First Solar Could See Big Boost From Saudi Renewables Push

by Trefis Team
First Solar
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Saudi Arabia is looking to install 41,ooo MegaWatts (MW) of solar capacity over the next 20 years in a bid to reduce dependence on hydrocarbons to produce electricity. The oil rich country is seeking about $109 billion in investments to finance solar projects so that it can reduce oil consumption to boost exports. Contracting for the proposed solar push could begin in the first quarter of 2013, opening new opportunities for panel manufacturers like First Solar (NASDAQ:FSLR) and Yingli Green Energy (NYSE:YGE). However, it is expected that the Saudi government may force installers to use locally manufactured panels, forcing these companies to open local plants. Despite these issues, solar companies should be boosted by the growing interest in solar among countries in Asia and the Middle East.

We have a $23 price estimate for First Solar, which is at a 40% premium to its current stock price.

Replacing oil

The Saudi government is looking to reduce the role of oil in local energy production to free up production for exports. With oil hovering above $100 /barrel, the government has a huge incentive to take steps to reduce local consumption as local prices are heavily subsidized. According to the latest plan, the country will install about 41 GW of solar installations and look to produce another 21 GW from wind and renewables. About 25 GW of the solar capacity will come from solar thermal plants, which use mirrors to concentrate sun rays on a heating tower. Solar PV plants could grow to 16 GW over the next 20 years. The country is expected to auction around 1.1 GW of capacity to build solar PV plants in 2013 and hold another auction in 2014.

Demand for PV panels from Saudi Arabia could provide the industry with a much needed impetus as it combats falling support from European governments. Companies are already targeting emerging markets like China, where demand is expected to grow over the next few years.

However, despite the size of the Saudi opportunity, companies may be forced to set up local manufacturing to tap into the market. The possibility of the government restricting imported equipment could be a major issue, reducing the profitability of sales in the country. Overall, the development is a positive signal for the industry as the Saudi’s moves could be replicated by other countries in the regions, looking to boost oil and gas exports. Capturing demand from such emerging markets is a key factor to revive the panel manufacturing business of First Solar.

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  • commented 5 years ago
  • Sure, oil and gas will still be around for decades to come but their pricing power will fade ... We no longer can plan our economy entirely based on oil and gas supplies despite recent developments in shale rock or tar sands, whatever.. The reasoning is that we are using way too much of oil and gas already... we are creating way too much heat and CO2 into the atmosphere.. Yes, heat is a huge factor in global climate change .. not only carbon (dioxide) but heat !!! It is a huge issue that we forget to talk about... It is very huge!! H E A T !!! When it warms up the atmosphere, water vapor increases and stay up there increasing greenhouse gas.. Water vapor is the biggest ingredient in greenhouse gases (70% or more) More water vapor more global warming. Heat slows down or diverts wind currents until we reduce usage of oil and gas .. Once we reduce usage of oil and gas, the wind currents will return to old self , water vapor will decline... Polar ice will return to growth.. It will be instant effect once we wise up and reduce usage of oil and gas.. What is not clear about carbon dioxide is whether it will stay up permanently or will be absorbed by plants quickly or not. I think it will be absorbed pretty quickly.. Lastly, oil and gas fumes is not pleasant to smell or breath and it drives up our health costs.. We use too much of oil and gas already. We need to share oil and gas with billons of poor people who still rely on much worse firewood and cowbricks for cooking and heating. So we have so much more reason to switch to solar energy as rapidly as possible.. I think we are still moving way too slowly . We dont need permission from oil and gas producers to do so.. They dont own our economy.. What are you waiting for? Get moving !!
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  • commented 5 years ago
  • Solar energy has brighter future than oil , PERIOD! Any of you who still stubbornly hold oil stocks will be hurt!! My advice is sell a portion of your oil holdings and invest in solar stocks.. I am not saying to dump ALL of your oil stocks... This is a prudent move you can make today , tomorrow or next week, month or so... Time to act is near... If not, solar bulls will run over you..