First Solar lights fire under global solar market

First Solar, the leading US solar module manufacturer, injected new life into the global solar industry on Tuesday after its stock surged nearly 50 per cent in a single day – the largest gain since its spectacular stock market debut in 2006.

The gains came after the world’s largest thin-film solar manufacturer claimed a new record on module efficiency, lifted its sales forecasts for 2013 and in subsequent years, and announced it had bought a new high-tech start up that could further improve the output of its modules.

The company’s forecasts of sales revenue of up to $4 billion in 2013 and $12 billion over the next three years, as well as earnings of up to $4.50 a share in 2013, were well above analysts forecasts – some 33 per cent above the median guidance.

Part of the reason for the optimism was that its 550MW Desert Sunlight solar farm in Riverside, California, will start generating revenue later this year, and will be delivering full revenues in 2014.  (First Solar built Australia’s only utility scale solar farm, the 10MW Greenough River project in WA, and will supply modules for the 159MW solar farm to be built by AGL Energy in Broken Hill and Nyngan by 2015).

The company also said it had set a new world record for cadmium-telluride (CdTe) PV module conversion efficiency, achieving a record 16.1% total area module efficiency in tests confirmed by the US National Renewable Energy Laboratory. The new record is a substantial increase over the prior record of 14.4 per cent efficiency set by First Solar early in 2012.

This breakthrough will allow it to accelerate its module conversion efficiency roadmap, and help it to lower its manufacturing cost/watt will total $0.63-$0.66 in 2013 to $0.40 by 2017.

First Solar has long banked on lower manufacturing costs to differentiate its thin-film solar panels from silicon-based alternatives, but its edge has narrowed in recent years as Chinese rivals ramped silicon module production, leading to industry oversupply and dumping accusations.

The company also said it had bought a Silicon Valley startup called TetraSun for an undisclosed amount from JX Nippon Oil Energy Corp and other investors. It will begin commercial manufacturing of the high-efficiency crystalline silicon technology in the middle of 2014.

Reuters said this marked a big shift for First Solar, whose cadmium telluride, thin film panels have long been the cheapest in the market but are not as efficient at turning sunlight into electricity as traditional silicon-based products.

As prices on silicon panels plummeted, First Solar’s cost advantage eroded, and so did its cache with investors, and the TetraSun acquisition will give First Solar a foothold in markets where limited space requires a higher-efficiency product, such as rooftops, First Solar CEO Jim Hughes told Reuters in an interview.

The news pushed First Solar shares up 46 per cent to $39.35, while other solar manufacturers, its biggest gain since 2006 – although still well below its record share price of near $300.

Other solar stocks, which have experienced a boom-bust cycle, as our graph of the day shows, that has been exacerbated by a series of company failures and bankruptcies, also jumped sharply. Suntech Power gained 30 per cent, SunPower and Yingli Green each gained nearly 20 per cent, while Canadian Solar and MEMC Electronic Materials rose nearly 10 per cent.

Tim Buckley, an analyst with Australian-based ArkX, says the news from First Solar is a sign of the maturing of the industry that had not yet been absorbed by the market.

“A near doubling of installations in countries as diverse as China, Japan, the US, Saudi Arabia and Chile in 2013 shows the solar energy revolution is becoming more geographically robust, and moving towards a self-sustaining cost position no longer reliant on significant government subsidies,” he says.

“What the solar revolution is reliant on is the removal of barriers to its adoption, including fossil fuel sector subsidies and grid access barriers.

“As the First Solar technology advances combined with the lowering of their cost curve confirms, solar energy will be a dramatically cleaner, deflationary impact on the world’s energy markets over the next decade, particularly as battery storage is commercialised.”

Buckley said the announcements also meant that First Solar is set to prosper during what will still be a very difficult, deflationary period for solar. The share price surge was helped in part by the rapid unwinding of short positions – First Solar was heavily “shorted” by investors who assumed the worst.

“Even after the 46 per cent share price surge, this puts First Solar on a prospective price earnings multiple of 12 times 2014 and 8 times 2015 earnings – so (the share price) is eminently sustainable given the progress underway and the strength of balance sheet and technology gains,” Buckley said. “Go the Solar revolution.”