First Solar (NASDAQ:FSLR), the world’s largest thin film solar panel manufacturer, may score a contract to supply solar panels to NextEra Energy’s 1,000 MW Blythe power project, according to a report by Bloomberg. The Blythe solar farm, located in southern California, is touted as the largest in the world.^[1]

We believe that supplying panels to a project of this magnitude would be another shot in the arm for First Solar, a company that has weathered the solar industry downturn better than most of its competitors. If First Solar is awarded this contract, it could positively impact its revenues from the photovoltaic solar systems division.

As per a document filed with the California Energy commission in September, NextEra Energy is considering the use of Cadmium-Telluride (Cd-Te) as a possible technology for this project. According to an analyst from Pacific Crest Securities in Portland, Oregon, First Solar may be the only thin film panel manufacturer with the capacity to cater to such a large-scale project. ((First Solar May Supply Panels for Biggest Solar Project, Bloomberg)) At the end of the second quarter, the company reported module manufacturing capacity of 2.4 GW.^[2]

A spokesman for NextEra Energy said the company has yet to decide on a panel supplier for the project and may choose to use more than one vendor. ((First Solar May Supply Panels for Biggest Solar Project, Bloomberg))

Utilities Still Choose Thin Film Despite Lower Efficiency

Although the Cd-Te thin film panels produced by First Solar have a lower conversion efficiency and a larger physical footprint than polysilicon panels, they are still being widely adopted by utility scale developers. This is primarily because of three factors: lower cost of thin film-based panes, superior performance under variable lighting conditions, and the absence of space constraints for utility projects.

Semiconductor material costs contribute to a large portion of solar panel prices. With Cd-Te thin film technology, First Solar has been able to reduce the amount of semiconductor required to manufacture a panel by up to 98%. In addition, the scale and efficiency of First Solar’s manufacturing process helps the company produce the lowest cost solar panels in the world.

Due to their higher conversion efficiency, polysilicon based panels have a smaller physical footprint per installed watt. This is attractive for applications where space is at a premium, like the rooftop market. However, for utility scale applications, the physical footprint is less of a constraint, as utility projects are usually allotted several acres of land.

Thin film panels perform better under a host of lighting conditions. They deal better with partial coverage such as dirt, shade and snow than their polysilicon counterparts. They also experience lower performance degradation compared to polysilicon panels in extremely hot environments. Their ability to produce electricity at a wider range of lighting conditions makes them attractive to utility companies that require stable, large scale electricity production.

We have a price estimate of $22.13 for First Solar, which is about 1% ahead of its current market price.

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