; I have to keep reminding myself, that there are over 450 solar

companies that have failed, and gone bankrupt. There’re many stories of companies that

have made the wrong technology bet or invested in a technology before it’s time. You have

to pick the right technology, at the right time, and it’s a very serious decision because you

are, really are betting the company on those decisions.

- Steve O’Neil, Chief Executive Officer, REC Solar

On a sunny afternoon of May 2017, Steve O’Neil, CEO of REC Solar (REC), a leading company

in the solar industry, was attending a meeting in the company’s operational headquarters in

Singapore. His hand phone had been vibrating relentlessly and he finally took the call after the

meeting had just finished. He was informed that yet another solar company, Solar World, had

filed for bankruptcy. Just a few weeks earlier, two renowned solar companies, Suniva and Sun

Edison had filed for bankruptcy as well.

The solar industry was sailing on choppy seas again. The industry had been in constant turmoil

over the past several years due to fluctuating material prices, falling solar panel prices, industry

overcapacity, aggressive competition, and demand unpredictability. As O’Neil called it, the

industry was truly a “solar coaster”. More than a decade ago in 2005, the shortage of silicon

supply had forced many solar companies to close down or opt for consolidations. In 2008, solar

companies suffered badly from the aftermath of the global financial crisis. The industry gradually

picked up pace in 2013, gaining momentum from rapid customer adoption and new renewable

energy programmes. High profitability and growth motivated many companies to expand

capacity substantially. But in late 2016, the solar industry began riding the downslope of the

“solar coaster” again, as panel prices fell suddenly. 2017 looked a tough year financially for REC.

O’Neil and his top management team had to respond quickly to the market changes. Could REC

offer a price-cut on products to stay competitive? Could REC diversify their product scope and

geographic scope to minimise the market uncertainty? They also needed to examine whether their

long-term strategy was still viable for sustaining the competitive advantage in the ever-changing

market. Could REC focus on developing advantages in manufacturing, technology or service?

Could REC scale up the investment in new but uncertain technologies? In spite of the current

turbulence in the market, O’Neil firmly believed that the solar industry was on the cusp of

tremendous growth. The growth potential of the market was so huge that REC could potentially

double its market share, while still being selective in choosing their customers. Nevertheless, the

question of how REC’s current strategy could be changed weighed heavily on his mind.

Solar Market Solar technology dated back to the 1880s, and was based on the science of converting sunlight

into electricity using crystalline silicon, also known as the photovoltaic (PV) effect. High cost

and low conversion efficiency had prevented its commercial use until technological advances in

the late 1990s made solar power more affordable. Ever decreasing cost coupled with growing

energy demand, concerns about the dwindling sources of traditional energy and their

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environmental impact, as well as various forms of governmental subsidies, finally led to an

exploding global demand for solar power energy after 2008.1

Solar energy had become the fastest growing renewable energy source by 2016. Globally, solar

panel installation had grown from less than 1 gigawatts (GW) in 1990 to over 23GW in 2009,

and then soared to 70GW in 2016. It was projected to grow to 250GW annually by 2040 at the average compound annual growth rate (CAGR) of 5 to 7%. Solar power was estimated to account

for around 15% of world electricity generation by 2040, up from about 1% in 2016.2

The cost of solar power had dropped from US$2/kWh (per kilowatt hour) in late 1970s to around

US¢ 7¢/kWh in 2016.3 As a comparison, the cost for hydropower was about US¢ 0.85¢/kWh,

US¢ 1.7¢/kWh for nuclear, US¢ 2.13¢/kWh for fossil fuel, and US¢ 3.4¢/kWh for natural gas.4

It was estimated that solar power cost would further decrease to around US¢ 4¢/kWh by 2040.5

The development of the solar industry had been primarily policy-driven.6 Germany had taken

the lead by providing generous subsidies to solar panel manufacturers in the early 2000s. Spain,

Italy and France had followed with similar measures. By 2010, Europe alone had accounted for

74% of the global demand for solar modules.7 However, after the 2008 global financial crisis,

these countries had dramatically curtailed their solar energy programme subsidies. Asia had

replaced Europe as a substantial solar market and reached 65% of the total global demand in

2017.

Japan had become an important market in mid-2000s with its ambitious plans of using solar

power for large scale electricity generation.8 In 2003, Japan introduced laws which made it

mandatory for electric companies to use a specified amount of electricity from renewable energy

sources such as solar and wind. In China, the government had identified solar industry as one of

their focus areas, and offered export credits and R&D support to boost solar products

manufacturing since 2000.9 China had taken the lead over Germany as the largest solar panel

manufacturer in the world in 2013 and became the most dominant solar player of the decade. The

market in the U.S. had also picked up substantially since 2010. With the government

incentivisation schemes, the demand for solar products in the US continued to grow exponentially

since 2013 with the state of California dominating the U.S. market demand.10

The newly installed solar capacity in 2016 globally was around 34GW in China, 7.7GW in the

U.S, and 7GW in EU.11 China, EU, and the U.S. were expected to dominate solar PV installation

volumes through 2020, but market growth was expected to be particularly higher in Asia.12 The

Japanese government continued to support the solar industry with the ambition of increasing its

1 Gil Knier, How do Photovoltaics work?, NASA, 6 August, 2008, https://science.nasa.gov/science-news/science-at-

nasa/2002/solarcells, accessed May 2017.

2 Bloomberg New Energy Finance, New Energy Outlook 2016, https://about.bnef.com/blog/new-energy-outlook-2016-watch-the- story-unfold/, accessed May 2017.

3 Jeff Siegel, Chris Nelder “Investing in Renewable Energy: Making Money on Green Chip Stocks”, Jhon Wiley & Son’s., Inc,

2008, accessed May 2017. 4 http://www.wvic.com/Content/Facts_About_Hydropower.cfm

5 Bloomberg, New Energy Outlook, https://www.bloomberg.com/company/new-energy-outlook/, accessed May 2017.

6 World Energy Council, Solar, https://www.worldenergy.org/wp-content/uploads/2017/03/WEResources_Solar_2016.pdf, accessed May 2017. 7 National Renewable Energy Department, U.S. Department of Energy, 2010 Solar Technologies Market Report,

https://www.nrel.gov/docs/fy12osti/51847.pdf, accessed May 2017. 8 David Cyranoski, Japan goes for the sun, “Nature.com”, April 29, 2009,

http://www.nature.com/news/2009/090429/full/4581084a.html, accessed May 2017.

9He Nuoshu, Can Brazil replicate China;s success in Solar?, “China Dialogue”, 20June, 2017, https://www.chinadialogue.net/article/show/single/en/9865-Can-Brazil-replicate-China-s-success-in-solar-, accessed May 2017.

10 Daniel Wood, Watch 30 years of U.S. Solar Industry Growth, “Energy.gov”, US Department of Energy, January 30, 2015,

https://energy.gov/articles/map-watch-30-years-us-solar-industry-growth, accessed May 2017. 11 Bloomberg New Energy Finance, New Energy Outlook 2016, https://about.bnef.com/new-energy-outlook/, accessed May 2017. 12 Brian Publicover, APVIA sees steady Q1 growth in Asian PV, “PV Magazine”, May 26, 2017, https://www.pv-

magazine.com/2017/05/26/apvia-sees-steady-q1-growth-in-asian-pv/, accessed May 2017.

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installed capacity multi-fold by 2020. 13 14 It was also forecasted that India would quickly

overtake Japan as the third largest market of solar panels (Refer to Exhibit 1 for Global Solar

demand monitor Q1 2017). Moreover, countries like Mexico, France and Australia were expected

to see strengthening demand over the next few years. 15

Solar Value Chain

The value chain in the solar industry ranged from raw material production (like silicon) to solar

panel production, to installation and service for end consumers (refer to Exhibit 2: Solar Value

Chain). The first stage was the production of solar grade silicon wherein metallurgical grade

silicon was converted into high purity polysilicon. The next stage was to cast the polysilicon into

ingots and wafers, which were the inputs for the production of solar cells. The array of solar cells

were then assembled into solar panels (also referred to as solar modules) encapsulated within a

protective glass. The final stage involved installing solar energy systems for residential,

commercial, or utility customers.

The cost in each of these stages continued to be driven down by technological enhancements.

Polysilicon costs had reduced from US$ 0.43/Wp in 2010 to US$ 0.18/Wp in 2015. 16

Historically, polysilicon constituted half of the price of a finished solar module until the 1980s.

However, after the fall in prices of polysilicon in the 90s and then drastically after 2008, this

component cost constituted only about 30% of the total module cost.17

The production cost for ingot/wafer and solar cells also dropped continuously as a result of

technology enhancement that reduced the silicon consumption. The average silicon consumption

for manufacturing solar cells was expected to drop from 4.8 grams per watt (g/W) in 2016 by 25%

to 3.6 g/W in 2020. 18 Assembling cells into solar panels was one of the simplest processing steps

with the labor cost minimised due to automation. But the assembly process consumed an

extensive list of commodity materials like glass, sealant and aluminum etc. 19 In the final

installation stage, the Balance of System (BOS) components, such as mounting structures,

cabling, electrical components (inverter, meters, surge protection etc.), labor and overhead costs,

represented more than half of the costs for the total solar system. Among them, the inverter costs

embodied the largest component of BOS, accounting for about 10% of the total cost of the PV

system.20

Besides raw materials, the cost of a solar panel was significantly influenced by technology and

scale.21 The solar cell efficiency (i.e., the percentage of solar radiation converted into electricity,

or the electrical power generated per unit surface area) was expected to play the largest role in

solar panel cost reduction. An efficiency increase of 1% could result in a reduction of up to 10%

13 Newsletter, “Japanfs”, The spread of Solar Power Generation in Japan, June 30, 2008, https://www.japanfs.org/en/news/archives/news_id027851.html, accessed May 2017.

14 IEE Power and Energy Magazine, Ingram Publishing, First Solar, Feb 20 2013,

http://web.mit.edu/12.000/www/m2018/pdfs/japan/solar.pdf, accessed May 2017. 15 Julia Pyper, Global Solar Market to hit 85 GW in 2017, “Green Tech Media”, April 11, 2017,

https://www.greentechmedia.com/articles/read/global-solar-market-forecast-to-hit-85gw-in-2017-with-surge-in-china, accessed

May 2017. 16 Polysilicon Spot price, Energy trend, Price quote, http://pv.energytrend.com/pricequotes.html, accessed May 2017.

17 Eric Wesoff, Solar Power Year in Review, “Greentechmedia”, December 23, 2011,

https://www.greentechmedia.com/articles/read/solar-power-year-in-review-2011, accessed May 2017. 18 Irena, Solar PV Cost Analysis, https://www.irena.org/DocumentDownloads/Publications/RE_Technologies_Cost_Analysis-

SOLAR_PV.pdf, accessed May 2017. 19 Greenrhinoenergy, Solar Industry, PV Modules, http://www.greenrhinoenergy.com/solar/industry/ind_04_pv_modules.php, accessed May 2017.

20 Balance of system (BOS) to module pricing ratio opens up from 50:50 in 2011 to 68:32 this year, “Greentechmedia”,

November 15, 2012, https://www.greentechmedia.com/articles/read/solar-balance-of-system-accounts-for-68-of-pv-system-pricing- new-gtm-repo, accessed May 2017.

21 Irena, RE Technologies, Cost Analysis, Solar Photovoltaics, June 2012,

https://www.irena.org/DocumentDownloads/Publications/RE_Technologies_Cost_Analysis-SOLAR_PV.pdf, accessed May 2017.

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of the total system ś cost per Wp.22 23 24 Moreover, economies of scale were crucial for the

industry as it required high fixed cost investment in equipment, overhead and managerial costs.

To remain competitive in the industry, at least 1 GW of scale was required. The learning curve

in the industry was phenomenal as well, because of required experience in installation,

maintenance, and process optimisation, and could reduce costs significantly. As a result, the

entire solar industry had struggled to stay on the steep learning curve. In 1976, solar panels sold

for US$72 a watt, which then fell to US$3/W in 2008, and then to US$0.5/W in 2016 and fell

another 30% in just six months.

Several hundred companies operated across the value chain in the global solar industry. Other

than polysilicon manufacturing which was dominated by a handful firms only, each part of the

value chain had anywhere from 50 to 75 companies making up to 90% of industry activity.25

Among all the manufacturing stages of the value chain, the solar cell manufacturing was the most

fragmented. The solar panel market was fragmented too, with no panel manufacturer having more

than 10 % of the market share. In the final installation stage, besides numerous small installers

(especially in the residential market), some integrated manufacturers provide designing,

financing and project management services at this downstream installation stage.

The customer of solar panels could be residential, commercial (e.g., on retail and industrial

buildings rooftops) and utility (e.g., power plants). The residential consumers were fragmented,

and most were one time buyers, making switching costs irrelevant, and the barrier to entry for

the installers was minimal.26 The commercial or utility market was much less fragmented. These

consumers had much larger power generation need, the solar panels they required were typically

much larger and more expensive than residential ones. However, the appearance factor of solar

panels in terms of color and look was not as important for commercial or utility buyers. The

installation design differed because commercial building typically had flat roofs, as opposed to

slanted roofs in most residential houses27. Though the demand for residential and commercial

solar panels was much lower than the demand from the utility sector (9%, 29% and 62%

respectively in 2016) all segments in the industry had continued to see substantial growth year

over year.2829 (Refer to Exhibit 3 for US Solar PV Installations).

REC: Company Background

REC was founded as a hand-washed wafer producing unit in Norway in 1996. Over the years the

company had grown to become a leading integrated solar panel manufacturing company, and the

largest European supplier of solar panels, producing more than 30 million solar panels as of end

2017.30 Its solar panels had generated 10 GWh of electricity for more than 12 million people

around the world. REC had established itself as a reputable, quality-focused solar panel

manufacturer over the past two decades and was well known for its product quality, advanced

technology, and exceptional customer service.

22 Wp stands for Watt peak which refers to the peak power value or the maximum output power achieved by a solar module under full solar radiation (under set Standard Test Conditions).

23 Solarmango, Watt Peak, Definition, http://www.solarmango.com/dictionary/watt-peak, accessed May 2017.

24 Mercom Capital Group, Mercom Solar Intelligence Report, April 11, 2011, http://mercomcapital.com/news-analysis, accessed May 2017.

25 Finlay Colville, Consolidation in the Solar Industry, Think Again, “PV Tech”, Feb 15, 2017, https://www.pv-tech.org/editors-

blog/45880, accessed May 2017. 26 Lucas Davis, A deeper look into the Fragmented Residential Solar market, Energy Institute at Haas, June 8, 2016,

https://energyathaas.wordpress.com/2015/06/08/a-deeper-look-into-the-fragmented-residential-solar-market/, accessed May 2017.

27 Alan Goodrich, Ted James, and Michael Woodhouse, Residential, Commercial, and Utility-Scale Photovoltaic (PV) System Prices in the United States: Current Drivers and Cost-Reduction Opportunities, p. 6-11, http://www.nrel.gov/docs/fy12osti/53347.pdf,

accessed May 2017.

28 Christian Roselund, The U.S. solar market nearly doubled in 2016 to 14.6 GW, “PV Magazine US”, February 15, 2017, https://www.pv-magazine.com/2017/02/15/the-u-s-solar-market-nearly-doubled-in-2016-to-14-6-gw/, accessed May 2017.

29 Bloomberg New Energy Finance, New energy Outlook, https://about.bnef.com/new-energy-outlook/, accessed May 2017.

30 REC, Company History, http://www.recgroup.com/en/company-history, accessed May 2017.

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Moving to Singapore

The original market for REC was Europe. Until 2010, it had developed production capacities in

wafers, solar cells and solar panels in both Norway and Sweden. When the solar market shifted

gear with growing demand emanating from Asia and dwindling demand from Europe, REC

decided to expand its operations into Asia. The management team in the company was entrusted

with the task of finding an alternative headquarter that would facilitate coordinating its operations

and activities across the globe. Explaining the factors that influenced the choice, O’Neil said,

We looked at over two hundred locations around the world, before choosing Singapore. We

had a very detailed matrix with various criteria, including cost of labour, cost of utilities,

cost of materials, cost of logistics, and favourable climate for using chemicals. We chose

Singapore primarily because of the ready availability of human talent here, especially in the

semiconductor area, which is very similar to the chemical solar cell manufacturing process.

The location of the city as a major port, its logistics excellence, and proximity to materials

were important factors as well. Moreover, Singapore is a trade-friendly country, and the

government is very supportive. We work closely with Singapore Economic Development

Board (EDB). Singapore is also a good location for doing research, due to the availability

of human talent in our research study area.

The Singapore government had geared towards adopting an integrated approach towards

sustainable energy across power generation, transmission, distribution and consumption. For

example, it had initiated a collaborative program involving REC to provide new hybrid electricity

solutions comprising of solar energy and natural gas sources. With such government-backed

initiatives to go solar, Singapore served as a perfect backdrop as operations and manufacturing

headquarter for REC.31

The firm set up its new large scale integrated solar manufacturing facility in Singapore in 2010.

The new plant in Tuas was equipped with automated and integrated facilities to manufacture

wafers, cells, and panels in a state-of-the-art factory with multi-fold increase of its original

production capacity. REC favoured Singapore as a hub as the city had access to competent

research labs, which could help the company with research in latest technologies and product

innovation. REC had partnered with a leading solar institute, Solar Research Energy Institute of

Singapore (SERIS) (a research institute at National University of Singapore, NUS) to co-create

advanced products.

Change of Ownership

In 2015, REC joined forces with the Elkem Group, a Norwegian conglomerate,.32 The same year,

REC was rated as the most reliable, dependable and bankable solar company by New Energy in

the Altman-Z score.33 In a study of the major solar companies, REC had the lowest debt and

lowest debt/equity ratio (Refer to Exhibit 4 for REC debt/equity ratio).

Interestingly, many solar companies relied on huge amount of credit due to the long gestation

periods for investments involved in running a solar business. The downside of choosing products

of such companies is that these consumers may have to purchase third party warranties to cover

the risk that these solar companies are unable to fulfil their product warranty obligations, and

even then there was the risk of claims not being met due to caps and deductibles imposed under

the third party warranties.34

31 Ministry of Trade and Industry Singapore, Solar Nova Project, https://www.mti.gov.sg/MTIInsights/SiteAssets/Pages/Budget- 2014/SolarNova.pdf, accessed May 2017.

32 REC, REC Factsheet, http://www.recgroup.com/sites/default/files/documents/rec_factsheet_elkem_en_web_20150618.pdf,

accessed May 2017. 33 The Altman Z-Score is a statistical tool used to measure the likelihood that a company will go bankrupt.

34 REC, Files, Documents, Fact Sheet, Altman Z Score, 2016,

http://www.recgroup.com/sites/default/files/documents/rec_factsheet_financial_strength_2016_en_web.pdf, accessed May, 2017.

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Products and Technology

Products

REC’s major products included its REC Peak Energy (60 multi-crystalline cells with an energy

output of up to 265 Wp) and REC Peak Energy 72 (72 multi-crystalline cells with an energy

output of up to 320 Wp), as well as some variations of these two core products. In 2015, these

products were upgraded to their new product lines of REC TwinPeak (120 half-cut multi-

crystalline cells, with an energy output of up to 275Wp) and REC TwinPeak 72 (144 half-cut

multi-crystalline cells, with an energy output of up to 335Wp). The TwinPeak series’ panels

boasted a 17% energy efficiency and increased power output of about 10 Wp per panel, achieving

a 275 W per panel performance.35

The architecture of REC panels sought to maximise the amount of sunlight absorbed. For both

their product lines, the panels’ throughput of electricity generated could overcome the general

limitations of solar panel technology, including reduced performance in high heat, restrictive

usage in warm climate, and light-induced degradation leading to lower efficiency and throughput.

The unique half-cut cell architecture of its modules provided its solar panels with unparalleled

performance in shaded areas or areas that receive less sunlight.36 Their solar panels were also

100% free from potential induced degradation (PID) and had low light induced degradation

(LID).37 As a result, REC solar panels reported a much lower power loss (1.5%) due to LID

when compared to industry averages (5%).38 39 REC products were guaranteed to perform for

25 years. Their products also had the lowest warranty claims rate in the industry (Refer to Exhibit

5 for REC Warranty claims).

Typically, solar panels installed on single-axis trackers could track the sun from the East to the

West from 10 AM to 4 PM. The architecture of REC’s TwinPeak modules allowed a backtracking

function which tracked the sun before 10 am and after 4 pm, resulting in improved yield.40 In

addition to capturing sunlight that hit panels’ surface, the panels could also harness the light that

passed through the surface with the help of a reflective material at the rear of the solar cell. This

material reflected the light back into the solar cell to be converted into electricity.

From the design perspective, REC solar modules were typically thinner and lighter with shorter

cables, and could accommodate more cells per panel, compared to the average industry products.

Thinner frames of solar panels allowed for greater packing density and reduced shipping and

storage costs. Thinner frames also allowed more modules to be stored onsite and in remote setup

areas due to less space consumption. Also, the installation of lighter modules was faster than

conventional modules, which, coupled with shorter cables that did not require cable ties, reduced

the number of man-hours required for installation while also improving safety.

Technology

The solar panel industry was experiencing rapid technology advancement and having the latest

technology was crucial in order to remain competitive. REC tried to maintain a market image of

being a leader in launching new technology. They had been a first-mover in launching the multi-

35 REC, Twin peak, http://www.recgroup.com/sites/default/files/documents/im_rec_twinpeak_series_ul_rev_f.2_eng.pdf,

accessed May, 2017. 36 Dricus, Half cut solar cells: new standard in product differentiation?, “Sino Voltaics”, 18 April 2016, http://sinovoltaics.com/solar-cells/half-cut-solar-cells-the-new-standard/, accessed May 2017. 37 Pingel, Sebastian & Frank, O & Winkler, M & Daryan, S & Geipel, Torsten & Hoehne, H & Berghold, Juliane, Potential

Induced Degradation of solar cells and panels, 2010, accessed May 2017. 38 National Renewable Energy Laboratory, Documents, Understanding Light-Induced Degradation of c-Si Solar Cells,

http://www.nrel.gov/docs/fy12osti/54200.pdf, accessed May, 2017. 39 REC, Documents, http://www.recgroup.com/sites/default/files/documents/assessing_the_impact_of_degradation_0.pdf, accessed May 2017.

40 REC, Videos, How Solar Works,

https://www.youtube.com/watch?v=pMU6QCTVbWU&index=3&list=PLE499AE76F77E0032, accessed May, 2017.

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crystalline technology and their multi-crystalline products reported high cell efficiency of

17.7%. 41 Their half-cut cell technology was also reported to be 2 to 3 years ahead of the

competition. Continuous commitment to improve technology and product quality had enabled

REC to win several of the world’s most prestigious performance awards (Refer to Exhibit 6 for

REC awards and Accolades).42

In 2014, REC switched production capacity to half-cut PERC cell technology. It had taken REC

several years to lab test and pilot their latest technology before its mass production in 2015.

REC had developed a streamlined process for commercialising their technology. First, they used

a long-term strategic technology roadmap. Second, they developed a pipeline of new

technologies to be adopted at different stages of product development. For example, while

researchers were experimenting with mono-crystalline silicon technology in their research lab,

the company was also testing other emerging technologies with partner research firms. At the

same time, technologies that had already been researched and developed (e.g., multi-PERC

technology) would be adopted in the production process on a larger scale. (refer to Exhibit 7 for

Solar panel Technology variances) As O’Neil emphasised:

R&D in this industry has to be very close to manufacturing. To do otherwise is a mistake

many of our competitors have made. You can’t do it in a laboratory. It’s all about “can you

do it at industrial scale”. So it’s really important for the research and development to be

very close to the manufacturing plants.

To manage a change like assessing new technology or assessing a new focus geographic market,

REC assigned a team to start with RBS (REC Business System). Typically, the team would define

the questions, and key requirements, formulate the working assumptions and then develop the

hypotheses and the tests accordingly. However, decision on technology adoption was primarily

a financial decision that revolved around the estimated cost-benefit analysis and risk assessment.

However, it could be a strategic decision when a certain technology was not financially feasible

but could provide first-mover advantage for REC.

Target Consumers

REC’s products catered to the residential, commercial and utility markets. Their residential

clients ranged from farm owners in the U.K. to homeowners in California. Their commercial

projects included IKEA in Germany, Dubai International Airport in United Arab Emirates,

Heineken Wickse Brewery in Netherlands, and the Sports Hub in Singapore. The utility clients

included Phoenix power plant in Italy, and BMD solar power plant in India. Because utility

segment had the lowest prices for the solar modules and was the most competitive, REC focused

more on the residential and commercial rooftops segment but without completely withdrawing

from the utility sector because it was an ‘important segment in the long run’.

Geographic Outreach

REC products were sold primarily in Asia Pacific (India, Japan, Australia and Southeast Asian

countries), Europe (Germany, France, Spain, Italy, Belgium, The Netherlands, UK), the Middle-

East and the US where REC enjoyed strong cost advantages vis-à-vis Chinese suppliers who had

to pay higher import duties in the US. The company had become the number one supplier to the

residential market in California. In the third quarter of 2016, around half of REC’s sales came

from the U.S. (refer to Exhibit 8 for REC Module Shipments by Region). REC had been ranked

41 REC, REC Twin Peak, http://www.recgroup.com/sites/default/files/documents/ds_rec_twinpeak_2_series_rev_e_eng.pdf, accessed May 2017.

42 REC, Japan Media, News Archive, 2011, http://portals.recgroup.com/ja/media/jpn_news_archive/REC-Solar-Modules-ranked-

as-a-Top-Performer-in-Independent-Photon-Field-Performance-Test-/, accessed May, 2017.

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as the top module supplier in Germany for 2016 and had been able to improve shipments to

Europe, Middle East and Africa (EMEA) by 24% year-over-year.43

High Value Customers

REC aimed to serve their high-value customers (customers who valued new technology, quality

and reliability of their product) at scale with REC products sold at a premium.

Solar systems typically needed a lot of customisation depending on the weather, location, and

power utilisation patterns. They also required regular monitoring and maintenance. Although the

upfront installation costs could be very high, they could be even more expensive and inconvenient

for individual consumers if their solar systems failed after a few years and they had to replace

the panels. Moreover, it was not feasible to use panels from multiple suppliers because that could

reduce the efficiency of the entire system and could prove troublesome on occasions that the

customer had to replace only part of the system that had failed. Therefore, consumers provided

more consideration to long term costs than the upfront costs in installation.

O’Neil had observed that customers over time often realised that the maintenance, service and

replacement of cheaper but low quality products could be a headache in the long run. Many times,

customers returned to REC after poor low quality product experiences. Because REC wanted to

build long term relationship with its clients, it was very selective in choosing their consumers.

REC therefore, focused more on smaller consumers with whom mutual trust was easier to build.

Sustainability Edge

REC focused on those consumers who were environmentally conscious and looking for products

that were truly environmentally friendly. The production of solar cells was very energy intensive.

For example, to melt quartz the temperature had to be extremely high. The energy consumption

in producing solar panels could outweigh the energy savings produced by panel usage. REC had

a leading low carbon footprint in the industry that acted in their favour to attract “green”

consumers. The Company had developed a unique process that required only 25% of the energy

of industry average and used a 100% hydroelectric power in Norway to reduce the carbon

footprint in the production process.

REC solar panels therefore delivered an energy payback time of 1.2 years. In other words, after

just over one year, REC panels could generate an equivalent amount of energy to what was

required to produce them. REC’s sustainable manufacturing principles also helped them reduce

consumption of raw materials and water, and minimise waste. However, because of this, REC

had managed to maintain a comparatively slower drop in their price with respect to the price drop

in the market, making their price premium even higher relative to the market in recent times.

Manufacturing and Sales

REC had integrated manufacturing facilities. Their operation facility in Singapore had 1.3GW of

production capacity in 2016, including a wafer plant (two wafer factories), a cell plant (eight cell

lines), a module plant (six module lines) and a utilities support office. The Singapore facility

manufactured approximately 15,000 solar panels a day and could operate 24x7. Scale was crucial

for REC to compete in the scale-based industry. As O’Neil described,

When you get up to over 1 gigawatt, you are well down, you are as competitive as the guys

that are now at about 8 gigawatts of scale because you are way down the flat part of the

economies of scale (curve)… [When you] get so large then it gets harder to manage costs in

some cases where you have very large sprawling operations.

43 REC, News and Media, Solar Market Insight Report Q1 2017, http://www.recgroup.com/en/rec%E2%80%99s-q1-2017-solar-

market-insight-report-new-world-record-setting-products-serving-enlarged, accessed May 2017.

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Production

Product Efficiency REC’s production cost was controlled through several quality focused manufacturing

practices.To ensure production efficiency and product quality, the manufacturing units in REC

had implemented many innovative automated processes in their facility. For example, to limit

the impurities present in their silicon mix, REC sourced only the highest quality silicon available

in the market. REC also used its own unique coating technology (an automated process) that

coated the crucibles used to melt silicon with silicon nitrate to protect the melt from any

contamination and improve the quality of the wafers. In addition, the company had implemented

a stringent product quality and management system, a production monitoring system, and a

product qualification system.

Product Uniformity REC had implemented the REC Business Systems (RBS) and REC Product Development Model

(RPDM) systems based on a lean six sigma approach to enable continuous improvement in cost

control, process improvement, and adoption of new low cost process technologies, thus

optimizing the value chain at every step (refer to Exhibit 9 for RPDM and Exhibit 10 for REC

RBS system).44 REC’s high level of control over production assured product uniformity, giving

it an advantage over other manufacturers.45 46

Integrated Production The vertical integration not only helped REC to have a tight control of quality in every stage of

production, but also made it less vulnerable to market fluctuations of critical components’ prices

and suppliers. O’Neil shared,

In the solar industry, having scale is important for a company as price competition among

manufacturers is cut throat. REC is relatively smaller in scale compared to some large scale

solar companies, but through integration and automation of our production capabilities we

are able to achieve the cost advantage that is normally associated with scale.

Although integrated production ensured adequate control over the production process, it was

complex to manage. In REC, there were more than 120 steps in making a solar panel. Different

skillsets were required for the various stages in the solar panel production process. Wafer

production was very much a chemical process, but cell production was a semi-conductor process,

and assembly was a mechanical engineering process. Electrical, chemical and mechanical

engineers worked together in REC and it needed high level of coordination and communication

for them to understand each other and what made for excellence in different fields.

Sales and Service

Delivery REC had tried to consciously build a brand name for themselves for providing premium products.

Besides quality products, REC also emphasised on quality service and timely delivery. The

average turnaround time from REC warehouse to order confirmation date was about one day for

local consignments and approximately seven days for international container shipments. This on-

time delivery performance was universal across all projects and regions.

Customer focus

44 SolarWorld, Solar Energy 101, How we make solar panels, https://www.solarworld-usa.com/solar-101/making-solar-panels,

accessed May 2017.

45 Jan Schmidt, Light-induced Degradation in Crystalline Silicon Solar Cells, Solid State Phenomena Vols. 95-96 (2004) pp. 187- 196, accessed May 2017. 46 REC, Videos, REC Automated Production plant,

https://www.youtube.com/watch?v=Zw0uAQvfn3g&list=PLE499AE76F77E0032, accessed May, 2017.

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REC was selective in choosing its customers as it had limited production capacity. A narrower

customer focus resulted in tighter customer relationships and consistent service. Another benefit

of building long-term customer relationship was to allow REC to follow their customers when

they entered new markets. REC closely monitored their high value customers who valued

performance and long term relationship, and were really willing to pay a premium for a better

product and service. Customer’ preferences and demands could be very different between

different regions. In a particular geographical segment, REC would try to figure out what the

unmet user demands were, what were the special requirements specific to the region, and how

REC could develop a product that was better than their competitors for those consumers.

Sales support REC maintained a dedicated market intelligence team, who were constantly comparing and

benchmarking REC with its competition. REC employed engineers and service personnel in the

field who constantly monitored their customers’ systems, and often were the first to identify any

pertinent problems for their customers. For example, during monitoring if they found a drop in

panel performance, they would immediately investigate the cause and call the customer to

provide a solution for it. Such additional services, although coming at a cost, enhanced the brand

reputation of REC amongst its customers.

Installers as partners

REC did not sell their panels directly to end users. They usually partnered with third party

installers. This meant that the company had ensured that the racking, invertors, electrical fittings

provided by the installers were of high quality and matched REC standards of product quality.

REC’s Solar Professional Programme helped educate installers on how best to install and sell

REC solar panels, enabling them to maximise their business potential. REC would also provide

their installers exclusive access to their tools and services, as well as re-certification programmes

to ensure that they were properly trained to continuously meet REC’s delivery quality standards.

REC treated installers as partners and would jointly market their products with them. For example,

in Singapore, REC had partnered with Phoenix Solar to provide solar systems in Changi airport,

Singapore, Sports Hub, the National Stadium and Tiger Brewery.

REC had ventured into downstream installation activities before. They had established a separate

unit called REC Solutions, which provided consumers with a full range of services including site

identification, permit management, due diligence, investment structuring, facility design, project

and site management, monitoring and maintenance and a host of other services.4748 REC also

provided financial analytics services to help evaluate the financial benefits and feasibility of

installing solar systems. However, the company quickly realised that an installation business

could potentially shift their focus from the core manufacturing business. As a result, instead of

competing with the installers, they withdrew from this downstream business and built a more

cooperative relationship with their installers.

Organisation Structure, Vision and Values

REC’s mission was: “We want every person to benefit from electricity directly from the sun”.

REC demonstrated its green mindset in every aspect of its company operations. REC had a

leading low carbon footprint in the solar industry, around 25% less than their competitors.49 REC

also applied its sustainability principles in choosing suppliers, selecting those that shared similar

47 REC, Systems Solutions, http://www.recgroup.com/sites/default/files/documents/rec_brochure_systems_solutions_web_20150710.pdf, accessed May 2017. 48 Elkem, News, REC Acquisition, https://www.elkem.com/news/The-REC-acquisition-A-good-agreement-for-all-parties/,

accessed May 2017. 49 REC Silicon, Corporate Sustainability report,

https://www.recsilicon.com/RECSilicon/media/RECSilicon/corporate/sustainability%20reports/lca_brochure_020911_web-

1.pdf?ext=.pdf%7C, accessed May 2017.

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objectives. The mission was well embraced by REC employees who were very passionate about

developing green technologies and products.

The values of REC were “responsible, experienced, collaborative and straightforward”. This

culture of collaboration and integrity had helped REC attract and retain human resource talent. It

had also helped the company to be a reliable partner for its customers and installers. The

company’s key focus was operational excellence and its motto was to be successful, and if things

didn’t work, fail fast, learn and change. O’Neil shared,

Ours is a culture of hard work, discipline, and understanding your role in the team. When

you are lean, everybody has to perform their role very well because you can’t afford to not

have someone performing. And so that means that you have to have a lot of trust in the team.

So, we work very hard to make sure we are communicating effectively throughout the

organisation and that we all understand what we are trying to do, that the mission is clear,

and everybody knows how they are contributing to that mission. If you talk to any of our 2000

employees here, and ask them what they are working on, they can relate that to our goals for

the year and our longer-term mission. They’ll say “I’m working on this particular process

and this is going to improve the efficiency of this cell by 0.1% and therefore this would give

us a premium in the marketplace. This would help us to achieve our goal of higher power

products.” They can relate their project to the bigger goal, which makes it very meaningful.

REC had over 2000 employees, with a majority of them based in Singapore. Its organisation

structure was simple and relatively flat. The Board of Directors were at the top followed by an

unusually small management team consisting of the Chief Executive Officer, the Chief

Operations Officer, the Chief Financial Officer, Chief Legal Officer and the heads of Technology,

Human Resources and Global Marketing. According to O’Neil, this lean structure helped create

a very open and candid culture as well as an efficient and fast decision making culture and helped

in staying adaptive to market change.

The culture in REC was inductive to the loyalty of employees. Attrition rate in the company was

very low, and in cases when employees left, they often became the customers and partners of the

company. Employee surveys at REC found that most employees thought the company was a great

place to work because of its culture of collaboration and trust. People would rather trade off with

less salary than leave the company. Employees also liked to work for REC because it was a global

company and staff valued the experience gained from working for a company which focused on

high product standards and advanced technologies.

Market Competition

Over many years, the global available capacity of solar products had exceeded installations.

According to a 2017 research estimate, solar panel capacities were likely to exceed installations

by 45% that year, putting downward pressure on price. Across the value chain, the excess

capacity was lowest for solar cells and highest for modules.50

Market competition for REC was tough, and it faced severe competition from several other large

and leading solar panel companies like Trina, Jinko, Canadian Solar, Hanwha, JA Solar and a

few others. Trina Solar was a Chinese company with several branches across the US, Europe and

Asia. Trina Solar was a vertically integrated company starting from the production of ingots to

modules implementing both mono and multi crystalline technologies.51

Jinko Solar, another Chinese company, was a leading solar company that had reported very

50 R. Sree Ram, How excess capacities are fuelling the solar boom, “Livemint”, July12, 2017, http://www.livemint.com/Money/10VXsohhF2A7f3hzMQme8K/How-excess-capacities-are-fuelling-the-solar-boom.html,

accessed May 2017.

51 Trisolar, Products, http://www.trinasolar.com/us/product, accessed May 2017.

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impressive growth in 2016. The company had partnered with Enphase Energy to provide bundled

service that consisted of a Jinko Solar module, an Enphase micro inverter and a supported service

programme called Enphase energy services (EES). The bundled service was claimed to maximise

project revenue for customers by providing higher system availability, reduced installation time,

and easier system design.52 Jinko Solar had manufacturing base in China and Malaysia with 70%

of their sales revenues coming from China and US markets. The company emphasised using

improved technology to increase manufacturing efficiency. Although they focused on multi-

crystalline technology, their mono-crystalline product lines had managed to achieve similar

efficiency levels to PERC lines of competitors.

Canadian Solar was the third in the global rankings of leading solar PV companies.

Headquartered in Canada with factories in China and Ontario, they were a vertically integrated

company, providing ingots, wafers, solar cells, solar modules, solar power systems and

specialized solar products. Their 60-cell format products were geared toward residential market,

whereas the 72-cell formats were geared toward the commercial/utility market.53 Their core

product Poly Gen 4 and Mono PERC can reach the cell efficiency of 20.3% and 21% respectively.

The company had manufacturing presence in Brazil, Canada, China, Indonesia, and Vietnam,

and its targeted market focused on China, the US. and Japan. In addition, they also owned and

operated commercial solar power plants valued at US $2 billion with a combined capacity of

1420MWP. 54

First Solar was based in US, and had restructured itself as a solar module and power systems

focused manufacturer. The firm had boasted steady reduction in operational expenses per watt

and had managed to thrive amidst huge competition. The company focused on thin-film

technologies and continuous innovation to make installations faster and easier. In 2015, First

Solar had migrated its manufacturing facilities in Asia and thereafter expanded quickly in

Malaysia and Vietnam. The company had plans to double their capacity in Asia by 2018 to 2019. 55

Hanwha Q CELLS was another large player in the solar industry. Headquartered in Seoul, South

Korea, it had diverse international manufacturing facilities across South Korea, Malaysia and

China. It offered a full spectrum of photovoltaic products ranging from applications and solutions

to modules, kits, systems and catered to large scale power plants as well. Hanwha’s large cell

production capacity of 6.8 GW and its solar module manufacturing capacity of 6.8 GW made the

company the largest cell and one of the biggest solar module manufacturers in the world.56 It

had manufacturing facilities in China, Malaysia and Korea. More than 50% of their net revenues

came from the US market, followed by Japan (11.7%), India (9.6%) and Turkey (7.4%).

JA Solar Holdings was another top tier solar development company based in Shanghai, China.

The company designed, developed, manufactured and sold solar cell and solar module products.

The company sold its products primarily through a team of sales and marketing personnel to solar

module manufacturers, who assembled and integrated the solar cells into modules and systems.

JA Solar also manufactured a variety of standard and specialty solar modules. Their

manufacturing facilities were located in China, Malaysia and Vietnam. More than 50% of their

net revenues came from China, with about 40% from Asia Pacific and Japan.57

Several upstream manufacturers were also moving into downstream manufacturing to compete

with companies like REC. GCL and Longi, who were long considered to be solely ingot and

52 JinkoSolar, Press Coverage, http://www.jinkosolar.com/press_detail_1089.html?lan=en JinkoSolar Offers Bundle with Enphase Energy for Commercial Customers, accessed May 2017. 53 Canadian Solar, Solar Panels, http://www.canadiansolar.com/solar-panels/standard.html, accessed May 2017. 54 Canadian Solar Annual Report 2016; Canadian Solar Investor Presentation Q3 2017 55 First Solar Annual Report 2017; First Solar website; First Solar Investor Overview 2017 56 Hanwha Q CELLS, Introduction, https://www.hanwha-qcells.com/qcells-office/about/introduction, accessed May 2017. 57 JA solar Holdings Annual Report 2016; JA Solar Cells website

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wafer manufacturers, had expressed strong intentions to move downstream in 2016. GCL was

using the multi- crystalline module technology while Longi had adopted mono- crystalline

module technology. These companies had the ability to be very cost competitive due to their very

large scale and fully integrated manufacturing capabilities.

The Ongoing Crisis

Prospects for the solar panel industry looked particularly gloomy toward the later part of 2016

due to a sudden fall in price of solar panel products.58 This was triggered by a panic sale by

Chinese solar panel manufacturers amidst changing regulations and reduced power plant

contracting activity. Since 2009, the Chinese government had used substantial subsidy to drive

the growth in solar manufacturing industry in China, leading to significant overcapacity that had

plagued the global industry with cut-throat price. The high trade tariffs in the US and EU for

Chinese solar products had led to further price cuts. The Chinese government had withdrawn

subsidy for the solar industry, and debt-plagued Chinese manufacturing companies began a sell-

out by liquidating their inventory.

Greentechmedia (GTM) Research had forecasted a sharp decline of as much as 40% in the

demand of solar panels in China by late 2017.59 Many of the smaller Chinese manufacturers

simply dumped their inventory for whatever price they could get. In the last quarter of 2016 and

early 2017, the price of solar panels had declined by roughly 30% in the international markets.

In the U.S., the price fall was even steeper.60 61 62 Stock prices of major solar companies had

fallen significantly. MAC Global Solar Energy Stock Index (an exchange-traded fund (ETF) that

was traded on the New York Stock Exchange) had dropped by 45% in 2016, projecting a difficult

period in the following years for the solar industry.63

In 2012, the management team at REC had to quickly close down its multi crystalline wafer

plants in Herøya and Glomfjord and their solar cell plant in Narvik to reduce capacity and cost

to cope with the downturn.64

O’Neil knew that they had to deal with the current crisis quickly and cautiously. He wondered:

Given the current situation of overcapacity and price war, what could be the right strategy?

Would cutting down capacity be a solution to stop the bleeding responsively? On the other hand,

scaling-up was crucial for the company because there were speculations that the industry would

most likely go through a period of consolidation and smaller firms would become vulnerable. In

fact, REC was carrying on the plan to expand capacity so as to expand further in the US and the

Southeast Asia. In terms of their pricing strategy, REC had been historically resistant to price

cutting. But with such a significant price plunge in the market, would it be feasible for REC to

follow the market and cut price to maintain competitiveness? He knew, that there wasn’t much

room left for further cut down on already strained manufacturing costs.

58 pvEurope, Markets-Money, http://www.pveurope.eu/News/Markets-Money/Solar-panel-price-Further-drop-expected-in-2017,

accessed May 2017. 59 Julia Pyper, Global Solar Market to Hit 85 GW in 2017 with surge in China, Greentech Media, April 11, 2017,

https://www.greentechmedia.com/articles/read/global-solar-market-forecast-to-hit-85gw-in-2017-with-surge-in-china, accessed

May 2017. 60 Trefis Team, What-to-expect-from-the-Solar-Industry-in-2017, “Forbes” December 7, 2016,

https://www.forbes.com/sites/greatspeculations/2016/12/07/what-to-expect-from-the-solar-industry-in-2017/, accessed May 2017. 61Trefis Team, What to expect from the solar industry in 2017? , “Forbes”, Dec 7, 2016, https://www.forbes.com/sites/greatspeculations/2016/12/07/what-to-expect-from-the-solar-industry-in-2017/#6dccdfe33745,

accessed May 2017. 62 U.S. Department of Energy, History of Solar, https://www1.eere.energy.gov/solar/pdfs/solar_timeline.pdf, accessed May 2017. 63 MAC Solar Index, Ticker SUNDIX, http://www.macsolarindex.com/, accessed May 2017. 64REC, REC Annual Report 2008, http://www.recgroup.com/sites/default/files/documents/rec_annual_report_2008_0.pdf, accessed

May 2017.

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Moving Forward

REC had an aspirational strategy of “10 by 20” – to be one of the top 10 global companies in the

industry by 2020. Therefore, O’Neil and his management team had to consider strategic issues

beyond the current crisis. First, given the price-cutting pressure in the long run, was it still feasible

to remain focused as a premium module manufacturer serving only the high value consumers?

Could they expand the consumer scope, if so, how? REC did not have a sales presence in the

rapidly growing emerging solar markets of Mexico, South Korea and Brazil. Would exploring

emerging markets be a more viable option rather than focussing on their current market?

Moreover, would offering customers more customisations to justify their premium price be

feasible?

Second, although integrated production facilities had helped REC withstand the fluctuation of

raw material and component costs, the recent sharp decline in component costs had given its

competitors who procured cell and wafers from open markets an upper hand in the cost advantage.

Would REC need to modify their operational scope to deal with component price fluctuation?

Bundling of services was another value added service that REC was looking at to further enhance

the market positioning. For example, power storage was increasingly getting bundled with solar

services, and customers increasingly wanted battery solutions with their solar products. REC was

experimenting with this technology and often worked very closely with third party companies

for providing their customers such bundled solutions.

Although they were a leader in multi-crystalline technology, REC had to deal with emerging

mono-crystalline technology. They needed to extend the life of their multi-crystalline products

while researching on the new mono crystalline technology simultaneously. Although the industry

was moving towards P-Mono crystalline technology, REC could potentially, strategically skip a

generation and move to N-Mono crystalline technology, considering their reputation of focusing

on avant-garde technology development. However, this could be a high stake decision, and

REC’s future could depend on it, because of the huge investments involved in designing and

developing such solar products. The challenge for REC was to pick the right technology at the

right time.

We work very hard to stay focused. There are many temptations in this industry when it’s

growing so fast, there’re so many technologies, there’re so many markets and we’re a very

lean team. So, if we try to do too many experiments we very quickly get defocused. So we’re

pretty ruthless in saying, as a management team, we going to try this one but we’re not going

to do these three, and once we finished this one, made a decision then we will go on to the

next one. Otherwise we get defocused. – Steve O’Neil

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EXHIBIT1: GLOBAL SOLAR DEMAND MONITOR

Source: Global solar market forecast, GTM Research, Global Solar Demand Monitor,

https://www.greentechmedia.com/articles/read/global-solar-market-forecast-to-hit-85gw-in-2017-with-surge-

in-china, accessed May, 2017.

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EXHIBIT2: THE SOLAR VALUE CHAIN

Source: Greenrhinoenergy, Solar Industry, The Solar Value Chain, Value Chain Segment & Activities,

http://www.greenrhinoenergy.com/solar/industry/ind_valuechain.php, accessed May 2017.

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EXHIBIT 3: US SOLAR PV INSTALLATIONS

Source: US Solar Market Insight Report, GTM Research, US Solar PV Installations,

http://www.seia.org/research-resources/us-solar-market-insight, accessed May, 2017.

EXHIBIT 4: REC DEBT EQUITY RATIO, Q3 2016

Source: Company data

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EXHIBIT 5: REC WARRANTY CLAIMS 2016

Source: Company Data

EXHIBIT 6: REC AWARDS AND ACCLODES

Source: Company Data

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EXHIBIT 7: SOLAR PANEL TECHNOLOGY VARIANCES

Source: Company Data

EXHIBIT 8: REC MODULE SHIPMENT BY REGION

Source: News, PV Tech, REC shifts module sales to APAC, https://www.pv-tech.org/news/rec-shifts-module-

sales-to-apac-region-on-continued-us-decline

Solar panel technologies were categorised by the type of silicon used, which could be mono-

crystalline, multi-crystalline, or thin-film. Mono-crystalline solar cells were made out of

cylindrical shaped silicon ingots which were made of two types of semiconductors, called

p-type and n-type silicon. As such, there were three major architectures of crystalline

technology: Multi crystalline, P-Mono crystalline, and N-Mono crystalline. N-Mono

crystalline technology was considered as the leading next generation platform after multi-

crystalline due to higher power efficiency as well as higher bi-facility. Besides the main

stream of N-Mono technology, other new technologies were competing in the market,

including passivated emitter and rear contact (PERC), passivated emitter and rear totally

diffused (PERT), and passivated emitter and rear locally diffused (PERL), just to name a

few.

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EXHIBIT9: REC RELIABILITY AND DURABILITY (RAD) MODEL

Source: Solar Electric Supply, Media, REC Quality Beyond Expectations,

https://www.solarelectricsupply.com/media/custom/upload/REC-Quality-Beyond-Expectations_1.pdf,

accessed May 2017.

EXHIBIT10: REC BUSINESS SYSTEMS (RBS) MODEL

Source: Solar Electric Supply, Media, REC Quality Beyond Expectations,

https://www.solarelectricsupply.com/media/custom/upload/REC-Quality-Beyond-Expectations_1.pdf,

accessed May 2017.