First Solar Looks Address Its Balance Of Systems Handicap With Series 5 Modules

Although First Solar’s (NASDAQ:FSLR) Cd-Te solar panels have been recording significant efficiency gains over the last three years, they have lagged behind their silicon peers in terms of rated peak power. This means that a larger number of solar panels are required for a given system size, translating into higher balance of systems costs (such as mounting and labor). However, the company looks set to address this handicap with the introduction of its much anticipated Series 5 modules, which were unveiled in late June. Below we take a look at why the module may be very important to First Solar’s business.

We have a $65 price estimate for First Solar, which significantly ahead of the current market price.

Reducing BOS Costs Is Becoming Important

With the cost of solar panels falling fast, cutting balance of systems costs is becoming key to improving the overall affordability of solar power systems. For instance, fixed-tilt utility solar systems saw an average cost per watt of about $1.33 in the U.S. during Q4 2015, with balance of systems costs – including electrical systems, structural equipment and labor – accounting for close to 35% of the figure. ^[1] Bringing down BOS costs will be key in international markets as well, given that the low bids on power purchase agreements in countries such as Mexico may require solar systems prices to drop to as little as $0.80-$0.90 per watt, according to Deutsche Bank.

Addressing First Solar’s Peak Power Handicap

While First Solar’s current Series 4 modules offer a peak power rating of roughly 120 watts (W) per module, many multi c-Si panels have maximum power output of upwards of 315W. However, First Solar’s new Series 5 modules will be rated at 365W, translating into a slight advantage over silicon modules. The surface area of the modules will also be about three times as large as the company’s Series 4 modules, implying that a lower amount of mounting equipment will be required, allowing the firm to cut mounting costs by about half. The modules will also be pre-wired, allowing for an installation time that is 2x as fast as crystalline silicon based modules. ((First Solar’s ‘game-changing’ Series 5 module to reduce BOS costs and installation times, PV Tech, June 2016)) The lower balance of systems costs, coupled with First Solar’s technology advantages – such as fast improving efficiencies and higher energy yields – could make its panels very competitive against crystalline silicon panels.

Mid-2017 Delivery Date A Concern 

However, First Solar only expects to deliver these panels in mid-2017 – close to a year away. This puts the firm at a significant disadvantage, since competition in the global solar markets is expected to heat up over the second half of 2016, amid weakening demand in China and panel supply growth. Moreover, Chinese module manufacturers are already selling mono-crystalline panels with capacities of 330-335 W and mono-perc modules with peak capacities of 340-345 W at prices of roughly $0.55-$0.60 per watt. ^[2] This could potentially weigh on First Solar over the next few quarters.

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1. Solar Market Insight 2015 Q4, SEIA [↩]
2. First Solar Drops 10% as Deutsche Cuts Target 45% on Price Competition, Delays, Barrons, July 2016 [↩]