[The Vector] US Solar Supplier Scaling Up as Residential Market Commoditises
As the residential solar market matures in the Southern US, investors should be asking themselves which solar outfits are on the verge of growing into a project developer, capable of delivering big systems to the utilities, according to Paul Leming, an analyst with Princeton Tech/Soleil Securities.
SunPower, for example, built its share in the Californian residential sector with market-leading technology sold at a premium price. It is continuing to innovate. The company announced on 23 June a full-scale solar cell from one of its factories in the Philippines capable of converting a record 24.2 percent of the sunlight that strikes it into electricity. (http://investors.sunpowercorp.com/releasedetail.cfm?ReleaseID=482133)
The problem for SunPower and its residential/commercial sector business model is that it is getting very close to the technical limits. While silicon solar panels could – in theory – convert just under 30 per cent of the light that falls on them into electricity, the practical reality is closer to 25 per cent, according to SunPower CEO Tom Werner (quoted in greentechmedia.com).
As the technical gap closes between the pioneer and the mass market producers, SunPower is being dragged ever closer to competitive scraps based on price. According to an analysis of SunPower in TheStreet.com, dealers and installers of SunPower panels, such as NextEnergy, have had to cut their margins in order to compete against the influx of cheap Chinese-manufactured panels into the Californian market.
All this is taking place in a strongly growing market of course. Because of the California Solar Initiative, during 2009 the number of solar systems installed grew by 103% to 183.6 megawatts. FBR Capital Markets predicted calendar 2010 installation from the California Solar Initiative to be in the 250 MW to 300 MW range.
But, to escape the white heat of commodity-style competition, SunPower has been developing alternative customer bases, moving towards the development of solar projects for the utilities.
SunPower can probably make competitive bids on some projects in the large-scale systems business it wouldn’t otherwise be able to bid on by using the Serengeti lower cost panels, Wedbush’s Hersey said.
“With the completion of our SunRay acquisition, we are constructing more than 100 MW of power plants in Europe and expect to monetize these projects, along with our previously completed Montalto power plant, by the end of 2010,” said CEO Tom Werner. “We also secured an incremental 40-MW power purchase agreement with Pacific Gas and Electric Company, bringing our contracted capacity at California Valley Solar Ranch to 250 MW.”
An important next step in the Sunpower’s strategy seems to have been taken on 21 May, when the company announced the establishment of a Joint Venture with Taiwanese TFT-LCD manufacturer AUO. The joint venture will take ownership of SunPower’s third solar cell fabrication plant under construction in Malaysia.
According to Tom Werner: “As a result of SunPower’s downstream channel investments, demand has been rapidly increasing for our differentiated high-efficiency solar panels and systems. We believe that this JV will enable us to produce more megawatts faster, at lower cost, with substantially less cash contribution from SunPower.”
Legislative backing
There is strong legislative backing for solar development in California. A power purchase agreement for Southern California Edison to buy power from a 484 MW solar plant being developed by Solar Millennium LLC (part of the German Solar Millennium Group) received approval from California state regulators on 8 July.
The Cal Solar 10 project will qualify for Recovery Act funding if it completes the approval process before December. Cal Solar 10 will eventually comprise two 242MW plants using parabolic mirrors to heat steam to drive turbines.
