First Solar Should Worry About The Competition

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First Solar (FSLR) is under pressure as falling polysilicon prices make rival solar companies more competitive, but that’s not worrying its president, Bruce Sohn.

Sohn, spoke with Tom Cheyney at PV Tech about the company’s inner workings. Sohn says he’s doesn’t focus on solar rivals. He focuses on fossil fuel rivals.

Contrary to what one might think is First Solar’s competitive landscape, Sohn and his colleagues have a different way of looking at the marketplace.  “A lot of people, when they ask us about competition, always want to know about the other photovoltaics or solar companies that are out there, but that’s not our interest. Other companies may be kind of gunning for us because we’re the industry leader, but from our perspective, we’re really gunning for the fossil-fuel industry.

“We want to give utility companies a viable choice between dirty, traditional fossil fuel-generated energy and clean, environmentally friendly, photovoltaic-generated energy. That’s what we see as the core vision of our company. If we’re going to solve the world’s problems, we have to do it on a massive scale. And you can’t do things on a massive scale if it’s always going to be subsidized.

“So our objective is to drive down the cost, so now a utility company executive has to choose, ‘Do I really want to put in this gas peaker plant or do I want to put in this solar power plant? Do I have to invest in this coal-fired plant and can I put in a solar power plant?’ That’s the choice that we’re trying to create in the marketplace.”

While that’s all well and good, he might want to take a look at solar rivals, because they are getting ready to cut into First Solar’s market share. FBR released a bearish note this morning, reinforcing what Barron’s said over the weekend. The keypoints:

  • Checks also suggest six inch solar wafer prices (in the spot market) have declined to US$3.50/piece, implying that finished solar wafers are now < US$1/watt. Assuming US$0.80/watt for turning wafers into modules, we estimate $65/kg poly to yield modules at a cost of US$1.60-US$1.80/watt. And even a rather aggressive gross margin of 20% implies si-based manufacturers could sell modules at US$2.10 (or EUR€1.62, assuming 1.3 F/X) and compete head-to-head with FSLR.
  • First Solar lost a major customer, who opted for a silicon based solar provider.
  • Takeaway from our KfW meeting in Germany: (1) Senior executives in charge of (PV) project origination and structuring told us that PV project financing has not improved as fast as they were expecting. Although KfW can finance less than 3MW to 5MW projects on its own, it is the larger projects, requiring a consortium of (3-5) banks that are slow to be approved. (2) Year-to-date project backlog (at KfW) is comprised of 45%si-based and 55%-TF based.This is a dramatic change from CY08 mix of 80%-plus TF.

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