Rising public concern over climate change and instability in electricity costs due to geopolitical conflicts are increasing the demand for the solar sector. Solar power has experienced a substantial growth rate globally over the last decades and generated enormous private investment and jobs. During this period, the cost of solar installation dropped significantly though supply chain constraints sparked the prices to some extent in recent years. IEA forecast that solar PV power generation will quadruple by 2030 in the Net Zero Scenario[1] and announced net zero plans of countries have become almost sufficient to the targets by 2030.[2] Another ambitious company has been contributing to tackle climate change by producing solar panels since 2011: Alfa Solar Enerji (IST: ALFAS).
Alfa Solar Enerji produces solar panels with various sizes and has more than 1780 MWp annual production capacity. It is noteworthy to state that focusing on producing only solar panels gives the company an advantage of allocating more resources to innovation and R&D activities. One of the company’s aims is to invest in renewable energy plants with 1 GW capacity and in cells, which consist of half of the solar panel production costs. At the moment, Alfa Solar Enerji purchases its cells from China but is willing to produce them inhouse. The company is aware of the fact that such a strategy would be a profitable long term opportunity even though it might not be a competitive one in global markets in the short term.
In the fourth quarter of 2022, the company almost tripled its output to 150 MWp from 65.4 MWp and continued at slightly higher figures. The workforce of the company is composed largely of blue-collar workers, comprising around 90% of the employees. As its output production increased, the company increased its number of employees 182% in the first half of 2023 (to 746 workers) compared to the first half of 2022 (from 264 workers), i.e. creating many additional low and middle skill manufacturing jobs in the Turkish labor market.
The data indicate that Alfa Solar Enerji is performing financially sound. In the first half of 2023 compared to the first half of 2022, both revenues and net gross income increased around 280%. During the same period, current and cash ratio also increased while debt to equity ratio fell significantly. Moreover, the company went public in 2022, listing 20% of its capital in Borsa Istanbul. Its share price increased from around 9 TRY in November 2022 to around 145 TRY by the end of September 2023, corresponding to almost 1400% rise in less than a year.
We must highlight that quality matters in the PV sector considerably because of efficiency and lifespan of the panels as well as the costs related to warranty and customer service. From this perspective, we observe that Alfa Solar Enerji cares about its long-term strategies as they pay significant attention to the quality of its products, its production technology and productivity. Additionally, the company may consider investing in battery storage rather than a renewable energy plant because pairing solar power with battery storage systems gained much attention and the market for such investments are expected to increase significantly.
Alfa Solar Enerji considers expanding to export markets, particularly the US and the EU, in response to consistently declining costs of solar energy since policymakers developed policy tools to protect producers against Chinese producers, facilitating market competition. Given the fact that Alfa Solar Enerji sells more than 95% of its products in the domestic market, widening its market portfolio would be considerably beneficial.
Finally, the market for residential solar panels is increasing steadily as policymakers are struggling to reduce emissions in the building sector which is typically hard to abate. Policy initiatives such as IRA and EU Green Deal are penetrating the market developments considerably and boost the solar market outlook. More actions from both the private and public sector are needed to reach climate goals and we believe that Alfa Solar Enerji has great potential to become a key market player in Turkey and even expand across different markets globally.
[1] https://www.iea.org/data-and-statistics/charts/solar-pv-power-generation-in-the-net-zero-scenario-2015-2030
[2] https://www.iea.org/reports/world-energy-outlook-2022/an-updated-roadmap-to-net-zero-emissions-by-2050