Cheapest Solar Panels No Longer Best, SunPower CEO Says

July 9, 2013 by  
Filed under Green Energy News

Chinese solar manufacturers are still
trying to sell panels at the lowest prices and have failed to
adapt to an industry seeking more efficient components, said
SunPower Corp. (SPWR) Chief Executive Officer Tom Werner.

Prices for panels have plunged, and now make up less than
half the cost of a system, he said in an interview today at
Bloomberg’s offices in New York. Customers are no longer seeking
the cheapest solar panels, they want the cheapest solar energy.

“Most solar companies compete on price,” Werner said.
SunPower, the second-largest U.S. solar manufacturer, has
“transitioned to selling energy.”

Chinese producers have been accused of selling panels in
the U.S. and Europe below their production costs. Offering ever-lower prices has become a money-losing strategy for most solar
companies, Werner said. All of the China-based manufacturers in
the 17-member Bloomberg Industries Global Large Solar Energy
Index are expected to report losses this year.

SunPower, based in San Jose, California, focuses on
delivering the most efficient panels in the industry. That lets
customers produce electricity at lower prices, and makes his
products more appealing, Werner said. The company said in May it
may post a profit this year, its first since 2010, on sales of
$2.6 billion to $2.7 billion, up from $2.42 billion last year.

Other Costs

Expenses including labor and customer acquisition make up a
greater portion of the cost of solar systems. Spending less on
photovoltaic components won’t have much affect on the bottom
line, Werner said.

“You look kind of silly saying ‘my module costs are
lower,’ ” he said.

SunPower’s panels use cells that convert as much as 24
percent of the energy in sunlight into electricity. The company
expects to reach 25 percent in “a few years,” Werner said.
Yingli Green Energy Holding Co. (YGE), the world’s largest panel maker
by shipments last year, sells panels with efficiency rates as
high as 15.4 percent.

Higher efficiency “allows you to produce more energy over
time.”

Buffett Solar

That’s important for SunPower customers like Warren
Buffett
’s MidAmerican Energy Holdings Co., which acquired its
579-megawatt Antelope Valley project in California in January.

SunPower typically charges more for its panels and Werner
said the higher efficiency justifies the price tag. “You pay a
premium, but you’re not paying too much,” he said.

Panel prices make up about 20 percent to 25 percent of the
cost of a solar system, compared with as much as 70 percent in
2010 and 2011, Ben Kallo, an analyst for Robert W. Baird Co.
in San Francisco, said in an interview.

‘Rough Spot’

That means companies like Yingli are facing headwinds
compared to rivals like SunPower and First Solar Inc. (FSLR) that have
done a better job of expanding into building and selling power
projects, Kallo said.

The low-cost producers are “in a rough spot,” he said.
“The extra few cents a watt at this level are not a
differentiator when choosing panels.”

SunPower expects to see more consolidation and more
failures among Chinese producers, Werner said. The main unit of
Suntech Power Holdings Co., the largest panel maker in 2011, was
pulled into bankruptcy proceedings in March after missing a bond
payment.

“The Chinese economy has decided that loaning money to
companies that lose money is a bad idea,” Werner said.

SunPower shares have quadrupled this year. The company is
majority-owned by the French oil company Total SA. (FP) First Solar
is the largest U.S. solar manufacturer.

To contact the reporter on this story:
Ehren Goossens in New York at
egoossens1@bloomberg.net

To contact the editor responsible for this story:
Reed Landberg at
landberg@bloomberg.net

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